Plan Sponsors Should Review Their Health Plan's Subrogation Language In Light Of Recent U.S. Supreme Court Ruling

Plan sponsors, especially those that sponsor self-insured health plans, should review their plan’s subrogation provisions in light of the U.S. Supreme Court's recent decisionin US Airways, Inc. v. McCutchen. Subrogation rights allow a plan to “step into the shoes” of a participant to obtain a recovery of the plan expenses from a third party who caused an injury to the participant. In McCutchen, the Court did not preclude certain defenses commonly asserted by participants in cases involving subrogation rights because the terms of the plan at issue were unclear. The Court held that equitable doctrines such as the "common fund" doctrine will not override the clear terms of a plan as long asthe plan clearly prohibits the use of a particular equitable defense. The common fund doctrine is used to reduce the amount reimbursed to a plan by a share of the attorney's fees incurred in obtaining the third-party settlement. McCutchen clarified a participant’s subrogation rights and emphasized the importance of unambiguous plan language in subrogation provisions. In light of McCutchen, plan sponsors of self-funded health plans should review existing plan language to ensure that the plan explicitly addresses equitable doctrines and defenses such as the common fund doctrine. Plan sponsors of insured plans should inquire as to how their plans pursue subrogation because subrogation recovery may improve the plan's claims experience.