Collateral Source Rule Violates Equal Protection: In its November 18, 2022 opinion, the Supreme Court of the State of Alaska (“Alaska Supreme Court”) stated: “Alaska Statute 09.55.548(b) provides that when a medical malpractice claimant’s losses have already been compensated in part by a collateral source (such as an insurer), the claimant’s damages award will be reduced by the value of the collateral source compensation, except when the collateral source is a “federal program that by law must seek subrogation.” This case presents the questions of whether and how the statute applies when the claimant’s losses are compensated by an employer’s self-funded health benefit plan governed by the federal Employee Retirement Income Security Act (ERISA).”
“We conclude that an ERISA plan does not fall within the statute’s “federal program” exception. Therefore AS 09.55.548(b) requires a claimant’s damages award to be reduced by the amount of compensation received from an ERISA plan. But we also conclude that the distinction the statute draws between different types of medical
malpractice claimants is not fairly and substantially related to the statute’s purpose of ensuring claimants do not receive a double recovery — an award of damages predicated on losses that were already compensated by a collateral source. Because insurance contracts commonly require the insured to repay the insurer using the proceeds of any
tort recovery, claimants with health insurance are scarcely more likely to receive a double recovery than other malpractice claimants. The statute therefore violates the equal protection guarantee of the Alaska Constitution.”
The Underlying Facts
Plaintiff Charina McCollum alleged that in May 2015, Dr. Thomas Knolmayer, M.D. mistakenly cut the wrong duct during a surgery to remove McCollum’s diseased gallbladder. As a result, McCollum was medevacked from Anchorage to Seattle, where she was given a drain to evacuate bile from her abdomen until she could have duct repair surgery. Due to problems with bile drainage in June 2015, she was again medevacked from Anchorage to Seattle and the drain was replaced. In August 2015, the duct was surgically repaired.
McCollum’s husband, Jason McCollum, was employed by Lowe’s Companies, Inc., and most of McCollum’s health care expenses were paid by a health plan administered by Lowe’s. The terms of the Lowe’s Plan include a right to subrogation, under which the Plan “may, at its discretion, . . . commence a proceeding or pursue a claim against any party” for the recovery of all benefits paid by the Plan.
Alaska Collateral Source Rule
The Alaska legislature modified the collateral source rule in medical malpractice cases in 1976 by enacting AS 09.55.548(b), which provides in relevant part: “Except when the collateral source is a federal program that by law must seek subrogation and except death benefits paid under life insurance, a claimant may only recover damages from the defendant that exceed amounts received by the claimant as compensation for the injuries from collateral sources, whether private, group, or governmental, and whether contributory or noncontributory.”
Alaska Constitution Equal Protection
The Alaska Supreme Court stated: “Article 1, section 1 of the Alaska Constitution provides “that all persons are
equal and entitled to equal rights, opportunities, and protections under the law.” “We interpret the equal protection clause ‘to be “a command to state and local governments to treat those who are similarly situated alike.” “The guarantee of equal protection under the Alaska Constitution is more robust than that under the United States
Constitution and so ‘affords greater protection to individual rights than’ its federal counterpart.””
The Alaska Supreme Court stated in the case it was deciding: “Preventing medical malpractice claimants from receiving double recoveries in order to limit the size of malpractice damages awards is a legitimate public purpose.
But the distinctions drawn by AS 09.55.548(b) do not bear a fair and substantial relationship to this goal. The statutory classifications are premised on the assumption that claimants who receive compensation for their injuries from non-federal collateral sources would receive a double recovery if permitted to recover damages for those injuries from the tortfeasor. But this assumption does not reflect reality. A claimant like McCollum is obligated by the terms of her insurance contract to reimburse her insurer out of any recovery. These terms are commonplace in health insurance contracts. So in the vast majority of cases, allowing claimants to recover damages from the tortfeasor corresponding to the amount of medical expenses paid by their insurers would not create a double recovery. Rather, those amounts would flow straight to the insurer through its contractual reimbursement right. There is little reason to think insurers will simply leave easy money on the table.”
“For that reason, malpractice claimants who receive compensation from nonfederal collateral sources are scarcely more likely to receive a double recovery than those covered by Medicaid, which is required by law to seek subrogation, or those whose medical expenses were not paid by any collateral source. It is true that not all claimants who receive collateral source compensation for their injuries will have to pay it back. A small number of claimants may receive compensation for their injuries from collateral sources that are not health plans, such as family members or charity. It is also possible that some health benefit plans do not give the plan a right of reimbursement, although it is hard to imagine why a health plan would forgo that straightforward approach to improving its bottom line. But for the most part malpractice claimants who receive collateral source compensation for their injuries are not poised to make a double recovery when suing a negligent medical provider in tort.”
“In a world where subrogation and reimbursement provisions are the norm, the statute’s differential treatment of medical malpractice claimants based on the existence and type of collateral source compensation is not fairly and substantially related to the legitimate purpose of preventing double recoveries. We therefore conclude that AS 09.55.548(b)’s limitation on recovery of collateral source compensation violates Alaska’s equal protection clause when applied to a claimant who receives compensation from a collateral source that exercises a right of reimbursement against the claimant’s recovery.”
Source Knolmayer, M.D. v. McCollum, No. 7631.
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