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Texas C.P.R.C. c. 140: The New Standard for Subrogation Rights

Texas health plans seeking reimbursement via subrogation, are now forced to deal with new guidelines. C.P.R.C. c. 140, governing subrogation, went into effect January 1, 2014; enacting H.B. 1869, which was passed months prior; but the finer points are still being explored.

Who Does This Affect?

The new law impacts municipal health and retirement plans and fully insured health plans; (policies and plans where state law is not exempted by ERISA).  Medicare, Medicaid/CHIP, workers’ compensation, and private self funded ERISA plans are not affected.

What’s Changed?

Chapter 140 limits benefit plan subrogation to half of the plan member’s total recovery.  If the plan member is represented by counsel, this rule further requires plans to “reasonably” contribute to the attorney’s fee, (usually one third of the share).  In practice, this results in a three way split of the total funds recovered.

The rule seems to limit a benefit plan’s rights, but The Phia Group recognizes benefits of this new law as well, such as the elimination of Texas’ made-whole rule.

What Does This Mean For Affected Plans?

Other elements have yet to be fully explored by the courts.  For example, the cap imposed on subrogation and reimbursement interests (up to one half of the total recovery) is a “communal cap”, meaning that if there are multiple entities claiming reimbursement rights, their combined recoveries are capped at one half of the member’s recovery. The law does not address how funds are to be allocated between the respective interests in such a case. How can you ensure your rights take precedence over all others?  Knowledgeable, creative advocates like The Phia Group can identify the best route to maximize your recovery. C.P.R.C. c. 140 creates a solid framework governing (and limiting) subrogation and reimbursement recoveries in Texas. There are cracks, however, in the wall erected by Texas legislators. Plans which are able to identify these cracks and find creative ways to take advantage of the law’s non-obvious opportunities will be the ones who reap the benefits.

What Should I Do?

For information about The Phia Group and how they can help, contact:

Michael Branco
Principal
The Phia Group, LLC
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mbranco@phiagroup.com
Phone: 781-535-5618
Fax: 781-535-5656