Summary
In Bonsanti v. Newman, supra, 40 Conn. L. Rptr. 700, the defendant brought a motion for a collateral source reduction of the jury's award of $1, 105, 700 for the plaintiff, in his personal injury action arising out of an automobile accident.
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No. CV03 040 10 98
February 3, 2006
MEMORANDUM OF DECISION RE COLLATERAL SOURCE REDUCTION
Before the court is the defendant's, Francoise Newman's, motion for a collateral source reduction of the jury's award of $1,015,700.00 for the plaintiff, Donald Bonsanti, in his personal injury action arising out of an automobile accident that took place on July 7, 2002. The award consisted of compensation for both economic and noneconomic damages. The economic damages award included medical damages, which, the jury concluded, arose from injuries the plaintiff suffered as a result of the accident. At trial, the plaintiff submitted the bills he received from various medical care providers. The court presented the jury with interrogatories asking the jury to list the medical expenses which it believed were reasonable and related to the accident in this case. The jury returned a list of fourteen medical care providers that provided services which were reasonable and related to the accident. The jury awarded the plaintiff $215,702.23 in medical damages which corresponded to the amounts billed by the providers.
The bulk of the plaintiff's medical expenses were paid by his group health plan, the FlexPlus plan, established and funded by his wife's employer, TJX Companies to conform with the Employee Retirement Income Security Act of 1974 (ERISA). The FlexPlus plan maintains a right of subrogation with respect to any injury or illness for which a benefit or payment is provided. Of the $215,702.23 in medical expenses, TJX Companies paid $139,619.16, and the plaintiff's medical care providers adjusted their billing by $76,083.07 as a condition of their contracts with Blue Cross and Blue Shield of Massachusetts, the plan administrator.
The defendant now moves for a reduction of the economic damages by the amount, which the plaintiff's medical care providers adjusted as a condition of their contractual relationships. The plaintiff opposes the defendant's motion for a collateral source reduction and argues that the award should not be reduced because federal law preempts state law relating to self-funded ERISA health plans, like the FlexPlus Plan.
The court heard argument on October 13, 2005 and November 1, 2005. On November 1, 2005, Lauren Hunter, an administrator of TJX Companies' FlexPlus plan, testified that TJX Companies maintains its own fund from which it pays employees' medical claims under the FlexPlus plan and that Blue Cross and Blue Shield of Massachusetts administers the plan. Ms. Hunter further testified that TJX Companies regularly submits lists of paid medical claims to a company called Ingenix. Ingenix reviews the list of paid claims and decides whether another source of funds exists against which TJX Companies should pursue its right of subrogation. Ms. Hunter testified that TJX Companies' right of subrogation only applied to amounts paid by TJX Companies and that Ingenix would not pursue the insured for amounts that represent adjustments made by individual medical care providers.
The FlexPlus Plan is an employee benefit plan established and funded by TJX Companies, an employer engaged in commerce as required by 29 U.S.C. 1003(a). Therefore, that ERISA applies to the FlexPlus Plan.
"Except as provided in subsection (b) of this section and in sections 1051, 1081, 1101 of this title, this subchapter shall apply to any employee benefit plan if it is established or maintained (1) by any employer engaged in commerce or in any industry or activity affecting commerce; or (2) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce; or (3) by both." 29 U.S.C.A. 1003(a).
"Except as provided in subsection (b) of this section, the provisions of this subchapter and subchapter III of this chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan described in section 1003(a) of this title and not exempt under section 1003(b) of this title." 29 U.S.C. § 1144(a). The Connecticut Supreme Court, in Napoletano v. CIGNA Healthcare of Connecticut, Inc., 238 Conn. 216, 680 A.2d 127 (1996), analyzed the extent to which federal law preempts state laws which relate to health plans regulated under ERISA. The court stated, "The [U.S.] Supreme Court has further concluded that a state law may `relate to' a benefit plan, and thereby be [preempted], even if the law is not specifically designed to affect such plans, or the effect is only indirect . . . However, [s]ome state actions may affect employee benefit plans in too tenuous, remote, or peripheral a manner to warrant a finding that the law `relates to' the plan . . . For example, many laws of general applicability that function irrespective of the existence of an employee benefit plan are not preempted because they are too remotely related to the plan . . ." (Citations omitted; internal quotation marks omitted.) Id., 237. In Napoletano v. CIGNA Healthcare of Connecticut, Inc., supra, 238 Conn. 216, the court focused on New York State Conference of Blue Cross Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 115 S.Ct. 1671, 131 L.Ed.2d 695 (1995) in which the U.S. Supreme Court limited federal preemption of state laws which relate to employer funded health plans. The Connecticut Supreme Court recognized that "[s]ince Travelers Ins. Co. was decided, various courts of appeals, including the Court of Appeals for the Second Circuit, have focused on the [U.S.] Supreme Court's primary concerns with respect to ERISA preemption and, consequently, have followed the lead of that court by limiting ERISA preemption to state action that demonstrably burdens ERISA plans." Napoletano v. CIGNA Healthcare of Connecticut, Inc., supra, 238 Conn. 240.
General Statutes § 52-225a(a) states in relevant part: "In any civil action . . . wherein the claimant seeks to recover damages resulting from (1) personal injury or wrongful death . . . and wherein liability is admitted or is determined by the trier of fact and damages are awarded to compensate the claimant, the court shall reduce the amount of such award which represents economic damages, as defined in subdivision (1) of subsection (a) of section 52-572h, by an amount equal to the total of amounts determined to have been paid under subsection (b) of this section less the total of amounts determined to have been paid under subsection (c) of this section, except that there shall be no reduction for (1) a collateral source for which a right of subrogation exists and (2) that amount of collateral sources equal to the reduction in the claimant's economic damages attributable to his percentage of negligence pursuant to section 52-572h." Id. § 52-225a is one of those state statutes of general applicability which only remotely relates to employer funded health plans in that such an ERISA plan may at times provide collateral source payments on behalf of a participating employee who is also a prevailing plaintiff in a civil case. If the statute has any demonstrable impact on ERISA health plans, it protects the plan and its participants by prohibiting collateral source reductions when a right of subrogation exists. This prohibition works to preserve an ERISA plan's right to be reimbursed for any payments made on behalf of the participant. Therefore, § 52-225a does not demonstrably burden ERISA health plans and is not preempted by 29 U.S.C. § 1144(a).
General Statutes § 52-225c, on the other hand, does burden ERISA health plans. Section 52-225c is Connecticut anti-subrogation statute which would prevent an ERISA health plan from independently pursuing its right of subrogation against a defendant, in this case, Francoise Newman, who is liable to the plan's subrogee, in this case, Donald Bonsanti. § 52-225c is the type of state law contemplated by the U.S. Supreme Court which "might produce such acute, albeit indirect, economic effects, by intent or otherwise, as to force an ERISA plan to adopt a certain scheme of substantive coverage or effectively restrict its choice of insurers, and . . . might indeed be pre-empted under [ 29 U.S.C. 114(a)]." New York State Conference of Blue Cross Blue Shield Plans v. Travelers Ins. Co., supra, 514 U.S. 645, 668. Furthermore, numerous Superior Court opinions have recognized that ERISA preempts Connecticut's anti-subrogation statute. See Gauntlett v. Webb, Superior Court, judicial district of Fairfield, Docket No. CV 98 0352842 (August 13, 2003, Ballen, J.) ( 35 Conn. L. Rptr. 419, 421) (October 13, 2003). Therefore, in this case, ERISA preempts § 52-225c, and pursuant to § 52-225a(a) the verdict should not be reduced as to the $139,619.16 paid by TJX because TJX retains its right of subrogation.
"Unless otherwise provided by law, no insurer or any other person providing collateral source benefits as defined in section 52-225b shall be entitled to recover the amount of any such benefits from the defendant or any other person or entity as a result of any claim or action for damages for personal injury or wrongful death regardless of whether such claim or action is resolved by settlement or judgment. The provisions of this section shall apply to insurance contracts issued, reissued or renewed on or after October 1, 1986." General Statutes § 52-225c.
The remaining $76,083.07 in medical special damages awarded by the jury is free from any right of subrogation. This amount represents adjustments applied to the plaintiff's medical bills as a condition of his medical care providers' contracts with Blue Cross Blue Shield of Massachusetts. The remaining issue is whether those adjustments are collateral source payments under General Statutes § 52-225b for the purpose of calculating a collateral source reduction of the verdict in this case pursuant to § 52-225a. Section 52-225b states: "`Collateral sources' means any payments made to the claimant, or on his behalf, by or pursuant to: (1) Any health or sickness insurance, automobile accident insurance that provides health benefits, and any other similar insurance benefits, except life insurance benefits available to the claimant, whether purchased by him or provided by others; or (2) any contract or agreement of any group, organization, partnership or corporation to provide, pay for or reimburse the costs of hospital, medical, dental or other health care services." Id. On this issue, Connecticut law is clear.
"In economic terms, at least, the forgiveness of a debt is as much a payment as a transfer of money." Hassett v. New Haven, 49 Conn.Sup. 7, 10 (2004), aff'd, 91 Conn.App. 245, 247, 880 A.2d 975 (2005) ( 37 Conn. L. Rptr. 735). In Hassett v. New Haven, supra, 49 Conn.Sup. 7, the court held that voluntary forgiveness of a debt is not a collateral source within the meaning of § 52-225b because the debt is not forgiven pursuant to an insurance arrangement or any contract or agreement. Id., 10. The Appellate Court adopted Hassett v. New Haven, supra, 49 Conn.Sup. 7 "as a proper statement of the issues and the applicable law concerning those issues." Hassett v. New Haven, 91 Conn.App. 245, 247, 880 A.2d 975 (2005). Consequently, involuntary forgiveness of a debt, like the adjustments made by medical providers in this case as a condition of their contract with Blue Cross Blue Shield of Massachusetts, is a collateral source payment within the meaning of § 52-225b for the purposes of calculating a reduction in economic damages pursuant to § 52-225a.
The plaintiff, asserting that his medical care providers' adjustments are not collateral source payments, relies on Hernandez v. Marquez, Superior Court, judicial district of Fairfield, Docket No. 377482, (January 5, 2004, Levin, J.) ( 36 Conn. L. Rptr. 351) (March 1, 2004), which held that write-offs by medical care providers were not collateral source payments because they were not specifically included within the definition of collateral sources in § 52-225b. Id., 359. Hernandez v. Marquez, supra, 36 Conn. L. Rptr. 351, is unpersuasive because it contradicts subsequent Appellate Court authority in Hassett v. New Haven, supra, 91 Conn.App. 245, and because it undermines the purpose of the statute "to prevent plaintiffs from obtaining double recoveries, i.e., collecting economic damages from a defendant and also receiving collateral source payments." Alvarado v. Black, 248 Conn. 409, 417, 728 A.2d 500 (1999).
In determining the proper amount for a collateral source reduction, consideration should be given to what the plaintiff is actually entitled to recover. There are now two awards used to compensate for personal injury: a subjective award of fair, just and reasonable damages for noneconomic loss and an objective award for economic damages. "`Economic damages' means compensation determined by the trier of fact for pecuniary losses including . . . the cost of reasonable and necessary medical care . . ." General Statutes § 52-572h(a)(1). This statutory definition makes it clear that the plaintiff is entitled to recover the actual cost of medical care which was both reasonable and necessary based on the injury sustained.
In many cases, however, the court's instruction requires the jury to determine "the fair and reasonable value of the medical services related to the accident." See, e.g., Madsen v. Gates, 85 Conn.App. 383, 388-89, 857 A.2d 412 (2004). Such an instruction is inconsistent with the statutory definition of economic damages. The plaintiff cannot be entitled, in every case, to both the reasonable value of his medical expenses and the cost of reasonable and necessary medical care because the reasonable value as determined by the jury may be different than the actual cost to the plaintiff. Rendering judgment on the reasonable value of medical care determined by the jury could, therefore, result in either under compensation or 52-225a so that the award to the plaintiff for medical damages reflects his actual costs. Under both the current collateral source statutes and the prior common-law collateral source rule, the jury has no means of determining the plaintiff's actual medical costs.
The common-law collateral source rule prohibited collateral source reductions of jury awards to prevent wrongdoers from benefiting from payments made by third parties. Rametta v. Stella, 214 Conn. 484, 489-90, 527 A.2d 978 (1990). Under that rule, now abolished in Connecticut, "the fact that a third party has paid the plaintiff's bills would be irrelevant and inadmissible," Acampora v. Ledewitz, 159 Conn. 377, 384, 269 A.2d 288 (1970), because third-party payments would not reduce the plaintiff's recovery. Despite the legislature's clear intent to abolish the common-law collateral source rule by passing § 52-225a, see Alvarado v. Black, supra, 248 Conn. 416-18, the Appellate Court has suggested that evidence of collateral source payments should not be revealed to the jury ". . . unless the evidence shows a windfall recovery would result . . ." Madsen v. Gates, supra, 85 Conn.App. 389, n. 4.
In the present case, the jury did not receive evidence of the collateral source payments made on behalf of the plaintiff, and based its award on the unadjusted medical bills the plaintiff presented at trial. The court instructed the jury, through interrogatories, to decide whether the plaintiff suffered medical damages and to list the plaintiff's medical expenses which were both reasonable and related to the damage he suffered as a result of the defendant's actions. Without evidence of collateral source payments juries, in general, are incapable of determining the plaintiff's actual cost of medical care. For this reason, we rely on the jury to determine the reasonable and related to the damage he suffered as a result of the defendant's actions. Without evidence of collateral source payments juries, in general, are incapable of determining the plaintiff's actual cost of medical care. For this reason, we rely on the jury to determine the reasonable value of medical care based on the bills the plaintiff submits at trial, and we reduce the award for economic damages by the amount of any collateral sources to arrive at the plaintiff's true cost.
The plaintiff's medical bills presented to the jury at trial do not reflect the cost of the medical care he received. Instead, the $139,619.16 paid by TJX Companies after contractual adjustments represents the true cost of the care because the plaintiff will most likely be required to reimburse the TJX Companies after he receives money from the defendant. The plaintiff will never become responsible for the $76,083.07 forgiven by his medical care providers. Therefore, this court reduces the jury verdict by $76,083.07 because that amount represents a potential windfall for the plaintiff in excess of his cost of reasonable medical care and contrary to the purpose of § 52-225a.