It’s never a good idea to try to cheat someone out of money they are owed. It’s an even worse idea when that someone is your ERISA health insurance plan. (ERISA is a federal law that governs employee benefits like health insurance.)
If your plan pays for your medical care when you are hurt in an accident, then—no surprise here—your ERISA plan wants its money back if it can get it.
So if you settle with or sue somebody and get money—for example, as a result of a car accident or assault—your plan wants a cut. They have “reimbursement” provisions in their policies for just such an occasion. These basically say that your plan gets to be reimbursed out of whatever money you get from the other person.
Which brings us to Brenda Elem. Brenda was in a serious car accident, and her health insurer paid around $133,000 for her medical care. Brenda got an attorney, Mark Link, and eventually settled with the other driver for $500,000. So far so good.
But here’s where it gets weird: Brenda and her attorney did not want to pay back the ERISA plan out of the settlement. So they lied to the ERISA plan and said the settlement was for only $25,000, not the full $500,000.
Again, that is a bad decision. Even worse: accidentally sending the health insurer copies of the settlement checks showing Brenda actually received $500,000, which Mr. Link totally did.
The insurance company wanted to be paid in full out of the $500,000. It could have ended there. But instead, Brenda and Mr. Link still refused to pay back the plan, and the plan sued.
In the end, the health insurer got all of its money back, plus nearly $150,000 in costs and attorney’s fees for having to sue.
The lesson: Please don’t try to cheat an ERISA plan.
ERISA is a complex and difficult law that is often unfavorable toward employees. That's a good reason to hire an attorney with experience in ERISA. It is not a good reason to try to cheat your insurance company. That will amost certainly end badly, just as it did for Brenda Elem and her attorney.
* The case is Airtran Airways v. Brenda Elem, 2014 U.S. App. LEXIS 18187 (11th Cir. Sept. 23, 2014). You can read it here.