Latest Legislative News from GRG: Wurtz v. Rawlings Co., LLC & Conditional Payment Appeals

Our GRG experts have summarized the latest legislative news for you in two important Client Alerts this month – CMS Issues Final Rule re: Conditional Payment Appeals for Applicable Plans and U.S. Supreme Court Denies Cert in Wurtz v. Rawlings Co., LLC. Catch up below!

Conditional Payment Appeals

U.S. Supreme Court Denies Cert in Wurtz v. Rawlings Co., LLC

Yesterday, The U.S. Supreme Court denied review of the Second Circuit’s decision in Wurtz v. Rawlings Co., LLC , — F.3d —, 2014 WL 3746801 (2nd Cir. 2014). The basis for writ of certiorari to the Supreme Court stemmed from an ongoing split between the Second, Third, Fourth and Fifth Circuits. As the Second Circuit’s decision stands, this will further cements the application of New York’s anti-subrogation law as it relates to fully insured health plans governed under the Employee Retirement Income Security Act (“ERISA”).

Background

Wurtz involved a class of personal injury plaintiffs who had employer-sponsored health plans funded through insurance arrangements (i.e., fully insured ERISA plans). Plaintiffs sued Rawlings, Oxford Health Plans, and UnitedHealth Group asserting, in part, that NY GOL 5-335 trumped any reimbursement rights that the health plans had under ERISA.

A lower court dismissed the lawsuit, finding that the general rule that insured ERISA plans are subject to state law did not apply to NY GOL 5-335. Specifically, the Court determined that the New York state law was not “saved” from preemption,” because the statute was neither (1) specifically directed toward insurance entities nor did it (2) “substantially affect the risk pooling arrangement between the insurer and the insured.” The Court found that NY GOL 5-335 was too limited in scope and excluded reimbursement and subrogation rights falling outside of the tort settlement realm.

Subsequent to that decision, the New York legislature revised NY GOL 5-335 intending to correct any flaws which may have existed in prior versions by replacing the term “benefit provider” with “insurer” to pull this law directly under the purview of ERISA’s saving clause. This change removed any confusion as to whether an insured ERISA claim fell under the definition of a “statutory reimbursement right.”

In July 2014, the U.S. Court of Appeals reversed the lower court’s decision in Wurtz holding that NY GOL 5-335 was “saved” from preemption after finding that 5-335 was a law regulating insurance and its application against fully insured ERISA plans did not disturb ERISA’s goal of providing national uniformity.

Impact

The Supreme Court’s denial of Cert in this case reinforces the Second Circuit’s holding that NY GOL 5-335 is applicable as it relates to fully insured ERISA plans in New York. Consequently, this decision does not extend to employer sponsored health benefit arrangements which are funded through the general assets of the employer (i.e., self-funded ERISA plans). In those instances, GRG continues to recommend a thorough review of contractual plan language for weaknesses that may be used to reduce or eliminate the health plan’s claim to reimbursement. Outside of the Second Circuit, similar issues will need to be addressed on a jurisdictional basis taking into account plan language review.


 CMS Issues Final Rule re: Conditional Payment Appeals for Applicable Plans

On February 27, 2015, the Centers for Medicare & Medicaid Services (CMS) issued a Final Rule related to appeal rights being granted to Applicable Plans pursuant to Section 201 of the SMART Act. The SMART Act amended the Medicare Secondary Payer (MSP) Act in 2013 in several ways. One way was to grant Applicable Plans a right to appeal final determinations from CMS when CMS pursued the Applicable Plan for reimbursement. Applicable plan means liability insurance (including self-insurance), no-fault insurance, or a workers’ compensation law or plan.

In short, CMS intends to provide Applicable Plans the same appeal rights as it currently provides Medicare beneficiaries. Those rights include the ability to access a multi-level process including a redetermination by the contractor issuing the recovery demand, a reconsideration by a Qualified Independent Contractor (QIC), an Administrative Law Judge (ALJ) hearing, a review by the Departmental Appeals Board’s (DAB) Medicare Appeals Council (MAC), and eventual judicial review once the beneficiary has standing to pursue such action. With very minor changes to the Proposed Rule it released on December 27, 2014, CMS will grant Applicable Plans a right to appeal when CMS pursues the Applicable Plan for recovery. This Final Rule will be effective 60 days from today or Tuesday, April 28.

Garretson Resolution Group (GRG) continues to track these changes in order to provide our clients with the best means to minimize or extinguish associated reimbursement exposure under the MSP Act. Stay tuned for a more substantive client alert coming shortly from us about how Applicable Plans should review and change their MSP compliance protocols in light of this announcement. For questions about what this means for you or your clients, please call John Cattie at 704-594-1778 or email him at jcattie@garretsongroup.com.

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