Wal-Mart Drops Lawsuit Over Health-Care Reimbursement

Wal-Mart Stores Inc. is dropping a controversial effort to collect over $400,000 in health-care reimbursement from a former employee who is confined to a southeast Missouri nursing home since she suffered brain damage in a traffic accident.

The world's largest retailer said Tuesday in a letter to the family of Deborah Shank it will not seek to collect money the Shanks won in an injury lawsuit against a trucking company for the accident.

Wal-Mart's top executive for human resources, Pat Curran, wrote that Ms. Shank's extraordinary situation had made the company re-examine its stance. Wal-Mart has been roundly criticized in newspaper editorials, on cable news shows and by its union foes for its claim to the funds, which it made in a lawsuit upheld by a federal appeals court.

Insurance experts say it is increasingly common for health plans to seek reimbursement for the medical expenses they paid for someone's treatment if the person also collects damages in an injury suit. The practice, called "subrogation," has increased since a 2006 Supreme Court ruling that eased it.

Wal-Mart's Ms. Curran said the retailer was required by the rules of its plan to seek reimbursement from the Shank's settlement. But she said the case has made Wal-Mart revise those rules to allow for flexibility in individual cases. "Occasionally others help us step back and look at a situation in a different way. This is one of those times," Ms. Curran wrote in the letter.

Ms. Shank, 52, lost much of her memory and ability to communicate or walk in a crash between her minivan and a tractor trailer in May 2000. Her family sued the trucking company and won $700,000. Court records show that after attorney's fees and costs, the remaining $417,477 from the settlement went into a trust to care for Ms. Shank. The fund now has about $270,000, the family said.

Ms. Shanks' health insurance was through Wal-Mart, where she worked nights stocking shelves. After the Shanks won their lawsuit, Wal-Mart sued the Shank family to recover medical costs totaling about $470,000.

Wal-Mart won its case and subsequent appeals by the Shanks that went as far as the Supreme Court, which closed legal avenues this month by declining to hear the case.

The case put a spotlight on the growing use of reimbursement claims by health plans, experts say. Roger Baron, professor of law at the University of South Dakota and a specialist in health-plan law, said health plans have become "very aggressive" about subrogation since the 2006 Supreme Court decision.

"It's free money. They want the free money," Mr. Baron said.

Lynn Dudley, vice president for policy at the American Benefits Council in Washington, D.C., said the negative publicity around the case was beginning to draw the attention of lawmakers who might want legislation to stop or limit subrogation.

Mr. Baron said Wal-Mart's size — it is the nation's largest nongovernment employer, with over 1.3 million workers — means that its willingness to compromise in an individual case may have a wider impact on reimbursement practices by other health plans. "I'm so pleased to see an element of reason because so much of this subrogation has been about just blindly going after the money," Mr. Baron said.