On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L-9285-99.
Before Judges Collester, Parrillo and Grall.
The opinion of the court was delivered by: Parrillo, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 28, 2004
In an earlier appeal, we remanded to the trial court for a determination whether the employer's medical benefits plan (Plan), qualified as a welfare plan under the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C.A. §§ 1001 to -1461, is either self-funded or insured. White Consolidated Industries, Inc. v. Pei Lin, M.D., No. A-1280-00T5 (App. Div. June 4, 2002) (slip op. at 5-6). If the former, the employer would be entitled to recover, by way of subrogation or reimbursement, the payments it has made to an employee for treatment of injuries caused by a tortfeasor against whom the employee has obtained a judgment expressly exclusive of those payments. On the other hand, if the plan is insured, and therefore subject to State regulation, New Jersey's collateral source rule, N.J.S.A. 2A:15-97, operates to bar the health insurer from seeking subrogation against the tortfeasor or reimbursement from the employee who successfully has sued. On remand, the trial court deemed the Plan in issue a non-insured plan and, therefore, preemptive of our collateral source bar, despite having contracted out certain administrative services to an insurance company and having provided some insured benefits to a limited class of out-of-state employees. We affirm.
Some background necessary to understand the matter was recited in our earlier opinion:
Plaintiff in this action is White Consolidated Industries, Inc., whose ERISA plan is in question. White employee, Carmen Cruz, whose husband Jorge Cruz sued per quod, brought a medical malpractice action against [defendant] Dr. Pei Lin, alleging mistreatment of her sinus ailments.*fn1 White's ERISA plan paid some $180,000 for medical expenses allegedly incurred by Cruz as the result of Dr. Lin's malpractice. The case went to trial, and the jury awarded the Cruzes damages of $325,000 apportioned by it to plaintiff's pain and suffering and lost wages and the per quod claim. Medical expenses were expressly excluded. The trial judge added prejudgment interest in the amount of $71,045.89, entering judgment for a total of $396,045.89.
White was not a party to the Cruz action. It had sought and was denied intervention in order to assert its reimbursement-subrogation claim. As we understand the record, the judge in the underlying action was not satisfied with White's proof of its actual expenditures and directed it to file a separate action although judicial economy would have suggested disposition of White's claim in the underlying action. This action against the tortfeasor for subrogation ensued.
The matter first came to us on appeal from the trial court's grant of summary judgment in favor of White, relying on our opinion in Perreira v. Rediger, 330 N.J. Super. 455 (App. Div. 2000), in which we held that the collateral source rule did not abrogate the health insurer's common-law and contractual rights to subrogation against the tortfeasor or reimbursement from the plaintiff-insured. During the pendency of that appeal, the Supreme Court reversed our judgment, Perreira v. Rediger, 169 N.J. 399 (2001). However, that ruling did not end the inquiry. We still had to decide whether an ERISA health plan is subject to the bar of N.J.S.A. 2A:15-97 or whether federal law to the contrary preempts the State statute. This question remained because an insured employee benefit plan is subject to state regulation and"saved" from the general rule of preemption by virtue of ERISA's savings clause, 29 U.S.C. § 1144(b)(2)(A), but a self-insured ERISA plan is not"deemed" an insurance company and is thus exempt from state law regulating insurance by ERISA's"deemer" clause, 29 U.S.C. § 1144(b)(2)(B). FMC Corp. v. Holiday, 498 U.S. 52, 111 S.Ct. 403, 112 L.Ed. 2d 356 (1990). In other words, employee benefits plans that are insured by insurance companies are bound indirectly by state insurance regulations, such as N.J.S.A. 2A:15-97, insofar as they apply to the plans' insurers. Id. at 61. Because the record on appeal was insufficient to permit us to determine whether the ERISA plan here is self-funded or insured, we remanded to the trial court for that purpose alone. White Consolidated Industries, Inc., supra, (slip op. at 5-6).
On remand, it was established that White has facilities in a number of states and Cruz was an employee of White's Frigidaire Division in Edison. White established its employee welfare benefits plan in 1988 as a single, integrated, company- wide plan, under which were established sub-plans - designated by White as"programs" - through which health benefits were made available to employees in specific regions under various funding arrangements.
The medical benefits White paid on behalf of Cruz were paid pursuant to a"Point of Service" program established under the general umbrella of White's ERISA plan, which provided specific benefits to White's New Jersey employees. The Point of Service program was entirely self-funded by White. Under the terms of the program, White paid a monthly fee to The Prudential Insurance Company of America (Prudential) to administer the program and process employee claims for medical benefits. Under this arrangement, while Prudential processed employee claims, White remained entirely responsible for the risk of payment of actual benefits. It is undisputed that White's plan was not regulated by the State of New Jersey.
A small percentage of White's health benefits, available only to 124 of White's employees who worked exclusively outside New Jersey, were insured. As noted, none of White's New Jersey employees received or were eligible to receive insured medical benefits. In other words, no"programs" providing insured health benefits were in operation in New Jersey or available to White's employees in New Jersey. In addition to health benefits, White provided other insured benefits, primarily life insurance, to a small number of employees outside New Jersey. Of the approximately $60 million in benefit payments nationwide under the Plan, roughly only 12.5% were funded by insurance.
The Plan includes a reimbursement and subrogation provision as follows:
This Plan, or the Company, shall be reimbursed for the costs of the benefits paid under this Plan to or on behalf of a Covered Person under a Benefit Program if the Covered Person receives, or is entitled to receive, any payment from another source on account of the actions of another person or other circumstances. The obligation of the Covered Person to provide such reimbursement shall apply to the extent that the payments received, or to be received, by the Covered Person do not exceed the benefits provided under this Plan. In addition, under such circumstances, the Plan and ...