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A Bucks County, Pa., Common Pleas judge has ruled that HMOs have the right under Pennsylvania law to assert a subrogation claim against an auto accident victim’s tort recovery — despite the general bar against subrogation in the Pennsylvania Motor Vehicle Financial Responsibility Law — because Pennsylvania’s HMO Act exempts them from such laws. Judge Robert J. Mellon’s 11-page opinion in Nott v. Aetna U.S. Healthcare mirrors a decision handed down in April by U.S. District Judge Harvey Bartle III. With victories in both lower courts, Aetna’s lawyers — Raymond A. Quaglia and Paul Lantieri III of Ballard Spahr Andrews & Ingersoll — will now defend the rulings in parallel appeals before the Pennsylvania Superior Court and the 3rd U.S. Circuit Court of Appeals. Both cases were class actions and were originally filed in Bucks County by attorney Ronald J. Smolow of Smolow & Landis in Trevose, Pa. The suits challenged Aetna’s practice of asserting liens against the tort recoveries for the medical benefits it has provided to auto accident victims. Aetna later removed both cases to U.S. district court, arguing that federal law controlled. But the Nott case was sent back to Bucks County when U.S. District Judge Timothy J. Savage ruled that the federal law at issue — the Medicare Act — does not “completely pre-empt” the MVFRL. The second case, Wirth v. Aetna U.S. Healthcare, remained in federal court when Bartle agreed with Aetna that it was governed by ERISA. Since the proposed class of plaintiffs in Wirth were insured by Aetna through their employers — which was not the case in Nott — Bartle found that ERISA completely pre-empted the plaintiffs’ state law claims. Bartle later granted summary judgment in Aetna’s favor, holding that the HMO Act, passed in 1972, effectively exempted HMOs from all state insurance laws then in existence as well as future insurance laws — unless they specifically apply to HMOs. Bartle found that since MVFRL was passed later, and since it does not specifically reference HMOs in the section that prohibits subrogation, HMOs are exempt. Now Mellon has ruled that the Nott case fails for the same reasons. Mellon found that the HMO Act, or Section 1560, “requires that any statute enacted after this act must ‘specifically and in exact terms appl(y) to such health maintenance organization.’” MVFRL, Mellon said, “fails to specifically prohibit subrogation by HMOs.” Smolow argued that the MVFRL anti-subrogation provision includes “catchall language” that shows it applies to HMOs. The wording of the law, he noted, is that “there shall be no right of subrogation … by a program, group contract or other arrangement.” HMOs, Smolow argued, are “group contracts” and are therefore covered by the law. But Quaglia and Lantieri argued that the HMO Act requires more. HMOs are exempt from laws that apply to other insurers, they argued, unless the law specifically and in exact terms includes HMOs. Mellon found there were no ambiguities in either MVFRL’s subrogation clause, Section 1720, or the HMO Act. Turning to the dictionary for guidance, Mellon found that the definitions of the words “specific” and “exact” tipped the scales in Aetna’s favor. “Given the definitions of ‘specific’ and ‘exact,’ there are no circumstances in which the catchall language of MVFRL Section 1720 can be construed to apply to HMOs.” Mellon found it was not his job to decide whether the law was correct. “Whether or not Section 1720 should apply to HMOs is not a matter for this court, but for the Commonwealth’s General Assembly,” Mellon wrote.

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