Opinion ID: 33400
Heading Depth: 3
Heading Rank: 2

Heading: Subrogation Versus Coordination of Benefits

Text: 16 But even if the OHP coverage were subject to the restrictions embodied in § 22:663, Arana would not prevail for a very simple reason. While this statute restricts the coordination of benefits, it does not affect subrogation to the insurance benefits paid to Arana under the settlement agreements. Section 22:663, as noted, forbids group health insurance policies to exclude[ ] or reduce[ ] the payment of benefits to or on behalf of an insured by reason of the fact that benefits have been paid under any other individually underwritten contract or plan of insurance. LA. REV.STAT. § 22:663. On the other hand, the Louisiana Insurance Code expressly allows HMOs to coordinate benefits, subrogate to third party funds, and engage in the assignment of claims to the extent that insurers are permitted to do so by the laws of this state. LA.REV.STAT. § 22:2006(7) (emphasis added). These two terms — coordination and subrogation — are legally and functionally distinct. 17 First, the Louisiana state legislature evidently understood coordination of benefits and subrogation to be separate and distinct concepts. Any other reading of the Insurance Code would have to presume, contrary to the canon of construction, that the legislature was redundant in defining the powers of HMOs in § 22:2006(7). See United States v. Reeves, 752 F.2d 995, 999 (5th Cir.1985) (A statute should be read to avoid rendering its language redundant if reasonably possible.); ABL Mgmt., Inc. v. Bd. of Supervisors, 773 So.2d 131, 135 (La.2000) ([I]t will not be presumed that the Legislature inserted idle, meaningless or superfluous language in the statute or that it intended for any part or provision of the statute to be meaningless, redundant or useless.). 18 In addition, Louisiana Department of Insurance regulations treat subrogation to third party funds and the coordination of benefits as different concepts. See LA.ADMIN. CODE 37:XIII.313 (COB [Coordination Of Benefits] Differs from Subrogation. Provisions for one may be included in health care benefits contracts without compelling the inclusion or exclusion of the other.). 3 The regulations go on to define coordination of benefits as establishing an order in which plans pay their claims, and permitting secondary plans to reduce their benefits so that the combined benefits of all plans do not exceed total allowable expenses. LA. ADMIN. CODE 37:XIII.303. The reduction in benefits described as coordination of benefits parallels the language used in § 22:663 prohibiting policy provisions that exclude[ ] or reduce[ ] the payment of benefits to or on behalf of an insured. LA.REV.STAT. § 22:663. Coordination of benefits occurs where a reduction of benefits takes place up front as an insurance company limits the benefits it pays on the basis of an insured's additional or third-party coverage. In contrast, the Louisiana Civil Code defines subrogation as the substitution of one person to the rights of another. LA. CIV.CODE, Art. 1825 (emphasis added). Subrogation generally takes place after insurance proceeds have been paid out and the insurance company, substituting itself in place of the insured, seeks reimbursement from a third-party. See Lee R. Russ, Couch on Insurance § 222:5 (3d ed.2000) (defining subrogation generally). 19 That § 22:663 limits coordination of benefits and not subrogation comports with the interpretation of this statute by Louisiana courts. See Peters v. Prudential Ins. Co. of America, 511 So.2d 37, 39 (La.App. 3 Cir.1987) (The legislature was quite clear in its intent to prohibit the coordination of benefits [in § 22:663] where a group policy and an individually underwritten policy cover the same insured.). This Court has also referred to § 22:663 as a coordination of benefits limitation. Nolan v. Golden Rule Ins. Co., 171 F.3d 990, 993 (5th Cir.1999). In addition, even though § 22:663 was enacted in 1972, the Louisiana state courts have consistently held that health plans may subrogate to third-party funds. See, e.g., Barreca v. Cobb, 668 So.2d 1129, 1131-32 (La.1996); Brister v. Blue Cross and Blue Shield of Florida, Inc., 562 So.2d 1040, 1041-46 (La. App. 3 Cir.1990). It strains credulity to suggest that § 22:663 was designed to allow insured parties to receive the substantial windfall that could result from a bar against subrogation, but that not one reported decision supports this proposition in the more than 30 years that this statute has been on the books. 20 In this case, the subrogation provision contained in the OHP policy allows OHP to succeed to Arana's right to the insurance proceeds paid by other insurance companies. Subrogation does not reduce the benefits OHP furnished to Arana — Arana has collected the full amount he was entitled to under the OHP policy. Should the Louisiana legislature wish to prohibit subrogation as between group and individually underwritten policies, in the same manner that it has prohibited the coordination of benefits, it is free to do so, but the plain language of § 22:663 does not allow this Court to expand the reach of the statute.