Buy an individual health insurance plan and avoid ERISA requirements.
Obamacare, aka the Affordable Care Act, is infamous for starting out as a bill so long that legislators literally did not have time to read it before voting on it. As Nancy Pelosi put it “We have to pass it so that you can find out what is in it.” One “easter egg” concealed within the legislation is a provision that has serious benefits for individuals who have won a settlement in a personal injury case.
Prior to the passing of the Affordable Care Act, the Employee Retirement Income Security Act (ERISA) was the rule of the land for most health insurance policies. Under ERISA, health insurance companies were permitted to recover all of the money they had paid out on a claim if the injured individual later received a personal injury lawsuit settlement covering their medical expenses.
For example, there was the Supreme Court case of US Airways v. McCutchen. James E. McCutchen suffered serious injuries in a car accident, which his employer-sponsored health insurance covered to the tune of $66,866. McCutchen pursued a personal injury claim against the driver who had caused his accident and later recovered $100,000 in damages. The health insurance company sought to exercise their right under ERISA to recover the $66,866 they had paid for McCutchen’s care. McCutchen fought this on the grounds that it was not fair for the health insurance company to recover all the money they had spent without taking any share of the expenses he had incurred to get the $100,000 in the first place. The Supreme Court ruled that under ERISA McCutchen’s court costs were irrelevant and the insurance company got their full $66,866.
Now, had a similar scenario occurred today, the outcome could have been very different. ERISA only applies to group plans sponsored by employers. Under the Affordable Care Act, people may purchase individual plans on the healthcare exchange. These individual plans are subject to the rules in the Affordable Care Act, which contains no provision for insurance companies to recover cash from personal injury lawsuit settlements.
This is most likely an unintended consequence of the Affordable Care Act, but that does not mean you cannot take advantage of it. When selecting your health insurance coverage, be sure to consider how this will affect any personal injury claims you may wish to file in the future.
