Amendment to New York’s General Obligations Law 5-101 and 5-335 Signed into Law

Yesterday, Governor Andrew Cuomo signed into law New York Bill S5715/A7828 which was passed by both the New York Assembly and Senate earlier this year. The new law was originally proposed in response to a recent Eastern District of New York decision which found that the original version of the laws, N.Y. Gen. Oblig. Law 5-101 and 5-335, were not “saved” from ERISA federal preemption because they were not specifically directed toward insurance entities. The new law is intended to correct any flaws which may have existed in prior versions by replacing the term “benefit provider” with “insurer” to pull this law directly under the purview of ERISA’s saving clause. Additionally, the new law removes the terminology exempting insurers with “statutory rights to reimbursement” and now limits this exemption specifically to Medicare, Medicaid and worker's compensation liens. This change removes any confusion as to whether an insured ERISA claim fell under the definition of a “statutory reimbursement right.” Finally, the law also replaces the terms “plaintiffs” and “defendants” with “persons” to clarify the legislature’s intent to allow this law to reach settled cases without requiring an injured party to formally commence the case by filing.

Bottom Line:

This bill will have a major impact, because it arguably limits the subrogation rights of subject ERISA plans against tried and settled cases. The law takes effect immediately and is retroactive to all cases, settled or tried, on or after November 12, 2009.

According to the Kaiser Family Foundation, approximately 40% of employees nationwide who received private employer-based health coverage in 2012 did so through fully insured arrangements. [i] Given the high number of individuals receiving fully insured employer-sponsored coverage, these health plans will likely see their reimbursement rights curtailed for medical costs for which their employee members later receive third-party payments.

The Garretson Resolution Group will closely monitor the application of the new law’s impact on healthcare lien resolution in New York. If you have any questions please feel free to contact Michael Russell at mrussell@garretsongroup.com or Charles Medlin at cmedlin@garretsongroup.com or 704.559.4300.

[i] Kaiser Family Foundation, 2012 Employer Health Benefits Survey, Section 10: Plan Funding; available at http://kff.org/report-section/ehbs-2012-section-10/