The Affordable Care Act and Life Care Plans - New Attacks on the Collateral Source Rule and Economic Damages

I. Introduction

When the Patient Protection and Affordable Care Act (ACA)[1] was signed into law on March 23, 2010, it appeared that injury victims and advocates had dodged a potential bullet. The most widespread and drastic reform of the national health care system since the establishment of Medicare and Medicaid in the 1960s had passed after years of debate in Congress and national media outlets. Further, the law would go into effect without the “malpractice reform” measures that many had insisted would be necessary to achieve the goals of increasing the number of Americans covered by insurance and decreasing national health care costs.[2]

The ACA, as enacted, seeks to increase access to health insurance coverage by forbidding carriers from denying coverage based upon pre-existing conditions, setting standards for “essential health services”[3] that must be covered, and precluding yearly or lifetime limits on coverage for those essential health services.[4] The law also contains the well-known and oft-debated “individual mandate” which requires all non-exempt U.S. citizens to maintain health insurance coverage so as to avoid a tax penalty.[5] The ACA does not, however, require individuals to purchase insurance coverage through the marketplace established pursuant to the ACA, as it continues to allow individuals to purchase coverage directly from a private carrier or through their employer, while also providing exceptions for those covered by government-sponsored health plans like Medicare and Medicaid.[6] Notably absent from the final version of the bill were any provisions placing additional caps on damage awards or limitations on attorney contingency fees in medical negligence actions. Proposed amendments requiring pre-suit alternative dispute resolution and the establishment of mandatory “health tribunals” or “expert panel” systems at the state level were also defeated prior to the ACA’s passage.[7]

Despite the fact that medical malpractice actions and state civil justice systems were virtually untouched by the language included in the 906 pages of the ACA, tortfeasors and defense attorneys in Ohio and nationwide have nonetheless attempted to use the law as a sword to reduce liabilities and limit the ability of plaintiffs to receive full compensation. Arguments that the individual mandate and annual out-of-pocket maximum provisions of the ACA should place a ceiling on future medical expense damages and/or negate the collateral source rule have become a common defense tactic in catastrophic injury cases, both in the medical malpractice arena and otherwise. Under the defense theory, “but for his injuries, the victim would still have been required to hold insurance due to the mandate, so the cost of purchasing this insurance is not attributable to his accident, and the health insurance company is not allowed to charge a victim a higher price due to his injuries.”[8] Similarly, defense advocates have also attempted to introduce future “amounts payable” under ACA marketplace plans as evidence of the reasonable value of future medical treatment.[9]

II. Recent Developments in Case Law

Much like the uncertainty created in the aftermath of Robinson v. Bates in Ohio, motion practice regarding the interplay of the ACA and future damage awards has led to contrasting results across various jurisdictions, and uncertainty for practitioners. To date, the majority of courts facing the issue have held that evidence of ACA benefits and annual maximum limits are inadmissible as to the issue of future economic damages.[10] That said, there are two recent opinions that defendants will argue support the notion that they can reap the benefits of ACA health coverage to “cap” life care plans and reduce their exposure at trial.[11] In reality, however, these opinions are limited in their applicability, and do not change the scope of damages available in most tort cases.

In Ohio, two trial court opinions have been issued in recent years that raise concerns about an injured tort victim’s ability to obtain full compensation for future life care plan expenditures with the ACA now in effect. Both are often being cited and relied upon by defendants in an effort to shift the responsibility for damages caused by negligence away from the at-fault party and on to third-party health insurers offering coverage via the ACA. It is important to note, however, that the first of these opinions was ruled upon in the context of a political subdivision defendant entitled to a post-trial “setoff” of collateral benefits under Revised Code Section 2744.05(B)(1), and thus clearly distinguishable in the vast majority of cases involving private defendants.

In Jones v. MetroHealth Med. Ctr.,[12] a trial court opinion issued in a birth trauma case, the trial court found that the damages awarded for the plaintiff’s life care plan was to be limited to the “cost of care under the Affordable Care Act” for the eight-year period before the plaintiff was to become Medicare eligible. In doing so, the damages for life care plan categories except transportation, home care, and housing were limited to $116,000, which represented the $8,000.00 maximum annual premium and $6,500.00 annual out-of-pocket limit established by ACA regulations for the duration of this time period.[13] The Eighth District Court of Appeals recently upheld this reasoning and decision, despite reversing and remanding to prevent damage amounts attributable to lost wages from being factored into the reduction.[14]

Jones, however, was an action against a political subdivision, not a private sector defendant, and the opinion at issue was rendered following a post-trial hearing conducted pursuant to R.C. § 2744.05(B)(1). Section 2744.05(B)(1) provides that collateral benefits from any source are to “be disclosed to the court, and the amount of the benefits shall be deducted from any award against a political subdivision recovered by that claimant.” As pointed out in the Jones appellate ruling and in the Ohio Supreme Court decision in Buchman v. Board of Education,[15] this setoff can only apply to benefits corresponding with a specific loss included in the damages awarded by the trier of fact. As such, even in those cases where a defendant is entitled to a statutory setoff for future benefits, ACA-related evidence clearly cannot be introduced at trial, but can only be introduced at a post-trial setoff hearing, and then only if the defendant can show a clear correlation between future damages reflected in the verdict and benefits that a plaintiff can reasonably be expected to receive through future coverage.[16]

Although Jones clearly can be limited to statutory setoff cases, at least one Ohio trial court has held that the existence of the ACA and, by extension, the availability of insurance coverage, cannot be kept from the jury. In Christy v. Humility of Mary Health,[17] the plaintiff filed a motion in limine to prohibit any evidence or argument pertaining to benefits available via Medicaid and/or coverage available through the ACA. Although the Christy Court found that references to Medicaid coverage were barred by the collateral source rule contained within Revised Code 2323.41,[18] it nonetheless found that the ACA was the “law of the land” and refused to grant the plaintiff’s motion in that regard.

While the Christy ruling appears to be problematic, the language of the order fails to provide any explanation as to how a defendant could properly admit such evidence without running afoul of the same collateral source rule it applied to Medicaid, nor does it provide any guidance as to how the foundation for ACA evidence can be established. At least three other trial court opinions involving Ohio law directly contradict the Trumbull County ruling. In Rogge v. Estes Express Lines,[19] a trucking case that resulted in severe injuries to the plaintiff including the loss of both legs, Judge Carr of the Northern District of Ohio granted a motion in limine as to the very same kind of evidence at issue in Christy. In refusing to permit a damages expert to testify “about possible payments by private insurers if the plaintiff purchases insurance under the Affordable Care Act,” the Court noted the speculative nature of testimony, especially considering the fact that the plaintiff’s accident-related injuries were covered by the Ohio Bureau of Workers Compensation and it was not “reasonably likely” that ACA coverage would be purchased. Furthermore, the court went on to state that “even if the plaintiff were, for some reason, to purchase [ACA] insurance, it would, in all likelihood, give the carrier a right of subrogation.”[20] The evidence was thus subject to the collateral source statute and properly excluded from consideration.

Similarly, the Butler County Court of Common Pleas was faced with a motion in limine concerning ACA evidence in a birth-injury case in Shiflett v. Troche.[21] In refusing to permit evidence or argument regarding the potential for this future coverage, the Shiflett Court found that “[t]he ACA is a collateral source that is wholly unrelated to the tortfeasor,” and also that “[a]ny testimony that [the plaintiff] would or could receive health insurance through the ACA is speculation and inadmissible at trial.”

In McLeod v. St. Rita’s Med. Ctr., et al.,[22] the Allen County Court of Common Pleas was presented with similar arguments. In its ruling, the McLeod Court noted that “evidence of benefits payable to plaintiff in the future, if they can be determined with a reasonable degree of certainty, should be included as a type of evidence that is the subject of the collateral source statutes.” Even when assuming the defense’s questionable argument that “there is no right of subrogation under the Affordable Care Act” in its decision, the court nonetheless ruled that such evidence was inadmissible as “prejudicial and not relevant,” as it was speculative that the plaintiff would be covered under the ACA in the future given the potential for continued Medicaid coverage and/or private insurance with a contractual right of subrogation.[23] Considering that rulings on the admissibility of the ACA can often have enormous effects on case valuation, pre-trial motions in limine on the issue will continue to be common place in claims involving permanent injuries for the foreseeable future. Under the current state of Ohio law, however, a litany of arguments exist that should prevent defendants from reaping the benefits of the ACA at the expense of injured plaintiffs and third-party health insurers in this manner.

III. ACA Premiums and Out-of Pocket Caps Are Not Relevant To Determining The Reasonable Value of Medical Services.

Ohio law has long provided that the “reasonable value of medical services” is a proper measure of economic damages in an injury action.[24] As the Ohio Supreme Court has recently clarified in its decisions in Robinson, Jacques, and Moretz, "'[b]oth the original medical bill rendered and the amount accepted as full payment are admissible to prove the reasonableness and necessity of charges rendered for medical and hospital care.'"[25]

There is no categorical rule requiring a court or jury to accept either the “billed” or “paid” amounts; rather “[t]he jury may decide that the reasonable value of medical care is the amount originally billed, the amount the medical provider accepted as payment, or some amount in between."[26] However, evidence of yearly premiums or out-of-pocket costs under health insurance plans made available through the ACA are neither amounts billed by a provider, nor do they represent amounts that a provider accepted as full payment for services rendered. As such, they are wholly irrelevant to the issue of fact in common pleas actions against private defendants, in that they bear no relation to the “reasonable value” of future medical services that are reasonably certain to occur in any particular case. At most, they reflect the amount it would cost to have some source other than the tortfeasor (or the tortfeasor’s insurer) make payment for the reasonable value of services rendered. Such amounts reflect only that which would be required for tort defendants, by and through a judgment, to pass the bulk of negligently-caused damages onto a collateral payor/source via the ACA guaranteed issue provision. Under Robinson, Jacques, and Moretz, however, this is not a proper measure of damages.

The reasoning behind such a position would run contrary to public policy as well. Indeed, if such a position was to be accepted, the “reasonable value” of covered future medical services provided to an injured plaintiff insured by Medicare would always be zero, and the “reasonable value” of essential benefit medical treatment provided to any injured plaintiff covered by a particular plan would be the same, regardless of the extent of the injuries and treatments required, so long as annual out-of-pocket maximums were reached. Neither the Ohio Supreme Court nor the General Assembly has ever recognized such a novel theory of damages, which would effectively re-write decades of Ohio common law. Such evidence should thus be excluded under Evid. R. 402 in common pleas actions against private defendants, as annual maximums do not relate to “any fact that is of consequence to the determination of the action” in a permanent injury case.

Aside from the annual premium and/or out-of-pocket maximum amounts, a strong argument exists that evidence of “amounts payable” by future ACA plan coverage should also be precluded under Evid. R. 403. While Robinson and its progeny recognized that these amounts can be taken into consideration in the determination of “reasonable value,” there is a far greater risk of undue prejudice in situations concerning future damages. In Moretz, the Ohio Supreme Court found that past “amounts payable” could be introduced without expert testimony via Revised Code 2317.421 in medical bills and statements that reflect write-off information.[27] When addressing future medical expenses, however, this prima facie evidence and the statutory presumption of reasonableness is unavailable. Any introduction of future “amounts payable” should thus require a proper foundation and, likely, expert testimony as to the availability of ACA plans in a plaintiff’s marketplace, the degree of certainty to which ACA coverage would be obtained as compared to other potential insurance, services covered by the particular plan(s) as compared to a plaintiff’s life care plan requirements, reimbursement rates for said services, the likelihood to which said reimbursement rates would change and/or remain constant, the costs associated with obtaining such coverage, etc.

Even though Ohio law has long recognized that insurance is irrelevant and not be taken into account in injury cases,[28] any ruling permitting the introduction of future “amounts payable” would seemingly require a trial-within-a-trial focused entirely on the subject. Under Evid.R. 411, evidence of liability insurance is inadmissible in tort actions as it has no probative value as to liability or damages, and its introduction at trial can lead to juror confusion. In auto cases, the fact that liability coverage is mandated by statute, i.e. “the law of the land,”[29] does nothing to change this conclusion. Nor should the general rule be altered by the individual mandate found in 26 U.S.C.A. §5000A(b)(1). Even if a trial court were to conclude that ACA-related evidence has some level of probative value as to the “reasonable value of medical services,” the potential that a jury will be misled by its introduction also be taken into account. Admitting testimony as the availability of policies in the marketplace, premiums, annual out-of-pocket maximums, life care services covered as “essential health benefits,” etc., invites a considerable risk of undue prejudice and confusion, and trial courts should thus deem it inadmissible under Evid. R. 403 as well.

IV. Evidence of ACA Coverage Violates The Collateral Source Rule

The continued viability of the collateral source rule also provides a strong barrier to any theory that the ACA can act to decrease or cap future award damages. Arguments have been presented suggesting that the rule is “out of sync” with the current health care landscape or that the individual mandate should negate its application.[30] Revised Code Sections 2315.20 and 2323.41 nonetheless continue to expressly provide that evidence of amounts payable for damages are inadmissible “if the source of collateral benefits has a mandatory self-effectuating federal right of subrogation, a contractual right of subrogation, or a statutory right of subrogation.”

For years, the vast majority of health insurance plans have contained provisions providing for a contractual and/or statutory right of subrogation as to medical payments for which a third-party tortfeasor is liable. In recent cases tort defendants have often relied upon the fact that, unlike Medicare, “the right of subrogation is not granted to insurers under the ACA.”[31] It does not follow, however, that subrogation and/or reimbursement provisions contained in policies are forbidden by the language of the law. The ACA does nothing to curtail the practice of including subrogation and/or reimbursement provisions in the language of a marketplace plan. Thus the “contractual” right of subrogation contemplated in Ohio’s collateral source statute can still be implicated in ACA coverage situations despite the lack of a statutory or “self-effectuating” right of subrogation contained within the law.[32]

Given the presence of a contractual right of subrogation, any defense arguments that a plaintiff is likely to receive a “windfall” or “double recovery” of future damages due to the ACA would appear highly speculative, at best. Limiting awards in such a manner when a contractual subrogation provision is present would instead subject plaintiffs to the risk of a “double reduction” of these future amounts. This would lead to a patently unfair result, and the plain language of Ohio’s collateral source statutes should continue to bar the introduction of such evidence in the aftermath of ACA.

V. Evidence of Future ACA Coverage Cannot Be Admitted Without A Proper Foundation.

Even in scenarios where a trial court determines that evidence of ACA annual maximums and/or future amounts payable pass muster under Evid. R 402 and 403 and the collateral source statutes, most cases will likely give rise to strong arguments regarding the inability of a defendant to lay a proper foundation for the admission of such evidence. The need for competent expert testimony regarding the “reasonably certain” effects on future damages that the ACA will produce, without running afoul of the collateral source rule, would seem to be an almost insurmountable burden in many scenarios. Relevant inquiries to challenge such testimony could include: (1) whether ACA coverage is likely to come into play at all given the possibility of alternative coverage;[33] (2) the qualifications of the proffered expert[34] and his/her knowledge base concerning the ACA insurance marketplace, benefits provided and language contained in specific available policies; (3) the “reasonable certainty” with which it can be stated that annual out-of-pocket maximums will remain constant;[35] (4) the witness’s competence regarding the establishment of insurance reimbursement rates (“amounts payable”) and the level of certainty to which they can be predicted; (5) whether specific elements of care in a plaintiff’s life care plan can be meaningfully correlated with specific “essential health benefits,” as vaguely defined by the ACA, and whether the defendant can establish that particular aspects of the life care plan will be fully covered by any particular plan available from the marketplace; and (6) whether the services specified in the life care plan will be available “in-network” under a particular policy, or whether they will constitute “out of network” costs that are not subject to the ACA’s out of pocket caps.

Of course, it could be argued that the existence and availability of ACA-guaranteed coverage throughout the duration of a plaintiff’s life care plan is inherently speculative in its own right. Although the Christy Court rejected such an argument by declaring the ACA “the law of the land,” any witness offered to testify on the matter could not reasonably deny that there have been more than sixty attempts in Congress to repeal the ACA since its enactment, and statements made over the course of the last year suggesting that a repeal of the law is of high priority and a central platform for various political candidates. As pointed out by one trial court, “[p]redictions about the longevity of the ACA and its impact on health care costs are much too uncertain, conflicting, and partisan to aid the jury in calculating damages and would likely lead to confusion of the issues.”[36]

VI. Conclusion

Rather than acknowledging well-settled Ohio law as to the measure of medical expense damages and the collateral source rule, defendants are increasingly asking Ohio trial courts to change the rules so as to permit the ACA, a law passed without any tort or “malpractice reform” included therein, to further tilt the playing field in their favor. These efforts will almost certainly continue and become more commonplace, and more arguments will develop, until further guidance on the issue is provided by the Ohio Supreme Court and appellate districts. For the time being, however, the windfalls sought by defendants should not be considered permissible in cases involving private defendants, and practitioners should be prepared to face numerous arguments to ensure that this remains the case.