Almost all group health plans governed by the Employee Retirement Income Security Act (ERISA) of 1974, as amended have provisions which are titled as, or purport to be, "subrogation" provisions. These provisions generally provide for immediate payment of the medical expenses of a participant, with the obligation that if the participant obtains a later recovery of these same expenses from another party (e.g., a party responsible for the injury), the participant is obligated to reimburse the group health plan for its payment of such expenses. A good example of a situation where these provisions would be implemented is when a participant is involved in an automobile accident, incurs medical expenses paid for by the group health plan of the participant’s employer and also receives payment from another party involved in the accident (or that party's insurance company). The plan's "subrogation" provision would require the participant to reimburse the plan for such reimbursed medical expenses after the recovery.
These provisions are generally referred to as "subrogation" provisions in ERISA group health plans. However, the historical meaning of a "subrogation" provision is the substitution of one party for another party in the assertion of rights against the third party. Normally, subrogation arises when one party pays the debt of another party (debtor) and succeeds to all rights of the creditor against the debtor. In the context of the example cited above, a "subrogation" provision would provide for the payment of the medical expenses of a participant by the plan and then allow the plan to pursue an action against the other party who was involved in the automobile accident.
In some Circuits it makes a difference whether these provisions are characterized as "subrogation" or not since the characterization affects whether the provision is enforceable by the group health plan against the participant under ERISA. The ERISA provision which a health care plan would use to require a participant to repay the plan, Section 502(a)(3)(B), allows an action only for "appropriate equitable relief." An action providing for "legal" relief (i.e., the payment of money), is not an authorized action under Section 502(a)(3)(B) of ERISA. The problem with the typical "subrogation" provision in many ERISA medical plans is that a court may characterize the requested relief as involving only the payment of money (i.e., legal relief) and therefore not authorized under ERISA. In fact, such a characterization was made by the Ninth Circuit Court of Appeals in FMC Medical Plan v. Owens, which refused to allow a health care plan to enforce its "subrogation" provision (which it said was really a reimbursement provision).
The issue of whether the normal "subrogation" provision in an ERISA group health plan is enforceable under ERISA was to be decided by the U.S. Supreme Court on the appeal of Reynolds Metals Co. v. Ellis, but the case was dismissed at the request of the plan. On January 22, 2001, the U.S. Supreme Court again decided to rule on the issue when it accepted review of the Ninth Circuit case of Great-West Life v. Knudson. Hopefully, such decision will affirm the use of, and enforcement of, such provisions under ERISA (as permitted in other Circuits) or provide guidance to group health plans as to how to write such provisions so as to be enforceable.