WASHINGTON–Congressional Democrats supported by several lobby groups are pushing to delete language in a pension bill that some believe could impact both accident and asbestos injury claims.

The effort, backed by the American Association of Retired Persons and the trial lawyer industry, is focusing on wording in a provision that would give health care insurers priority status in recovering their costs when an accident victim collects settlement money.

Opponents of the measure fear that giving such health insurer subrogation claims priority would mean that little or no settlement money would be left for the victim and his attorney.

Besides accident victims, the provision also could potentially affect those employees who obtain settlements for injuries suffered from exposure to asbestos in the workplace.

The pension measure clashes with language in another bill, the FAIR Act, drafted by Sen. Arlen Specter, R-Pa. That bill would remove asbestos claims from the court system and create an alternative claims-handling system. Sen. Specter's measure has a provision specifically exempting asbestos settlements from subrogation claims by insurance companies.

Mark Behrens, a partner with Shook, Hardy & Bacon LLPA, in Washington, D.C., who represents defendants and insurers on asbestos claims, said that if the FAIR legislation passes, its language would take precedence over the provision in the pension reform bill. But he declined to venture an opinion as to whether it would affect ongoing asbestos litigation going forward.

An official of America's Health Insurance Plans confirmed the import of the pension bill provision, apparently inserted after the House version of the bill left the committee and before it was put on the House floor.

A supporter of the pension provision is Rep. John Boehner, R-Ohio, the House majority leader, who inserted the provision before it reached the House floor last year when he served as chairman of the House Committee on Education and the Work Force. Boehner is another member of the reconciliation panel.

The pension bill provision came to light late Thursday, when Sen. Edward Kennedy, D-Mass., a member of the House-Senate reconciliation committee negotiating final pension reform legislation, said he would make removing it from the bill a priority.

Other Democratic members of the reconciliation panel also are working to have the provision removed, as mentioned in a letter to all members of Congress sent June 21.

In addition to the trial lawyers and AARP lobbyists, trade groups advocating for patients also are working to remove the language.

Under the disputed provision, the health plan would be paid first in the event of a settlement if there is language in health insurers' contracts with employees that says they can collect in the event of a settlement with a third party regardless of whether the insured is made whole or the attorney is compensated.

The provision would create a new cause of action under ERISA, allowing HMOs and health insurance companies to sue their policyholders when they have been injured in an accident–and require the policyholder to pay the insurer off the top, not only reducing the amount the policyholder gets but also the commission the victim pays his lawyer.

The issue must be resolved this week, because members of the reconciliation panel are putting finishing touches on a consensus bill in hopes of putting it on the House floor this week. The House is scheduled to complete work before a month-long summer recess July 27; the Senate plans to leave Aug. 4.

According to several industry lawyers, the provision was inserted at the request of the health insurance industry before the Supreme Court ruled in May in Sereboff v. Mid Atlantic Medical Services, Inc. that health plans can ask for reimbursement for previously provided benefits if the recipient of those benefits receives payment for the services from someone else.

But according to Mohit Ghose, the provision in the House pension bill is broader because it establishes a uniform standard for subrogation in all federal Appeals Court circuits, while the Supreme Court decision merely dealt with a decision in the 4th U.S. Circuit Court of Appeals.

Mr. Ghose confirmed the broad impact of the provision. He said insurance contracts with policyholders state specifically that reimbursement comes “at the time of settlement.”

The reimbursement would be from the top of the pot, not after the lawyer fee, he said. By reinforcing ERISA, it means that lawyer fees would be based on the amount left after the plaintiff settles with his health care plan.

The Supreme Court decision, Mr. Ghose said, was designed to resolve differences in several circuits on the issue but did not cover all of its aspects.

“It is important to retain the provision in the pension bill because it says that regardless of conditions, unions, employers and other plan sponsors can reinforce these reimbursement provisions,” Mr. Ghose said.

“In doing so, it ensures that all participants and beneficiaries of a plan are treated alike and also that any monies collected can be used for the entire group covered by the plan,” he said.

Reimbursing health care plans after policyholders receive settlements from third parties “continues to be a critical cost-saving device for unions, employers and other plan sponsors as they continue to face strong health care cost inflation pressures,” Mr. Ghose said.

He said there are estimates that recoveries going back into benefit plans are as much as $1 billion annually, “which help keep costs in check for all members of a benefit plan.”

In his comments on the issue last month, Sen. Kennedy said, “The effect of the House provision would be to take away defenses the patient currently has that in many cases prevent the insurance company from taking all or most of his or her financial settlement.”

He said it would allow the insurance companies to take money from injured patients that were intended to cover their future expenses for medical care and to compensate them for their lost wages.

“This would have devastating consequences for people who suffer serious and often permanent injuries, such as paralysis or loss of cognitive function,” Kennedy said.

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