Florida Court Follows Suit In Granting Double Damages to Part C Plan



Summary: The United States District Court for the Southern District of Florida in Humana Medical Plan , Inc. V. Western Heritage Ins. Co., recently granted Humana, a MAO, a private cause of action as well as double damages against the third-party tortfeasor. This decision, in conjunction with its predecessors, should alert MAO beneficiaries and settling parties that MAOs’ recovery rights are being viewed in many instances by the courts as resembling that of traditional Medicare.

The United States District Court for the Southern District of Florida recently joined other courts that are following the Third Circuit’s holding in In re Avandia.[1] On March 13, 2015, the Florida court granted summary judgment in favor of the plaintiff, Humana, holding that the Medicare Secondary Payer (MSP) statutes provide Humana, a Medicare Advantage Organization (MAO), with a private federal cause of action against Western Heritage Insurance Company (Western Heritage).[2] The court further determined that Humana was entitled to double damages per 42 U.S.C. § 1395y(b)(3)(A).[3] This result reinforces the fact that while MAOs have contractual rights associated with their enrollees, MAOs’ relationship to Medicare is becoming an equal, if not more important part of any recovery analysis, which is increasingly beginning to resemble statutory rights of recovery akin to the federal government’s MSP rights.

The facts giving rise to this case are unremarkable. Mary Reale filed a premises liability claim for a slip and fall she incurred on the property of Western Heritage’s insured. Western Heritage and Mary Reale entered into a settlement agreement to resolve her general liability claim. Following the state court’s order, Western Heritage released all settlement proceeds to Mary Reale’s attorney. Mary Reale subsequently filed suit against Humana; that case is currently under appeal with the Third District Court of Appeals.[4] Eventually, Humana filed a claim against Western Heritage which is the subject of this decision. Humana sought reimbursement from Western Heritage for conditional payments it made on behalf of Mary Reale, along with double damages for their claim pursuant to the MSP Act.

In its analysis, the court distinguished the Ninth Circuit’s holding in Parra v. Pacificare of Arizona, 715 F.3d 1146, (9th Cir. 2013) (holding that the MAO did not have a private cause of action), by identifying that Parra did not involve a claim against a primary payer. Instead, the court applied the reasoning provided by the Third Circuit: “The statutory text of the MSP Act clearly indicates that MAOs are included within the purview of parties who may bring a private cause of action.”[5] Thus, the court considered the benefits provided by Humana to be the same as conditional payments; no different from traditional Medicare. This meant Western Heritage was obligated to reimburse Humana for those payments. The court found inconsequential the fact Western Heritage had already settled the claim with Mary Reale based on its status as a primary payer. When Western Heritage entered into a settlement agreement with Mary Reale for medical expenses incurred, it was a primary plan that had that responsibility to make payment to the MAO.

The court took its jurisprudence a step further by agreeing that Western Heritage was obligated to pay double damages to Humana because it was aware of Humana’s right prior to the settlement with Mary Reale but failed to submit reimbursement to Humana.[6] The court found Western Heritage’s argument that a fact question remained with regard to the amount Humana was entitled to be reimbursed unavailing.

This decision follows the trend of cases in which courts are granting MAOs a private cause of action under the MSP statute. In so doing it also raises important questions about the rights of MAOs and the obligations of “primary payers” and Medicare-enrolled beneficiaries. While the case is arguably only authoritative in Florida, the court’s decision will likely keep MAO plan discussions (i.e. Medicare Parts C & D) in the mix of issues being discussed by the parties at the time of inking a settlement agreement.

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[1] See Humana Ins. Co. v. Farmers Texas County Mutual Ins. Co., 2014 U.S. Dist. LEXIS 166654 (W.D. Tex., September 24, 2014); Collins v. Wellcare, 2014 U.S. Dist. LEXIS 174420, (E.D. La., December 16, 2014).

[2] Humana Medical Plan, Inc. v. Western Heritage Ins. Co., 2015 U.S. Dist. LEXIS 31875 (S.D. Fla., March 16, 2015).

[3] Id. at 17.

[4] Notably, the state court reduced Humana’s claim, not only for fees and costs, but also by the same percentage that Ms. Reale’s case was diminished. (“The state court found that Mrs. Reale had recovered 33.75% of the full value of her claims in her settlement with Western Heritage and therefore had recovered 33.75% of the total benefits paid by Humana, or $6,464.95. [] The state court then further reduced that number by 43%, taking into account the pro-rata share of fees and costs incurred in securing the settlement agreement, thus holding that Humana was entitled to reimbursement in the amount of $3,685.03.”).

[5] Humana v. Western Heritage at 13.

[6] When Western Heritage learned of Humana’s lien rights, it attempted to include Humana as a payee on the settlement check. However, the state court judge ordered Western Heritage to tender funds without the inclusion of any lienholder on the check.

[7] The court found no question of fact with regard to Humana’s claim amount because Mary Reale failed to challenge the amount using administrative procedures.

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