Many businesses pool funds for employee health insurance rather than paying a large insurance company premiums in exchange for health coverage. These are called “ERISA” plans after the Federal law entitled the “Employee Retirement Income Security Act.”
These ERISA plans are governed by federal laws that require the fund to receive reimbursement for some medical costs. For example, if you are injured in a car wreck and go to the hospital, your ERISA health isurance plan will pay for your treatment. THEN, when you receive a settlement from an insurance company for your injuries, the ERISA plan requires that you reimburse it for any medicare it paid, even though you have been paying premiums all along.
The courts have characterized the ERISA plan’s right to reimbursement as an “equitable lien.” An equitable lien is a right to payment or possession of property based on principles of fairness. Usually, a claim based on equity, such as an equitable lien, would be subject to certain defenses. Those defenses include the principle of unjust enrichment (I got no benefit from what I paid), double-recovery (you got double what you deserved), and the common fund doctrine (the money was mixed with my other money and now we don’t know what is what).
These defenses are also based on principles of fairness. For example, unjust enrichment could occur if you have paid $50,000 in premiums over several years for the benefit of the health insurance. Then, after a car wreck and a broken arm, you have to reimburse the insurance company $20,000 for medical bills they paid on your behalf. Unjust enrichment says it is unfair that you got no benefit for the $50,000 in premiums you have paid to the insurance company. The insurance company got to keep your $50,000 and they also got reimbursed for the $20,000 they paid on your behalf.
The Supreme Court of the United States decided the case US Airways v. McCutchen, 569 U.S. ____ (2013) and held that a business can prevent all of these fairness defenses from applying to the equitable lien. The businesses simply have to put in the contract that these defenses are not allowed to apply. This makes sure the ERISA plan is reimbursed for any money it pays you that can be reimbursed from a third party settlement.
Be sure you know what type of insurance plan you have at work. If you are injured in a work-related accident, a car wreck, or due to a medical error, your insurance plan may have an absolute right to reimbursement under the Federal ERISA law.