The
"Collateral Source Rule"
bars personal injury plaintiffs
from recovering money previously
collected from other sources.
In New Jersey, the rule is
statutory law (N.J.S.A.
2A:15-97), and generally applies
to medical expenses that have been
paid by a health insurer.
As a result, most
subrogation provisions in
healthcare insurance contracts are
invalid. The
statute has two explicit specific
exceptions: 1) worker's
compensation benefits, and 2) life
insurance proceeds. In
addition, the New Jersey Supreme
Court has clarified that liens
created by federal law are
enforceable (for example, Medicare
and Medicaid). Recently, in County
of Bergen Employee Benefit Plan v.
Horizon Blue Cross/Blue Shield of
New Jersey, the County of
Bergen unsuccessfully attempted to
create an additional exception for
New Jersey public entities.
Bergen
County established a self-insured
employee health benefit plan and
hired Horizon Blue Cross/Blue
Shield to administer the plan. Horizon
subcontracted subrogation issues
to ACS Recovery Services, Inc. and
Primax Recoveries, Inc. Bergen
County's insuring agreement
contained a subrogation provision
which allowed it to recover
medical expense payments from
third parties.
The
Bergen County health plan paid
over $575,000.00 in benefits for
an employee whose child was born
with a severe congenital muscular
disease.
The employee filed a
medical malpractice lawsuit and
recovered $18 million.
During the course of the
lawsuit, the attorney for the
employee inquired whether Horizon
intended to assert a lien.
The attorney was then
advised that no lien was being
asserted.
Later, Bergen County became
aware of the lawsuit and asked
Horizon why it had not been
reimbursed medical expenses. Horizon,
ACS, and Primax responded by
advising that the Collateral
Source Rule barred any recovery.
Bergen
County then filed suit against
Horizon, ACS, and Primax, and the
case came before the Appellate
Division after summary judgment
was denied.
Bergen County acknowledged
that the payments did not fall
within the exceptions of the
Collateral Source Rule.
It argued that the public
interest required an additional
exception for public entities. The
Appellate Division disagreed,
concluding that there was no
evidence suggesting that the
legislature intended an exception
for public entities.
The court also noted that
subrogation was impossible since
the employee was barred from
recovering the medical expenses.
Interestingly,
the court noted that one of the
purposes of the Collateral Source
Rule was to help reduce the cost
of liability insurance.
Therefore, when the statute
became law in 1987, the
legislature clearly decided to
place the interests of liability
insurers above those of health
insurers. At
that time, there was considered to
be a liability insurance crisis. Today,
of course, the emphasis is on the
cost of health insurance. In
the current climate, it is safe to
assume that this is not the end of
the story.
