Courtesy of my friend, Professor Roger Baron, comes a fascinating article from yesterday's Minneapolis Star Tribune. In the wake of last year's tragic bridge collapse on I-35 over the Mississippi River, Minnesota state lawmakers would like to establish a recovery fund to ensure that victims in the disaster receive compensation for their losses. The problem? The great majority of the victims had their medical coverage provided through ERISA-governed welfare benefit plans. Given the prevalence of broad subrogation language in these plans, Supreme Court sanctioning of those subrogation rights and the increasingly aggressive collection actions by ERISA plans (see the Shank case), lawmakers fear the taxpayer funds intended to compensate the victims will go straight to the health insurers of the ERISA plans.
They are right to worry. ERISA plans have a strong argument that any state law requiring disaster funds to go to the victim and not be subject to ERISA plan reimbursement requirements is preempted by ERISA. It is similar to the ERISA preemption battles that are going on in courts across the country regarding laws that mandate minimum employer contributions and coverage for employee healthcare.
I was struck by the justification offered by a spokesman for America's Health Insurance Plans, the lobbying organization for employer sponsored health plans across the country: "Anything that can be done today to help keep costs down . . . is a good thing in terms of being able to provide health care coverage for all those who need it." This is hard to take from a group that has as one of its major players UnitedHealth Group, whose CEO has taken literally hundreds of millions of dollars in executive compensation over the past ten years in large part by cooking its books to backdate stock options. According to AHIP, doing what is necessary to keep business costs down is necessary and commendable even if it means taking taxpayer dollars out of pockets of those who are badly injured.
What promise do consumers have that any of the reimbursement these ERISA plans obtain from taxpayer money funding such a disaster plan will ever result in lower premium payments? We hear business assurances that such recouped money does inure to the benefit of society at large. But how can any such miniscule lowering of premiums, assuming it occurs at all, really compare with the losses individuals and families have to live with as a result of the dealth or serious injury to an individual unlucky enough to simply be in the wrong place at the wrong time? The refusal of ERISA plans to share the loss borne by victims of these types of horrific accidents violates fundamental insurance principles of risk spreading. Under the facts of this situation, it is evident that allowing ERISA plans to obtain reimbursement of their medical expenses from dollar one (as almost all ERISA plans provide) is profoundly wrong.
Unless the ERISA plans involved will agree not to seize the taxpayer funds under their reimbursement and subrogation provisions, the disaster plan promises to be yet another government subsidy for big insurance. Situations like this provide additional impetus for Congress to amend ERISA and eliminate the potential for such clear overreaching by health insurers and employers.