Workers' comp insurers can contest coverage without risking immediate double damages lawsuits, a Michigan appeals court ruled this week in a significant Medicare reimbursement case.
The Michigan Court of Appeals ruled Sunday that healthcare providers cannot immediately sue insurers for double damages under the Medicare Secondary Payer Act when there's a legitimate question about whether coverage applies in the first place. The decision reverses a lower court ruling and sends an important signal about how far insurers can go in contesting claims before facing penalties.
The case centered on a bartender's fall at a Fraternal Order of Eagles lodge in Battle Creek in June 2017. Linda Roach injured her hip while working at the establishment, but there was a catch: she hadn't received a paycheck since April 2017 and had discussed switching to volunteer status with the manager.
When Bronson Healthcare Group billed Conifer Insurance Company for Roach's medical expenses, the insurer denied the claim, arguing Roach was a volunteer, not an employee covered under the workers' compensation policy. Medicare stepped in and paid for her care conditionally, as it's authorized to do when primary insurers don't pay promptly.
That's where things got complicated. Bronson Healthcare sued Conifer under the Medicare Secondary Payer Act, which allows private lawsuits for double damages when primary insurers fail to pay or reimburse Medicare. But the lawsuit came while Roach's workers' compensation claim was still being decided.
A workers' compensation magistrate eventually ruled that Roach was indeed an employee when she got hurt, making Conifer responsible for her medical bills. But Conifer appealed that finding. Even so, a trial court sided with Bronson Healthcare, ruling the insurer would be entitled to double damages.
The Court of Appeals disagreed. Presiding Judge Brock Swartzle said the healthcare provider jumped the gun by suing before anyone had firmly established that Conifer was actually responsible for payment.
The key issue was whether insurers can dispute coverage without automatically facing double damages penalties. The court said yes, as long as they have a good reason for the dispute.
The court found no genuine dispute that Conifer had a good-faith basis for questioning coverage. Something more than just the insurance policy and basic law was needed to demonstrate Conifer was actually responsible for Roach's care, the court explained.
The decision puts Michigan at odds with how some other federal courts have read the Medicare law. The Sixth Circuit Court of Appeals, which covers Michigan along with Ohio, Kentucky, and Tennessee, had previously ruled in Bio-Medical Applications of Tennessee v. Central States that the demonstrated responsibility requirement only applies to lawsuits against tortfeasors, not to insurance coverage disputes.
But the Michigan appeals court found that interpretation didn't hold up to scrutiny of the statute's actual language. The court noted that the Medicare law specifically says insurers must reimburse Medicare if it is demonstrated they had responsibility to pay. That demonstration could come through a judgment, a settlement, or other means, but it has to happen before a lawsuit can proceed.
The court pointed to decisions from other federal appeals courts that took a similar view. The Eleventh Circuit ruled in a 2006 case called Glover v. Ligget that responsibility must be demonstrated before a double damages lawsuit can be filed. The Ninth Circuit reached much the same conclusion in a 2020 case involving a dialysis provider.
For workers' compensation insurers, the practical impact is significant. The ruling means they can contest whether someone qualifies as an employee, whether an injury happened on the job, or other legitimate coverage questions without automatically risking double damages lawsuits while those disputes play out.
The court made clear, however, that this protection only extends to genuine disputes. Insurers who deny coverage in bad faith when their policy clearly covers a claim won't be shielded from Medicare lawsuits and double damages. The court emphasized that neither the plain text of the Medicare law nor its ruling should be read to give insurers free rein to deny payment when the law or their own policy terms plainly provide coverage.
The ruling also highlighted some practical problems with allowing these lawsuits to move forward before workers' compensation proceedings wrap up. Trial courts could end up deciding factual questions that administrative agencies are supposed to handle. Insurers could face the prospect of paying triple what they would otherwise owe: once in the workers' compensation system, and then double damages in federal court for the same claim.
In this case, even though the magistrate's decision may have established Conifer's responsibility to pay, the court found that Bronson Healthcare hadn't shown the insurer actually failed to reimburse Medicare as required by law. Because the lawsuit was filed so early, Conifer never had a real chance to pay Medicare back once its responsibility was established.
The court sent the case back to the trial court with instructions to dismiss it without prejudice, meaning Bronson Healthcare could potentially refile if Conifer fails to reimburse Medicare now that the workers' compensation proceedings have concluded.
The decision, issued February 2, remains subject to revision until it's officially published in the Michigan Appeals Reports. Judges Kristina Robinson Garrett and Christopher Yates joined Swartzle's opinion.
For the workers' compensation insurance industry, the ruling offers a roadmap for handling claims where Medicare makes conditional payments. As long as insurers have legitimate grounds for questioning coverage and aren't acting in bad faith, they can work through the normal dispute resolution process without facing immediate exposure to double damages under federal law.
