New York Legislature Attempts to Revitalize Its Anti-Subrogation Statute

There’s an effort underway in New York state to clarify the scope of the state’s 2009 anti-subrogation law (General Obligations Law 5-335). New York Bill S5715/A7828 has passed both the New York Assembly and Senate and will be submitted for the governor’s signature. Recent court decisions in New York have effectively narrowed the scope of the law, such that it seems to apply only to basic insurance arrangements (individually purchased policies) and state-based health plans without a statutory right to reimbursement. Now, the proposed amendment aims to establish that the law is aimed at insurers and applies to any liability claims made, not only those filed.

As the legislative notes indicate, the amendment is a direct response to a federal decision we told you about this spring in Wurtz v. Rawlings Co., LLC, 2013 WL 1248631, (E.D.N.Y. March 28, 2013). In Wurtz, the Court found that the law was not “saved” from ERISA federal preemption, because it was not specifically directed toward insurance entities. Wurtz involved a class of personal injury plaintiffs who had employer-sponsored health plans funded through insurance arrangements (i.e., fully insured ERISA plans). Plaintiffs sued Rawlings, Oxford Health Plans, and UnitedHealth Group asserting, in part, that NY GOL 5-335 trumped any reimbursement rights that the health plans had per ERISA. The Court dismissed the lawsuit, finding that the New York state law was not “saved” from preemption. This new legislation is intended to restore the law’s protection under ERISA’s Savings Clause, 29 U.S.C. § 1144(b)(2)(A).

Bottom Line:

This bill could have a major impact if enacted, because it would arguably limit the subrogation rights of subject ERISA plans. 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, it seems that if this proposal is signed into law, these health plans could 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 progress of this proposed legislation and its potential impact on healthcare lien resolution in New York. If you have any questions please feel free to contact Michael Russell, who leads our private lien resolution team, at mrussell@garretsongroup.com, or (704) 559-4300.