PA 17-165—HB 6221

Planning and Development Committee

AN ACT CONCERNING RECOVERY OF PAYMENTS FROM COLLATERAL SOURCES BY A MUNICIPALITY WITH A SELF-INSURED HEALTH PLAN

SUMMARY: This act gives self-insured towns, cities, and boroughs (“municipalities”) a lien on the part of certain judgments or settlements to an employee or his or her covered dependent or family member (“insureds”) for medical, hospital, and prescription expenses incurred due to a third party's negligence or recklessness. The lien only applies to certain types of “tortfeasor recoveries” and instances when a municipality incurs more than $15,000 in medical, hospital, and prescription expenses. Prior law prohibited such municipalities from claiming such a lien.

As described below, the act specifies notice requirements and how the lien amount is calculated.

EFFECTIVE DATE: October 1, 2017

DEFINITIONS

Under the act, a municipality is “self-insured” if it provides group health benefits to its employees by paying submitted medical, hospital, and prescription expense claims from its revenues.

A “tortfeasor recovery” that may be subject to a lien is moneys paid by or on behalf of the person or entity whose negligence or recklessness caused the injuries for which medical, hospital, and prescription expenses were incurred. It includes recoveries from wrongful death suits alleging negligence or recklessness and claims alleging the negligent operation of a state-owned motor vehicle. But it excludes recoveries based on torts other than negligence or recklessness, including those related to causes of action based on state statute, intentional misconduct, and uninsured or underinsured motorist claims.

NOTIFYING INSUREDS

Right to Recover Expenses

For a lien to be effective under the act, a municipality must provide written notice of it to the insured or his or her counsel before settlement or a judgment's entry. The lien is effective from the date of this notification. A municipality can meet this notice requirement by including clear language in conspicuous, boldface font in its group health plan coverage booklet notifying insureds that they must reimburse the municipality from a tortfeasor recovery for any medical, hospital, and prescription expenses incurred due to a third party's negligence.

Amount Claimed

Under the act, if the insured or his or her attorney makes a written request to the municipality after settlement or a judgment's entry, the municipality must disclose within 30 days the total amount of the lien claimed. If a municipality does not provide this information in a timely manner, it waives the lien and has no further right to claim a portion of the tortfeasor recovery as reimbursement for medical, hospital, and prescription expenses incurred.

CALCULATING THE LIEN AMOUNT

The act limits a lien's amount to the medical, hospital, and prescription expenses incurred at the time of settlement or judgment. The amount must be further reduced by:

1. the percentage of comparative negligence attributed to the municipal employee under the statute concerning negligence liability in cases where there are multiple tortfeasors;

2. the percentage ratio that the employee's legal fees and costs bear to the total judgment or settlement; and

3. application of equitable defenses, including the make whole doctrine and unjust enrichment.

Under the act, if the parties cannot agree on the application of equitable defenses, the insured or municipality may petition the Superior Court for assistance in resolving the issue. Such a petition is privileged with regard to hearing assignment and must be heard by a Superior Court judge within 30 days of the petition's filing.

ADDITIONAL LIMITATIONS

The act specifies that the right to a lien does not extend to commercial insurance companies that provide health insurance benefits to municipal employees and their dependents and family members, including stop loss insurance. Similarly, self-insured municipalities cannot recover medical expenses paid from an insured plan, whether fully or partially insured.