A Louisiana Court of Appeal affirmed a judgment ordering the plaintiff to reimburse the State of Louisiana medical benefits received under the State’s HMO plan because the plan included a provision which entitled the State to reimbursement of benefits paid in the event of a judgment, “even if [the Insured] is not made whole.” Bayham v. State, 2018-1708 ( La. App. 1 Cir. 8/29/19); 2019 La.App. LEXIS 1504.

The plaintiff sustained injuries in a car accident, resulting in medical expenses. The plaintiff had health coverage through the State’s HMO plan, and it paid to treat her injuries. She then filed suit for damages against the tortfeasor and obtained an award. The HMO plan entitled the State to reimbursement for benefits paid in the event an insured obtained a judgment against a third party to compensate for injuries regardless of whether the insured had been made whole by the judgment. The State sought reimbursement, and the plaintiff filed a declaratory judgment action to determine the State’s rights to reimbursement. The trial court awarded reimbursement, and the plaintiff appealed.

The First Circuit affirmed, acknowledging a Louisiana Commissioner of Insurance’s directive that makes it the public policy of Louisiana that an insurance policy’s subrogation and/or reimbursement provision cannot harm the insured, but concluding that the “made-whole” doctrine did not apply because the HMO plan at issue contained a contrary agreement. A dissenting opinion pointed out that the case law cited by the majority involved plans governed by ERISA, which resulted in the preemption of Louisiana law, including its public policy with respect to the “made-whole” doctrine, and stated that it should have applied because the purpose of the Commissioner’s directive was to prevent insurers from contracting around Louisiana’s public policy.