United States: Amendments Strengthening Department Of Public Welfare’s Ability To Pursue Third Party Liability Claims Have Taken Effect

What happened?

On September 2, 2008, changes to the Pennsylvania Medical Assistance Third Party Liability statute, 62 P.S. §1409, intended to bolster the ability of the Department of Public Welfare ("DPW") to pursue third party liability claims became effective. These changes, while primarily directed at Medical Assistance ("MA") recipients, impact liability insurers whose insureds are sued by MA recipients. In such instances, the law now requires the insurer to provide DPW notice of the suit and notice of settlement. The notice obligations are independent of and in addition to notices that are required of the MA recipient. The amendments also give DPW the authority to impose monetary fines for willful failures to comply.

What does it mean?

The notice requirements were imposed on insurers because the DPW found that the prior notice requirements, which were directed only to MA beneficiaries, were ineffective. Consequently, the statutory revisions also make insurers responsible for ensuring DPW has the opportunity to recover benefits it paid from third parties.

Implications

When its insured is named in an action to recover damages, an insurer is required to notify the DPW in writing of the action or claim if the insurer "receives information indicating that the beneficiary received benefits under the MA program." The notice obligation is triggered by an indication that benefits were received, not actual knowledge. Further, the notice obligation is not dependant on the plaintiff seeking to recover medical expenses. In order to be proper and effective, the notice must be delivered by personal service, certified mail, or registered mail. The insurer must then file proof of the notice in the action or claim.

An insurer is also required to advise DPW of any settlement, even if DPW has not intervened in the case and reimbursement for benefits has not been sought by the Plaintiff. Notice of settlement is required within 30 days of the settlement. If judicial approval of the settlement is required, then DPW must be given "reasonable notice" in advance of a hearing to approve the settlement. Although no specific time is set forth in the statute, notice is deemed reasonable if the DPW has sufficient time to intervene.

To ensure compliance with the revised notice requirements, the DPW is now permitted, after notice and a hearing, to impose a penalty of up to $5,000 per violation, if the failure to comply was willful. The failure to give proper notice may also extend the statute of limitations for an action by the DPW to recover benefits for an additional two years.

Additionally, some of the new requirements directed at MA recipients have an effect on insurers or their insureds. If a MA recipient plaintiff chooses not to pursue medical expenses, a so-called "negative election," then DPW may intervene in the case. In most instances, however, the DPW will try to work directly with the insurer to resolve the claim before intervening. Additionally, a MA recipient plaintiff may not indemnify an insurer or its insured as a condition of settlement unless the DPW has resolved its claim for reimbursement of the benefits.

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