Unraveling the Lining of ERISA Health Insurer Pockets-A Vote for National Federal Common Law Adoption of the Make Whole Doctrine

I. INTRODUCTION Imagine the following nightmare. On a typical Monday morning you are again driving on a congested freeway, hoping for a timely arrival at your underpaid workplace. Despite considerable vehicular obstacles, you eventually maneuver to the off ramp and reach the surface streets that lead to your office. As you approach the last intersection before turning into your office parking lot, you experience the final seconds of the last typical Monday you will ever have because a split second later, the driver of a 1985 Dodge Ram Truck, while looking below his dashboard for a dropped cigarette, speeds through a mature red light at 50 mph directly into the driver's side of your car. One life flight, four surgeries, and several weeks later, you realize, while lying in a hospital bed, that you are grateful to be alive. You muse to yourself that shortly before your accident you had griped to your spouse that paying car and health insurance premiums was like throwing money out the window, since you had never benefited from either. You do some quick calculations in your head. Since you have been paying your own premiums, for about ten years, you have paid nearly $50,000 in car and health insurance premiums without receiving anything in return. Now, despite unfortunate circumstances, you have finally received your bittersweet payday. Your health insurance has already paid out over $100,000 for your medical treatment. You have a year's worth of physical therapy staring you in the face, another potential surgery, and at least nine months of lost wages. You also feel some justification in your inspired decision to increase your uninsured motorist coverage as the driver of the `85 Ram was uninsured, to go along with his lack of a valid driver's license. The $100,000 car insurance policy will come in handy as you struggle to pay bills and make ends meet while you are unable to work. Between meeting your normal monthly obligations and funding your newly acquired medical necessities, you figure that the insurance proceeds will sustain you for about a year while you literally get back on your feet. Given the fact that your case has been conservatively valued at $300,000, your car insurance company quickly settles for the $100,000 policy limit on your uninsured motorist policy. Unfortunately, unbeknownst to you, your nightmare has just begun. Your health insurance carrier has filed a lien on the entire proceeds of the settlement. Initially you are puzzled-why have you been paying health insurance premiums if you have to pay the entire cost of your treatment anyway? You hire an attorney who specializes in resolving dilemmas such as the one you are specifically facing. She explains that state law prescribes that until an injured party is "made whole," or is compensated for the entirety of his damages, a health insurance company has no right to reimbursement for payment of medical treatments. There is, however, an important caveat. If a health plan qualifies as an ERISA (Employee Retirement Income Security Act) plan, it can preempt state law, including state law considerations of whether a victim has been made whole. Your health insurance plan is unquestionably an ERISA plan. The legal counsel for your health insurer relies on the ERISA caveat and is unwilling to negotiate a settlement. Litigation ensues. Despite your attorney's best efforts, the trial court finds that the subrogation clause in your health insurance contract is sufficient to provide your health insurer with first priority to your settlement monies. The entire $100,000 from your auto policy settlement goes to your health insurer. Befuddled and dazed, and despite a decade's worth of faithful insurance premium payments, you are left with physical and emotional scars and nothing from your auto policy settlement with which to pay your day-to-day expenses, your newly amassed attorney bill, your fixture medical treatment, and lost wages. …