Woman Sues Blue Cross and Blue Shield To Block Health Insurer’s Liens

A new potential class action lawsuit looks to block the largest not-for-profit health insurance carrier in Missouri from cashing in on its members' personal injury settlements.

The lawsuit filed last week in Jackson County Circuit Court seeks an injunction against Blue Cross and Blue Shield of Kansas City for subrogation, specifically for applying liens against personal injury settlements for medical expenses that are covered through the Federal Employee Health Benefits Act. Blue Cross contracts with the federal government to administer FEHBA plans for government employees and dependents, according to the lawsuit.

The plaintiff, Shannon Jacks , accuses Blue Cross of subrogation, which her attorneys contend no federal provision allows to FEHBA carriers on personal injury settlements. Also, subrogation on most personal injury claims is prohibited in Missouri, said plaintiff's attorney Mitchell Burgess , of Burgess & Lamb in Kansas City.

"The courts in Missouri have consistently held that the assignment or sale of a personal injury claim is against our public policy," Burgess said in an interview.

Reached by phone, a Blue Cross spokeswoman declined to make an immediate comment Monday.

"We have not yet received official notification on this case and cannot comment until we've had a chance to review and evaluate the case itself," Blue Cross senior director of corporate communications, Susan Johnson , later wrote in an e-mail.

Wisconsin-based Meridian Resource Co. is named as a co-defendant in the class action for allegedly assisting Blue Cross with subrogation claims in Missouri. A Meridian representative didn't immediately return a phone call Monday.

Burgess said the issue of subrogation, which he described as complicated because it marries federal case law with state law, recently has become a hot-button issue with trial attorneys that he partially attributed to the economy.

"Plaintiff lawyers are realizing they shouldn't have to pay this money out of the settlements," Burgess said.

In states that allow subrogation on personal injury claims, insurance companies can step in to collect payment on medical treatment for personal injuries that were caused by a third party.

Jacks, the plaintiff in the Jackson County case, was hurt in an April 2007 traffic accident. Jacks is the dependent of a federal government employee and has medical insurance coverage through a federal health benefit plan governed by FEHBA. Since FEHBA contracts with Blue Cross to provide the federal benefits, Blue Cross paid Jacks' medical bills related to the accident, according to the lawsuit.

Jacks reached a settlement with the driver of the colliding vehicle that he paid through his motor vehicle insurance policy to compensate her for her injuries, medical treatment and pain and suffering connected to the accident.

Meridian allegedly asserted a roughly $9,800 lien against Jacks for payment on treatment for her accident-related injuries on behalf of Blue Cross and then upped it to nearly $15,800, according to the lawsuit.

Burgess noted that the U.S. Supreme Court held in Empire Healthchoice Assur., Inc. v. McVeigh in 2006 that FEHBA's pre- emption clause does not apply to subrogation or reimbursement rights of an insurer and that Missouri law "expressly prohibits subrogation of health care benefits paid in connection with personal injury settlements."

However, the defendants continued to pursue payment of "unlawful reimbursement" from the plaintiff's personal injury settlement, Jacks claimed. Jacks ultimately remitted the amount to Blue Cross under protest in August.

The potential class could include thousands of members who also have paid on similar liens, according to the lawsuit, which includes counts of unjust enrichment, conversion and violations of the Missouri Merchandising Practices Act against Meridian and Blue Cross.

In addition to an injunction, the complaint asks for a declaration that Blue Cross' and Meridian's actions violated the class members' rights. Jacks and any other members are seeking actual damages, pre-judgment interest, post-judgment interest, attorney fees and court costs.

The case is Shannon Jacks v. Meridian Resource Co. et al. No case number has been assigned yet.