New Anti-Subrogation Law for New York State Could Curb Insurance Companies’ Greedy Practices

November 17, 2009 11:12 am Jim Reed Health Insurance, NY Laws and Cases

Last week, the New York State Legislature passed an anti-subrogation bill. To the general reader, I realize this news needs some explanation, but believe me, this is VITAL information for anyone who lives in New York State and it is GREAT NEWS for NY consumers!

Roy A. Mura, posted about the new law on his excellent blog, Coverage Counsel.

Roy gives a very technical explanation, but the real gist of it is that this new law will prevent health insurance carriers in N.Y. from getting away with their historic practice of “double dipping.”

You can check out Roy’s detailed analysis of the new bill in his post “New York State Legislature Passes New Anti-Subrogation Law.”

Below is my less technical explanation of what this new law means to the average person.

What is subrogation – and what’s so bad about it?

As a concept, think of subrogation as you paying someone else’s debt and then your attempting to collect from the person that originally owed the debt. No problem if you do it fairly, but insurance companies have been adding their own twist to the idea.

An example would be: You know Jim owes Mary $40. You run into Mary, she mentions your friend Jim’s debt and you pay it. Then you ask Jim for the money. Fair enough. But what if Mary also asked Jim for the money again? And he paid it again? If he paid you back too, he’d be out $80. Mary would end up with $80 – twice the amount she risked!

The analogy is close to what the insurance companies have been doing for years. First, they charge you HUGE premiums for your health coverage. Then, if you get hurt, and you successfully pursue a personal injury case, they tell you you have to pay them back for the health bills they paid on your behalf!

So essentially, you pay for coverage and then when you use the coverage that you paid for, they say they should get reimbursed IN FULL from YOUR money!

Thankfully, this law will stop this horrible double dipping. I am just glad that the whole health care debate is finally shining a spotlight on some of the egregious past practices of health insurance companies!

Thanks again to Roy A. Mura for his detailed posting about the anti-subrogation bill and his permission to link to it from the NY Injury Law Blog.

Thanks for reading,

Jim
_________________________________________
James B. Reed, Esq.
Personal Injury & Malpractice Lawyer
Ziff Law Firm, LLP
303 William St., Elmira, NY 14902
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9 Responses

Ken Levine Says:
November 17th, 2009 at 10:48 pm
Your analysis is awful.

1. Health Insurance rates are based upon expected net losses. With the elimination of healthcare subrogation, insurance companies will be compelled to raise their premiums rates. This means that the cost for this measure will fall entirely onto all of us who pay for healthcare.

2. Insurance company subrogation has been in place for 100s of years and came to the US when the English did… and has kept the cost of healthcare down every step of the way – placing the ultimate burden for medical expenses on the person who caused the injury.

3. Your own blog fails to mention any doubledipping by the insurance companies – only doubledipping by the injured person (Mary) who seeks reimbursement for medical bills she never had to pay – because they were paid by the insurance carrier.

4. Why don’t you just admit in your blog that this short-sighted measure was promoted and pushed through the legislature by the personal injury trial lawyers’ lobby so they would not need to reduce their fees by the recoveries that had to be turned over to the healthcare carriers – the rightful recipients of any monies recovered for medical bills paid and arising from accidents?

I guess the truth doesnt make for a very sensational blog entry!

Ken Levine
Jim Reed Says:
November 18th, 2009 at 7:09 am
Mr. Levine:

Sorry you didn’t like my analysis. Given the fact that you are a lawyer for the insurance industry (I checked out your website and took note of your firm’s tagline: Focused on the Business of Insurance), it comes as no surprise to me that you hate this new pro-consumer law. Sorry to disappoint the insurance industry who derive billions of dollars of PROFIT every year. It is interesting that you say “insurance rates are based upon expected net losses” but you fail to say that those rates are also designed to extract HUGE profits. Hmmm, I guess your analysis is awful.

Your suggestion that subrogation has kept healthcare costs down is laughable. Have you looked at your premiums lately? My own health insurance premiums went up a whopping 14% again this year. It sure is tough explaining to my employees that their modest raises this year will be entirely consumed by the ridiculous health insurance premium increases.

Thankfully, the public has started to take a look at the historical practices of the insurance industry that have gotten us in to this mess in the first place. Why do health carriers enjoy an exemption from the anti-trust laws? Oopppsss, that’s right….it’s because insurance company lawyers and lobbyists spent millions of dollars persuading the politicians that it wouldn’t be fair for insurance companies to have to compete against one another like every other industry. How ridiculous!

Well, luckily the insurance industry has finally kicked the sleeping dog one time too many and the spotlight is being turned on the insurance industry. As an insurance industry lawyer, I am sure you will say you don’t like it but I am equally sure that you will make a lot of money helping the fat cat insurance companies resist the changes I hope are on the horizon……

Thanks for commenting and I am sure I will be hearing from you again!

Jim Reed
Proud to Represent the Little Guys against the Insurance Giants!
Jen Says:
November 18th, 2009 at 10:09 am
3 questions:
Has the bill been signed by Governor Patterson?
If not, is there any expected date for when this will become law?
Will it be retroactive?

Thanks,
jen
Jim Reed Says:
November 18th, 2009 at 1:10 pm
Ken, you and your insurance buddies can keep saying until the end of time, that our blog “lacks substance” or that our “analysis is flawed” but you just don’t get it that people are now seeing behind the dirty curtain of the insurance world.

Sure, corporate profits are great, and I am all about capitalism and companies making a profit. But gouging people year after year while hiding behind anti-trust exemptions is just plain wrong. People can no longer afford the “profit” of health insurance carriers who are paying their executives multi-million dollar salaries while their customers are having to make the decision between paying their rent and filling their prescriptions…..

As to your comment that this new law is only good for the personal injury attorney and does not benefit the consumer, you apparently don’t understand how these so-called health carrier liens are paid in NY. In NY, any payment to the client’s health insurance carrier comes out of the client’s share of the lawsuit proceeds, NOT out of the attorney’s fees. Accordingly, this law does not benefit me personally a single penny but it DOES benefit my clients in a HUGE way. So, even though “personal injury attorneys” don’t benefit personally from this new law, we still worked our butts off in pushing this legislation because we see first-hand how unfair it is for the insurance companies to grab our client’s money.

Call me a “personal injury attorney” to the end of all time and I will proudly wear that title. I represent the little guys against the insurance company behemoths and I am very proud to help these little guys. Unlike the CEO’s of the insurance company’s you represent, I didn’t make a $10,000,000+ in “executive compensation”. Unlike you and the other insurance company attorneys, I only get paid if I win so every time I take a case I take on the risk of losing. Do you forfeit your fees to the insurance company when you lose? I know you don’t. So go ahead, keep mocking my “substanceless” blog but you remind me of Nero fiddling while Rome burned…..

My regards,
Jim Reed
A Proud Personal Injury Attorney
Jim Reed Says:
November 18th, 2009 at 1:12 pm
Jen:

Three great questions that I can answer in a single sentence: Yes, the bill has been signed and becomes effective immediately in all cases that have not been previously settled or reduced to judgment.

Thanks for reading and commenting on our blog!

Jim Reed
Michael Laffey Says:
December 22nd, 2009 at 3:34 pm
December 23, 2009

Re: The vitality of personal injury claims in New York after §5-335;
Is this the end of small case litigation?
Did the Trial Bar shoot themselves – and their clients – in the Wallet?

Dear Colleagues,

As you know, the winds of change once again blew through the halls of the State Assembly this year with passage of The Governor’s Program Bill #95/S66002, which Governor Paterson signed into law on November 12, 2009. With it came a new section of the New York General Obligations Law (§5-335) which outlawed common law subrogation in all pending and future actions for personal injuries, medical, dental, podiatric malpractice or wrongful death. In the coming months that law will be challenged on various grounds, but before you contribute in a fight to sustain it, I ask that you consider the intended and unintended consequences of §5-335 and the effect it will have on your client’s cases and many of your practices.

It is obvious, but still paramount to note, that part of your client’s claims used to include subrogable medical and wage loss claims. These claims are now gone with the wind. Now nearly all of the medical expenses and wage losses previously asserted in the cases which you are prosecuting on behalf of injured clients are no longer a part of the equation by which property and casualty carriers calculate settlements or potential verdicts. Before you conclude that you can make this up with a higher percentage of settlements in your current case portfolios now that the medicals are no longer “in the way,” consider the following:

Property and casualty adjusters will assign lower values to settlements in many of your cases (e.g. premises liability, slip and falls, dog bites, products liability). Your 62 year old client who slipped and fell, breaking her hip, does not have to pay back the $60,000 operation to the health carrier. Consequently, your client no longer has that claim. Rather, you are relegated to making a claim of pain and suffering, or trying to prove your client’s incontinence or arthritis was caused by the fall and not by a pre-existing condition. And, of course, there is no wage claim.

For the dog bite and small injury claims, no longer can you claim a settlement value of 3-5 times the $2,000 emergency room charge. Counsel will be required to prove specials with greater specificity. You will see settlement values decline in all areas of personal injury. In the past, if needed, you could call in the health insurer and offer to protect their interest for a fee if the defendant was particularly reticent about including anything for provable medicals. Those days are gone. Plaintiffs recoveries in this segment of the market will drop by at least 20% and the days of easy fees from health insurers are gone.

This law will not affect the incidences of medical malpractice. While it is axiomatic in commercial law that payment is only due upon the successful completion of a task, such has never been the case with medical providers who expect to be paid for their services regardless of whether or not they were performed negligently. Plaintiffs used to be able to make a claim for the cost of not only corrective surgery but for deficient services. These claims are now extinguished. Where is the value in a left-sponge or instrument case now?

There are numerous examples where there simply is not enough money to pay the plaintiffs and the subrogation claims. Those cases have been addressed by the Fasso v. Doerr decision which limits the health insurers in those situations. There is simply no need to cut out the subrogation wage claims just to spite the carriers.

Many claims which would have been questionable (like the intoxicated patron who fell from a railing and becomes a quadriplegic) are now not worth considering because there is a significantly reduced recovery potential without the medical and wage specials, subrogable or not. And, of course, under the Common Fund Doctrine, the carrier always pays the attorney for his efforts.

The death of small cases in New York is not the entire story here. It may seem insignificant to some, but small cases are for many attorneys what krill are to the food chain.
§5-335 will eliminate those cases for all but the philanthropic among us and it will diminish the ability of many plaintiffs’ attorneys to survive and prosper.

In the common example of the child who bears one noticeable scar from a dog bite, we must now tell his parents that the case is not worth the time and effort it will take to recover reasonable compensation. In that type of case and in many others you will have to confront the new reality that §5-335 has wrought upon the entire plaintiffs bar

To concede that the people of New York must learn to live with a less vital plaintiffs’ bar or to leave this as part of our legacy is sinful. Knowing the impact that eliminating medical and wage damages will have on all our futures should be unacceptable.

§5-335 is not change worthy of your support.

Your Colleague,

Michael J. Laffey
Jim Reed Says:
December 23rd, 2009 at 6:50 am
Even though I know Mr. Laffey works for the insurance industry in their effort to take money from my clients’ pockets, I approved his comment because I am a true believer in the fair exchange of ideas and impassioned debate.

Needless to say, I totally disagree with Mr. Laffey and his mistaken analysis of how lawsuits work in N.Y. state (both before and after this new law!). Mr. Laffey mistakenly claims that the new law will drastically lower future settlements in injury cases. He is simply flat wrong. He incorrectly suggests that under the old law, we could use lost wages and medical expenses to enhance the value of our injury cases and that we will no longer be able to do so under the new law. He obviously does not know how it works in N.Y. because in N.Y. we have never been able to recover for lost wages or medical bills paid by a carrier because the courts imposed what is generally referred to as the “collateral source rule”. This rule prohibited “double dipping” by the injured person. The only change in the new law is that it prohibits “double dipping by the insurance carriers. Needless to say, the insurance carriers hate the new law because they love their profits more than anything else!

I have practiced injury law in N.Y. and PA every day for the last 23 years. I represent the little guys AGAINST the insurance companies. Mr. Laffey works for the insurance companies who are trying to recover money they have paid by taking money out of my client’s pockets. My views reflect my belief that the little guy is owed some protection from the insurance companies. Mr. Laffey’s view is that the insurance companies deserve to get reimbursed for money they have paid despite the fact that the little guy already paid them hard-earned $ for expensive insurance premiums. Frankly, I think he (and the insurance industry) is full of hog-wash. I can tell you from real-world experience that in the short time since this new law was passed, I have succesfully used the new law to deny insurance carriers attempts to “double dip” and as a result have put at least $50,000 more in my client’s pockets. By my definition, that’s a good thing.

Jim Reed
N.Y. & PA Injury & Malpractice Lawyer
V. Bauer Says:
January 16th, 2010 at 4:59 pm
This is great news for New York consumers! That is, if they don’t get their health plan at work. If they work for a large company that self-funds their plan, they could lose their entire settlement to their employers, even if there is an anti-subrogation law and even if the victim is not compensated.
So the victim pays their own medical bills. This happened to me in Pa. How can the insurance companies dare pass this off as fair? You purchased a product – you are entitled to the benefits for which you paid.
V. Bauer Says:
January 16th, 2010 at 5:05 pm
Oh, by the way, to Ken Levine: my attorney did not lower his fee – he took 1/3 of the entire settlement, then told me about the health plan’s “right” to take the rest! He had absolutely no incentive to protect my interests as he received 1/3 of the whole thing no matter what happened to me.