The Impact of the Affordable Care Act on Unrealized Future Benefits and Collateral Source Offsets
11.12.2024
A recent decision by the Appellate Division of New York on the question of collateral sources of medical expenses highlights some issues that have arisen in the wake of the Affordable Care Act. One issue is the subsequent policy of not enforcing the original rule of requiring everyone to be enrolled in a health insurance plan and if such lack of enforcement affects its potential as a collateral source offset. In one recent case, a plaintiff who was paralyzed in an accident near the subway was challenged to reduce his future medical expense award after the defendant argued for a collateral source hearing. While the court was only tasked with deciding whether a collateral source hearing was appropriate, it laid out the rationale for how a future benefit, not yet realized, could be considered a collateral source reduction. The significance of this decision cannot be understated. Not only are future collateral sources permitted as an offset reduction to plaintiff’s damages, but the collateral source does not have to be guaranteed; it merely needs to be reasonably certain that it will be available to the plaintiff.
In Robert Liciaga v. New York City Transit Authority,[1] the 23-year-old plaintiff was riding his bicycle through an unbarricaded drop zone where the defendant was conducting a track replacement on an elevated subway line. While riding his bicycle through the drop zone, the plaintiff alleged he was struck by a railroad tie, which caused multiple fractured vertebrae in his thoracic spine and a severed spinal cord, leaving him permanently paralyzed below the T7 vertebra. The jury awarded the plaintiff $9 million and $60 million for past and future pain and suffering, $1,174,972.38 for past medical expenses and $40 million for future medical expenses. The plaintiff stipulated to reduced awards for past and future suffering to $4 million and $12 million, respectively. The defendant appealed, and the Appellate Division upheld the reduced award of over $57 million. However, they remanded the matter for a collateral source hearing regarding plaintiff’s future medical expenses.
The defendant’s collateral source hearing request focused on the fact that the plaintiff was purportedly eligible for an insurance policy available through New York State’s Health Plan Marketplace pursuant to the ACA.
The trial court denied the defendant’s request, holding that their position would “improperly compel the plaintiff to procure insurance against his will.”[2] Furthermore, the trial court held “insurance coverage that a plaintiff may be able to procure, but which a plaintiff does not currently have, cannot qualify as a ‘collateral source within the meaning of CPLR 4545.’”[3]
While the Appellate Division noted the defendant bears the burden of establishing an entitlement to a collateral source reduction by “clear and convincing evidence that the result is highly probable,” the burden for a collateral source hearing is “less than the ultimate hearing burden.”[4] In order to be entitled to a collateral source hearing the defendant “must [merely] tender some competent evidence from available sources that the plaintiff’s economic losses may in the past have been, or may in the future be, replaced, or the plaintiff indemnified from collateral sources.”[5]
In support of their motion for a collateral source hearing, the defendant submitted affidavits from both a licensed insurance broker and a forensic economist. The broker identified a specific policy, and the economist opined that if the plaintiff obtained the policy, the future value of his future medical expenses would be approximately $3.75 million less than the jury awarded for future medical expenses. Furthermore, the broker noted the “plaintiff was legally obligated to obtain health insurance” pursuant to the ACA.[6]
As the text of CPLR 4545 does not squarely address this issue of whether a court is prohibited from “awarding a collateral source offset against future medical expenses which, at the time of trial, a plaintiff does not receive the benefits of,” the Appellate Division considered the legislative history of the statute.[7] The primary objective of CPLR 4545 “was to eliminate windfalls and double recoveries for the same loss.”[8] Furthermore, in 1985 the statute was amended to include future damages, the purpose of which was to “‘extend’ the ‘practice’ of awarding offsets for ‘those sources of compensation that will, within reasonable certainty, be available to the plaintiff in the future.’”[9] Additionally, in 2009, language was added to CPLR 4545 to include “any collateral source” with certain exceptions.[10]
Without affording defendants the opportunity to present their evidence at a collateral source hearing, the plaintiff is in a position to recover twice for the same loss. In citing to the Fourth Department’s dissent in Young,[11] the Appellate Division noted a plaintiff could “refrain from applying for” an insurance policy though the ACA “until after he [or she] has obtained a judgment” and recover a “larger award for future medical expenses than he or she would otherwise be entitled.”[12]
The Appellate Division disagreed with the trial court’s apparent interpretation and restriction of the phrase “continued receipt” of CPLR 4545. They found support in the Court of Appeals’ Bryant decision.[13] The Bryant court followed the “interpretative maxim that a court should not ‘hold that in one part of the same statute the legislature deliberately enacted one thing, and then in a subsequent part of the same statute revoked the previous enactment without any apparent reason for so doing.’”[14] Interpreting “continued receipt” in a “way that limits collateral sources to those of which the plaintiff is currently a beneficiary would conflict with the statute’s broad language” to consider “‘any collateral source’ that ‘will, with reasonable certainty,’ replace or indemnify any awarded future damages (CPLR 4545[a]).’”[15] Further, the Bryant court held a plaintiff’s “protected interest in a government entitlement”[16] can be considered a collateral source offset. While recognizing the ACA does not establish a government entitlement, the Appellate Division noted it does entitle “individuals with preexisting medical conditions” to “not be denied coverage or pay unusually high premiums.”[17] As such the ACA does support defendant’s position that the plaintiff “will, with reasonable certainty,” be able to reduce his out-of-pocket medical expenses. Additionally, the court noted even though Congress “effectively nullified the [financial] penalty” for those who failed to procure insurance coverage, the ACA “requires most American to comply with its mandate.”[18] Regardless, plaintiffs are required to mitigate their damages. Without a plausible explanation, they cannot “simply decline” to obtain insurance coverage which would offset some of their future medical expenses.[19]
In remanding the matter back to the trial court, the Appellate Division held the purpose of CPLR 4545 requires, at a minimum, that the defendant be afforded an opportunity to present their evidence at a collateral source hearing.[20]
Of course, the court’s dicta could lead to many unintended consequences for plaintiffs. Suppose at the time of the collateral source hearing there is “currently” a future benefit that will be available to offset plaintiff’s future economic costs, but when those benefits are actually needed the collateral source is no longer available. By way of example, there is currently insurance available to cover the type of procedure a plaintiff may need in the future, but when that moment arises, the insurance is no longer available or the insurance carrier refuses to pay for the procedure. In this scenario, the plaintiff is now in a worse position due to any collateral source offset that may have been granted – the opposite of a windfall. However, the court is cognizant of not leaving the plaintiff in a worse position by granting a collateral offset. The court is looking to strike a balance between a plaintiff receiving a windfall and ensuring a collateral source offset does not unfairly harm the plaintiff. The court noted that if such an insurance policy deprived a plaintiff of the ability to choose his or her own providers or limited the plaintiff’s treatment options, a defendant should not be entitled to a collateral source offset.[21]
The court focused on the standard for not only being entitled to a collateral source hearing but also explained that the standard to award a collateral source offset for future damages now includes future sources of compensation that will with “reasonable certainty” be available to the plaintiff. It is incumbent upon the plaintiff’s counsel to argue against and focus on the “reasonable certainty” aspect of CPLR 4545 in order to avoid their client being put into a worse position should the future benefit not be available when needed. Counsel will need to point to instances, data and specific examples, supported with expert testimony, to show that a future benefit is not reasonably certain to be available to their client.
This decision bodes well for defense counsel practicing in New York, who now have an additional tool in their arsenal for post-trial motions. Additionally, it is wise to use this decision to counter plaintiffs’ economic expert reports, as well as for settlement negotiations. A current lack of insurance should not lead to an automatic increase in monetary damages for plaintiffs. At the same time, counsel need to remember that the court strikes a balance to ensure a plaintiff is not put in a worse position due to an offset reduction. The court stressed that a plaintiff is entitled to receive any necessary medical care by their provider of choice.
Michael A. Posavetz is an attorney in Foley Mansfield’s New York office. He focuses his practice on toxic/mass tort defense, with a particular emphasis on talc and asbestos litigation.
Endnotes
[1] Liciaga v. New York City Tr. Auth., 218 N.Y.S.3d 359 (2d Dep’t 2024).
[2] Id. at 15.
[3] Id.
[4] Id. at 12.
[5] Id. at 13.
[6] Id. at 16.
[7] Id. at 23.
[8] Id. at 23-24.
[9] Id. at 24.
[10] Id. at 25-26.
[11] Young v. Tops Mkts, Inc., 283 A.D.2d. 923 (4th Dep’t 2001).
[12] Liciaga, 218 N.Y.S.3d at 25.
[13] Bryant v. New York City Health v. Hosps. Corp., 93 N.Y.2d 592 (1999).
[14] Liciaga, 218 N.Y.S.3d at 28.
[15] Id. at 29.
[16] Examples of a government entitlement include Medicare and Social Security.
[17] Id.
[18] Id. at 17.
[19] Id.
[20] Id. at 24.
[21] See Malmberg v. United States, 816 F.3d 185 (2d Cir. 2016).
