Thomas J. Knolmayer, M.D., Alaska Trauma and Acute Care Surgery, LLC. v. Charina McCollum and Jason McCollum

Notice: This opinion is subject to correction before publication in the PACIFIC REPORTER.
Readers are requested to bring errors to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, phone (907) 264-0608, fax (907) 264-0878, email
corrections@akcourts.gov.

THE SUPREME COURT OF THE STATE OF ALASKA

THOMAS J. KNOLMAYER, M.D., )
ALASKA TRAUMA AND ACUTE ) Supreme Court No. S-17792
CARE SURGERY, LLC, )
) Superior Court No. 3AN-16-04601 CI
Petitioners, )
) OPINION
v. )
) No. 7631 – November 18, 2022
CHARINA MCCOLLUM, JASON )
MCCOLLUM, )
)
Respondents. )
)

Appeal from the Superior Court of the State of Alaska, Third
Judicial District, Anchorage, Herman G. Walker, Jr., Judge.

Appearances: Howard Lazar and Whitney L. Wilkson,
Delaney Wiles, Inc., Anchorage, for Petitioners. Margaret
Simonian, Dillon & Findley, P.C., Anchorage, and Michael
Cohn, Phillip Paul Weidner & Associates, Anchorage, for
Respondents. Christian N. Bataille, Flanigan & Bataille,
Anchorage, for Amicus Curiae Alaska Association for
Justice. Ian S. Birk, Keller Rohrback L.L.P., Seattle,
Washington, and Eva Gardner, Ashburn & Mason P.C.,
Anchorage, for Amicus Curiae Premera Blue Cross.

Before: Bolger, Chief Justice, Winfree, Maassen, Carney,
and Borghesan, Justices.

BORGHESAN, Justice.
I. INTRODUCTION
Alaska Statute 09.55.548(b) provides that when a medical malpractice
claimant’s losses have already been compensated in part by a collateral source (such as
an insurer), the claimant’s damages award will be reduced by the value of the collateral
source compensation, except when the collateral source is a “federal program that by law
must seek subrogation.” This case presents the questions of whether and how the statute
applies when the claimant’s losses are compensated by an employer’s self-funded health
benefit plan governed by the federal Employee Retirement Income Security Act
(ERISA).1
We conclude that an ERISA plan does not fall within the statute’s “federal
program” exception. Therefore AS 09.55.548(b) requires a claimant’s damages award
to be reduced by the amount of compensation received from an ERISA plan. But we also
conclude that the distinction the statute draws between different types of medical
malpractice claimants is not fairly and substantially related to the statute’s purpose of
ensuring claimants do not receive a double recovery — an award of damages predicated
on losses that were already compensated by a collateral source. Because insurance
contracts commonly require the insured to repay the insurer using the proceeds of any
tort recovery, claimants with health insurance are scarcely more likely to receive a
double recovery than other malpractice claimants. The statute therefore violates the
equal protection guarantee of the Alaska Constitution.

1
29 U.S.C. § 1001 et seq. ERISA comprehensively regulates employee
welfare and pension benefit plans “to make the benefits promised by an employer more
secure by mandating certain oversight systems and other standard procedures.” Gobeille
v. Liberty Mut. Ins. Co., 577 U.S. 312, 320-21 (2016).

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II. FACTS AND PROCEEDINGS
A. Facts
Plaintiff Charina McCollum alleges that in May 2015 Dr. Thomas
Knolmayer, M.D., mistakenly cut the wrong duct during a surgery to remove
McCollum’s diseased gallbladder. As a result McCollum was medevacked from
Anchorage to Seattle, where she was given a drain to evacuate bile from her abdomen
until she could have duct repair surgery. Due to problems with bile drainage in June
2015 she was again medevacked from Anchorage to Seattle and the drain was replaced.
In August 2015 the duct was surgically repaired.
McCollum’s husband Jason McCollum was employed by Lowe’s
Companies, Inc., and most of McCollum’s health care expenses were paid by a health
plan administered by Lowe’s. The terms of the Lowe’s Plan include a right to
subrogation, under which the Plan “may, at its discretion, . . . commence a proceeding
or pursue a claim against any party” for the recovery of all benefits paid by the Plan. The
Plan’s terms also give it a right to reimbursement from any damages award McCollum
might recover for her injury:
The Plan shall be entitled to recover 100% of the benefits
paid, without deduction for attorneys’ fees and costs or
application of the common fund doctrine, make whole
doctrine or any other similar legal theory, without regard to
whether the Covered Person is fully compensated by his or
her recovery from all sources. The Plan shall have an
equitable lien which supersedes all common law or statutory
rules, doctrines and laws of any State prohibiting assignment
of rights which interferes with or compromises in any way
the Plan’s equitable subrogation lien. The obligation exists
regardless of how the judgment or settlement is classified and
whether or not the judgment or settlement specifically
designates the recovery or a portion of it as including
medical, disability or other expenses. If the Covered

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 Person’s recovery is less than the benefits paid, then the Plan
is entitled to be paid all of the recovery achieved.
B. Proceedings
In February 2016 McCollum filed a complaint for medical malpractice
against Knolmayer and Alaska Trauma and Acute Care Surgery, LLC.
1. The superior court’s first order on preemption
McCollum moved for a ruling of law on the recoverability of her medical
expenses that had been paid by the Lowe’s Plan. Alaska Statute 09.55.548(b) provides
that “a claimant may only recover damages from the defendant that exceed amounts
received by the claimant as compensation for the injuries from collateral sources,” with
the exception of “death benefits paid under life insurance” or collateral sources that are
“federal program[s] that by law must seek subrogation.” McCollum’s motion argued that
as an employer-funded benefit plan, the Lowe’s Plan is governed by ERISA, which
preempts state laws relating to employee benefit plans. McCollum asked the court “to
hold that ERISA [preempts] the application of AS 09.55.548(b) in this case, and that
[McCollum] is not precluded from requesting medical damages that include the
expenditures of the” Lowe’s Plan.
Knolmayer opposed McCollum’s motion, arguing that ERISA does not
preempt AS 09.55.548(b). Knolmayer claimed that although ERISA does preempt some
state laws, “state laws that do not affect coverage or impose requirements upon ERISA
plans are not preempted.”
In reply McCollum argued that AS 09.55.548(b) is preempted because it
affects the Lowe’s Plan’s contractual subrogation and reimbursement rights. To support
this argument McCollum pointed to a letter from the Plan’s representative, the PHIA
Group, to McCollum’s counsel stating that “at the time of settlement or resolution of any
underlying claims, [the Plan] will seek full reimbursement of all related claims paid by

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the Plan.” At oral argument, McCollum explained that because AS 09.55.548(b) limits
the amount that McCollum can recover from the defendants, it also potentially limits the
amount the Lowe’s Plan can recover from McCollum. She argued that because
AS 09.55.548(b) would result in the Lowe’s Plan recovering less from claimants in
Alaska than from claimants in states without similar statutory provisions, the statute
impairs ERISA’s goal of uniform health plan administration across the country.
Knolmayer, on the other hand, argued that AS 09.55.548 “only governs the defendant’s
liability to the plaintiff. It does not prevent the [P]lan in any way from seeking
reimbursement from the plaintiff after this lawsuit has concluded.”
On October 1, 2018, the court issued an order holding that ERISA does not
preempt AS 09.55.548(b). The order stated that under AS 09.55.548(b), the plaintiff’s
award is reduced by the amount the insurer paid in medical expenses; that amount is then
“set aside by the court to reimburse the insurer.” According to the superior court,
because the statute did not “prevent the [Plan] from seeking or receiving
reimbursement,” it did not affect the operation of ERISA plans and therefore was not
preempted by ERISA.
2. The superior court’s order on partial reconsideration
Knolmayer sought partial reconsideration of the October 1 order. He did
not challenge the court’s conclusion that ERISA does not preempt AS 09.55.548. But
he sought reconsideration of the court’s holding that the amount deducted from the
plaintiff’s recovery would be “set aside” to reimburse the insurer. Knolmayer argued
that this “set-aside” would contradict the statute’s purpose of reducing the size of
medical malpractice awards, as well as contradict the common law by allowing the
subrogated insurer to obtain a recovery that the plaintiff herself could not recover.
McCollum opposed the motion. She argued that under Knolmayer’s interpretation of
AS 09.55.548(b), the Lowe’s Plan would be able to “seize” her entire recovery, thus

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“eviscerat[ing]” the “basic principle of tor[t] law that individuals have basic interests
protected by law in the event of civil wrong.”
The court granted partial reconsideration on June 25, 2019. It agreed with
Knolmayer that AS 09.55.548(b) “forecloses collection of the Plan’s subrogated interest
against Defendants by Plaintiff.”2 It therefore vacated “those portions of its Order that
set out a post-trial procedure for earmarking covered medical costs and awarding them
to the non-party Plan.” However, the court noted that “nothing in AS 09.55.548(b)
prevents the Plan from recovering on its subrogated interest as a party itself.” The court
stated that unless the Lowe’s Plan joined as a party, McCollum could not “pursue the
covered medical costs, regardless of the contract between [McCollum] and the Plan.”
But the court determined that “[t]he Plan’s subrogation right has not been eliminated by
the statute,” and that the Plan was still free to join the present action or to bring its own
action against the defendants.
3. The superior court’s clarification order
McCollum then moved for clarification of the court’s reconsideration order,
asking whether the Lowe’s Plan could assign its subrogated claim to her. The defendants
opposed, urging the court to find that even if McCollum received an assignment of the
Lowe’s Plan’s subrogated claim, her recovery on the claim would still be limited by
AS 09.55.548(b). The court denied the motion as a request for an advisory opinion.
In October 2019 McCollum filed a notice to the court that she had “agreed
to an assignment from” the Lowe’s Plan and that the “actual assignment w[ould] be
completed in the near future.” Knolmayer responded, arguing that the Plan had to join
the action as a party itself in order to recover the Plan’s expenditures. McCollum replied

2
Emphasis in original.

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by asking the court whether the proposed assignment would be valid, stating that if it
would not be, she would instead seek involuntary joinder of the Lowe’s Plan.
In November 2019 McCollum moved to join the Lowe’s Plan’s
representative, the PHIA Group, as a co-plaintiff. The defendants opposed, arguing that
the Lowe’s Plan had exercised its option to ratify McCollum’s action instead of joining
it and could not be forced to join. They further argued that any claim brought by the
Plan would be barred by the statute of limitations. In May 2020 the court denied
McCollum’s motion for joinder.
On April 30, 2020, the court issued an “Order Vacating & Clarifying
Orders Re: ERISA Preemption of AS 09.55.548 & Denying Plaintiff’s Motion.” The
order stated that because of the parties’ confusion regarding the earlier rulings on ERISA
preemption, “the Court vacates its previous orders (issued October 1, 2018 and June 25,
2019) and clarifies its holding for the record: ERISA does not preempt AS 09.55.548,
and AS 09.55.548 applies to this case.” The court held that AS 09.55.548(b) did not
prevent McCollum from recovering the medical expenses paid by the Lowe’s Plan
because the Plan falls under the statute’s exception for federal programs that by law must
seek subrogation. The court reasoned that because the Plan is an employee welfare
benefit program governed by ERISA, it is a “federal program.” And it reasoned that
according to the terms of McCollum’s contract with the Plan and the Plan’s letter to
McCollum’s counsel, “the plan is also required to seek subrogation and
reimbursement.”3 Thus, “[b]ecause Ms. McCollum’s federally-governed health
insurance plan constitutes a ‘federal program that by law must seek subrogation’ under
the statute, evidence of any compensation or payments from her plan is not admissible
and her damages may not be reduced based on payments received from those sources.”

3
Emphasis in original.

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 4. Petition for review
In May 2020 Knolmayer petitioned for review of the superior court’s
April 30 order, specifically the court’s “holding that [the Lowe’s Plan] is a ‘federal
program that by law must seek subrogation’ under AS 09.55.548(b).”
We granted the petition, posing the following questions to the parties and
inviting the participation of amici curiae:4
• First, is the Lowe’s Plan part of a “federal program required by law to seek
subrogation” for purposes of AS 09.55.548(b)?
• If not, does AS 09.55.548(b) bar a medical malpractice plaintiff from
recovering damages paid by a contractually subrogated insurer?
• Can an insurer assign a contractually subrogated claim to a plaintiff for
collection purposes in a medical malpractice lawsuit, and was there an
effective assignment in this case?
• Does AS 09.55.548(b) as applied to a plaintiff whose insurer has a
contractual right to collect from the plaintiff’s recovery violate the due
process or equal protection guarantees of the Alaska Constitution? Or does
AS 09.55.548(b) require that such contractual subrogation rights be
invalidated?5
III. STANDARD OF REVIEW
Deciding the correct interpretation of AS 09.55.548, whether the statute’s
operation may be avoided by the use of assignment, whether this statute is preempted by

4
We thank amici Alaska Association for Justice and Premera Blue Cross for
their helpful briefing.
5
See Knolmayer v. McCollum, No. S-17792 (Alaska Supreme Court Order,
Sept. 29, 2020).

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ERISA, and whether the statute violates the Alaska Constitution are questions of law that
we review de novo.6
IV. DISCUSSION
A. AS 09.55.548(b)’s Bar On Recovering Damages Compensated By A
Collateral Source Raises Difficult Questions About Allocation Of Loss
When The Collateral Source Has Rights Of Subrogation And
Reimbursement.
This case concerns how AS 09.55.548(b) affects the recovery of damages
in a medical malpractice case when the plaintiff’s medical expenses have been paid in
part by an employer’s self-funded health benefit plan governed by ERISA.
Historically, a plaintiff’s damages award against a tortfeasor could not be
“diminished or mitigated on account of payments received by plaintiff from a source
other than the defendant.”7 The so-called “collateral source rule” was “based on the
principle that a tort-feasor is not entitled to have his [or her] liability reduced merely
because plaintiff was fortunate enough to have received compensation for his [or her]
injuries or expenses from a collateral source.”8 The rule prevented the admission of

6
Alaska Pub. Offs. Comm’n v. Not Tammie, 482 P.3d 386, 388 (Alaska
2021) (statutory interpretation); Catalina Yachts v. Pierce, 105 P.3d 125, 128 (Alaska
2005) (federal preemption); Ruggles ex rel. Estate of Mayer v. Grow, 984 P.2d 509, 512­
13 (Alaska 1999) (relationship of assignment to subrogation); Forrer v. State, 471 P.3d
569, 583 (Alaska 2020) (constitutional interpretation).
7
Weston v. AKHappyTime, LLC, 445 P.3d 1015, 1021 (Alaska 2019)
(quoting Beaulieu v. Elliott, 434 P.2d 665, 673 (Alaska 1967)).
8
Id. (alterations in original) (quoting Ridgeway v. N. Star Terminal &
Stevedoring Co., 378 P.2d 647, 650 (Alaska 1963)).

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“evidence that the plaintiff was compensated by a collateral source for all or a portion
of the damages caused by the defendant’s wrongful act.”9
The Alaska legislature modified the collateral source rule in medical
malpractice cases in 1976 by enacting AS 09.55.548(b), which provides in relevant part:
Except when the collateral source is a federal program that by
law must seek subrogation and except death benefits paid
under life insurance, a claimant may only recover damages
from the defendant that exceed amounts received by the
claimant as compensation for the injuries from collateral
sources, whether private, group, or governmental, and
whether contributory or noncontributory.
This statute prevents a plaintiff from recovering damages for expenses that have already
been paid by a collateral source — typically an insurer — and thereby receiving a
windfall. An exception is made for payments from a “federal program that by law must
seek subrogation.”10 This exception reflects that a federal program like Medicaid is
legally required to seek recovery of its expenditures attributable to a tort, either by
pursuing its subrogated claim against the tortfeasor directly or by seeking reimbursement

9
22 AM. JUR. 2D. Damages § 779 (2022).
10
“Subrogation” is “the substitution of another person in place of the creditor
to whose rights he or she succeeds in relation to the debt, and gives to the substitute all
the rights, priorities, remedies, liens, and securities of the person for whom he or she is
substituted.” 16 GEORGE JAMES COUCH, ET AL., COUCH ON INSURANCE § 222:5 (3d ed.
2021). We have explained that “[w]hen an insurer pays expenses on behalf of an insured
it is subrogated to the insured’s claim. The insurer effectively receives an assignment of
its expenditure by operation of law and contract.” Weston, 445 P.3d at 1021 n.16
(quoting Dixon v. Blackwell, 298 P.3d 185, 193 n.38 (Alaska 2013)). The subrogated
claim belongs to the insurer. Id. The insurer may allow the insured to include the claim
in a suit against a third-party tortfeasor and recoup proceeds directly from the damages
award, id., or the insurer “may pursue a direct action against the tortfeasor, discount and
settle its claim, or determine that the claim should not be pursued.” Ruggles, 984 P.2d
at 512.

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from the claimant’s recovery.11 Allowing the claimant to recover payments made by a
subrogated federal program that is obligated to exercise its recovery rights does not result
in a windfall for the plaintiff, because it is the federal program that ultimately recovers
this amount.
Yet Medicaid is not the only collateral source that seeks to recover its
expenditures on an insured when a tortious third party is responsible. The contract
between a health plan and an insured commonly gives the health plan express rights of
subrogation and may also oblige the insured to reimburse the insurer’s payments with
any damages the insured has recovered from a tortious third party.12 That is the case
here, where the Lowe’s Plan has a contractual right “to recover 100% of the benefits paid
. . . without regard to whether the Covered Person is fully compensated by his or her
recovery from all sources . . . [and] regardless of how the judgment or settlement is

11
See 42 U.S.C. § 1396a(a)(25)(B) (mandating that states and local agencies
seek recovery for Medicaid expenses); AS 47.07.025 (requiring Alaska Medicaid
recipients to assign their rights to third-party payment for medical care to the State and
permitting the State to garnish a recipient’s wages or salary to ensure reimbursement).
The parties assume that Medicare imposes a similar obligation. Although Medicare
clearly possesses a right to seek reimbursement, see 42 U.S.C. § 1395y(b)(2)(B)(iii), and
subrogation, see 42 U.S.C. § 1395y(b)(2)(B)(iv), the parties have not pointed to any law
that gives Medicare a legal obligation to do so.
12
See 16 COUCH ET AL., supra note 10, § 226:3 (“Traditionally, an insurer
who paid its insured’s claim then looked to recover the payments from any third party
who might have caused the insured’s loss. However, because of various limitations on
the concept of ‘subrogation,’ . . . as well as to avoid the need to undertake the expense
of prosecuting its own action against a third party, insurers have in past decades become
increasingly concerned with their ability to recover back their payments directly from
their own insureds, by means of ‘reimbursement.’ ”); see also id. § 222:2 (distinguishing
“subrogation” as “attempts by insurers to recover from a third party” from
“reimbursement,” which refers to “attempts by the insurer to recover from the entity
which received the policy proceeds — the insured or a beneficiary — once that entity
has, in fact, recovered from the third party who is responsible for causing the loss”).

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classified.” In these cases, the plain language of AS 09.55.548(b) causes the health
plan’s medical payments to be deducted from the plaintiff’s damages award twice: first
by the court, applying AS 09.55.548(b), and a second time by the health plan exercising
its contractual right of reimbursement. This “double deduction” means that the plaintiff,
instead of receiving a windfall, comes up short.
The combination of AS 09.55.548(b) and insurers’ contractual rights of
subrogation and reimbursement can create harsh results for the injured person to the
advantage of the person’s insurer, which recovers the cost of providing insurance, and
the tortfeasor, who does not have to pay the full cost of the negligence. For example, a
severely injured person unable to continue working a strenuous, high-paying job might
have incurred $500,000 in medical bills, covered by his insurer, and lost $500,000 in
future income. Under AS 09.55.548(b) the person may not recover the $500,000 paid
by the insurer. Thus the defendant, who has caused $1 million in damages, is on the
hook for half the cost of its negligence. As for the $500,000 the person could recover
as compensation for lost income, the insurer may exercise its contractual right of
reimbursement and take the entire amount. This person would end up far worse than
someone who had no insurance at all, who would be able to recover all damages and,
after paying medical debts, could keep the compensation for lost income.13 Knolmayer
takes the position that this result is not unfair; it is the result of a legislative policy choice
to reduce damages awards and the insured’s choice to accept these terms of health
insurance coverage.

13
McCollum maintains that this harsh result is likely to occur in her case. If
AS 09.55.548(b) precludes her from recovering the $349,049.87 the Plan paid for her
medical expenses and she is limited to $250,000 in non-economic damages by
AS 09.55.549(d), McCollum asserts that she will be left with nothing. We express no
opinion on McCollum’s allegations or the figures she cites.

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 To avoid the risk of such a harsh result, McCollum and amici advance
several theories of how AS 09.55.548(b) should be interpreted and applied in this case.
They argue that because McCollum’s health benefit plan is governed by ERISA, it falls
within the exception for “federal program[s] that must by law seek subrogation,” so
AS 09.55.548(b) does not preclude her from recovering damages that were compensated
by the Plan. She argues that AS 09.55.548(b) was not intended to result in a “double
deduction” for medical malpractice plaintiffs and thus cannot be interpreted to preclude
her from recovering damages for which the Plan has a right of reimbursement. If these
interpretations of AS 09.55.548(b) are rejected, she argues that the Plan may assign its
subrogated claim to her and has done so in this case, allowing her to recover the damages
that AS 09.55.548(b) would otherwise preclude her from recovering. Alternatively,
McCollum and amici argue that ERISA preempts the application of AS 09.55.548(b) to
McCollum’s case.
Each of these theories raises questions about just how the legislature
intended AS 09.55.548(b) to operate when the collateral source has rights of subrogation
and reimbursement — and in particular, who will bear the loss caused by the injury.
Lurking underneath these questions is the constitutional question of whether the
legislature’s approach to allocating the loss is consistent with Alaska Constitution’s
guarantees of equal protection and due process.
B. AS 09.55.548(b) Does Not Eliminate Collateral Sources’ Subrogated
Claims.
Resolving the parties’ arguments requires us to decide how the legislature
intended AS 09.55.548(b) to operate and, in particular, how the legislature intended to
affect collateral sources’ subrogation rights. Put simply, the question is whether the
legislature intended to preclude only the injured person from recovering the amount of
collateral source payments or to preclude also the collateral sources themselves from

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recovering those amounts. Answering this question is the first step to deciding: (1) the
scope of the “federal program” exception; (2) whether the Lowe’s Plan has a claim it
could assign to McCollum for collection; (3) whether ERISA preempts AS 09.55.548(b);
and (4) the legislature’s ultimate purpose in enacting the statute, which is essential to our
constitutional analysis.
Knolmayer contends that the legislature did not intend to abrogate collateral
sources’ subrogation rights. Rather, he contends the legislature intended merely to
preclude claimants from recovering amounts that equitably belong (under subrogation
principles)14 to insurers, so that insurers may pursue these amounts from tortfeasors
directly. McCollum and amici appear to agree with this interpretation. Although the
parties do not dispute this point, we must independently consider this threshold issue.
Whether the legislature intended to preserve, eliminate, or otherwise modify
collateral sources’ subrogation rights is an issue of statutory interpretation. We interpret
statutes “according to reason, practicality, and common sense, taking into account the
plain meaning and purpose of the law as well as the intent of the drafters.”15 “Statutory
construction begins with the language of the statute construed in light of the purpose of
its enactment.”16 We decide questions of statutory interpretation “on a sliding scale”:
“the plainer the language of the statute, the more convincing any contrary legislative
history must be . . . to overcome the statute’s plain meaning.”17 “We give popular or

14
See Ruggles, 984 P.2d at 512 (observing that “[w]hen an insurer pays
expenses on behalf of an insured it is subrogated to the insured’s claim” and that “the
subrogated claim belongs to the insurer”).
15
Native Vill. of Elim v. State, 990 P.2d 1, 5 (Alaska 1999).
16
Tesoro Petrol. Corp. v. State, 42 P.3d 531, 537 (Alaska 2002).
17
City of Valdez v. State, 372 P.3d 240, 248 (Alaska 2016) (first quoting
(continued...)

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common words their ordinary meaning, if the words are not otherwise defined in the
statute.”18
The statutory text applies the recovery limitation only to a “claimant.”19 And
the text clearly distinguishes between a “claimant” and a “collateral source” from which
a claimant receives compensation. Nothing on the face of the statute suggests a limitation
on the right of a subrogated insurer to pursue its subrogated claim directly against a
tortfeasor.
However, applying the traditional common law rules of subrogation to this
statutory text supports a colorable argument that collateral sources too are limited from
recovering these amounts. “[A] subrogated insurer stands in [the] shoes of an insured,
and has no greater rights than the insured, for one cannot acquire by subrogation what
another, whose rights he or she claims, did not have.”20 For that reason, the subrogated
insurer “is subject to all the limitations applicable to the original claim of the subrogor
[i.e., the insured].”21 By precluding the claimant from recovering damages for losses
compensated by a collateral source, AS 09.55.548(b) arguably precludes the subrogated
collateral source from recovering these damages too. And under traditional principles of
subrogation, the subrogated insurer would have no right to other categories of damages,

17
(...continued)
Marathon Oil Co. v. State, 254 P.3d 1078, 1082 (Alaska 2011); and then quoting
Peninsula Mktg. Ass’n v. State, 817 P.2d 917, 922 (Alaska 1991)).
18
Wilson v. State, Dep’t of Corr., 127 P.3d 826, 829 (Alaska 2006).
19
AS 09.55.548(b).
20
16 COUCH ET AL., supra note 10, § 222.5.
21
Id.; see also 17 COUCH ET AL., supra note 10, § 236:8 (“Since the insurer’s
claim by subrogation is derivative from that of the insured, it is subject to the same
statute of limitations as though the cause of action were sued upon by the insured.”).

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such as pain and suffering or loss of income, that the claimant can still recover.22
Although the text of AS 09.55.548 does not expressly limit a collateral source’s
subrogation rights, these subrogation principles raise the possibility that the legislature
intended to limit recovery by collateral sources as well as claimants.
The legislative history does not decisively answer this question either.
Alaska Statute 09.55.548(b) originated as one of 27 recommendations by a Medical
Malpractice Insurance Commission convened by Governor Jay Hammond.23 In Reid v.
Williams we described AS 09.55.548(b) as “part of a comprehensive medical malpractice
reform package intended to alleviate a perceived crisis in medical malpractice insurance
costs.”24
It seems fairly clear that the Commission intended to limit the recovery of
both injured persons and their insurers. The Commission’s final draft of the provision
that would eventually become AS 09.55.548(b) was similar in many respects to the
legislation enacted, but the Commission’s draft expressly provided that
“[n]otwithstanding other provisions of state law, and except as provided in this
subsection, a collateral source does not have a right of subrogation.”25

22
See 16 COUCH ET AL., supra note 10, § 223:94 (“Under the principle that
an insurer who pays its insured’s claim is only subrogated to the insured’s rights against
a third party that relate to the same loss compensated by the insurer, it becomes crucial
to determine whether a settlement or judgment in an action between the insured and the
third party is, in fact, related to the same loss the insurer has compensated.”).
23
STATE OF ALASKA, REPORT OF THE GOVERNOR’S MEDICAL MALPRACTICE
INSURANCE COMMISSION, at iii-vii (1975) (hereinafter COMMISSION REPORT).
24
964 P.2d 453, 456 (Alaska 1998).
25
House Bill (H.B.) 574, 9th Leg., 2d Sess. (1976) (initial proposal).

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 The proviso eliminating collateral source subrogation rights is consistent
with the Commission’s explanation for what became AS 09.55.548(b). The Commission
stated:
[I]t was discovered that frequently a person would be allowed
an award predicated upon out-of-pocket losses which, in fact,
were wholly or partially compensated from other or collateral
sources. The result is potential for double recovery, and the
presentation of the additional complications of subrogation
and collateral source liens.
In determining how to approach eliminating the double
recovery or subrogation problem, it was determined that
overall cost would be reduced if the patient was required to
first utilize the first party coverages to which he is entitled,
which are much more efficient forms of distribution than
allowing the full measure of damages in an expensive third
party proceeding, and then deny the patient the right of
alleging, in the malpractice action, the items of damage which
were compensated by collateral sources.[26]
This discussion indicates that the Commission designed the provision that
became AS 09.55.548(b) to lower the size of damages awards by targeting: (1) “double
recovery” by claimants whose losses were already compensated, and (2) the
“complications of subrogation and collateral source liens.”
Finally, the proviso eliminating collateral source subrogation rights also can
explain the “federal program” exception.27 The Commission likely understood that any
attempt to abolish the subrogation rights of a “federal program that by law must seek

26
COMMISSION REPORT, supra note 23, at 19.
27
See AS 09.55.548(b) (providing an exception to the collateral source rule
for “federal program[s] that by law must seeks subrogation”).

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subrogation” would be preempted by federal law.28 Therefore the Commission allowed
claimants to recover damages that had been compensated by a federal program, ensuring
that the program’s subrogation rights would remain intact. In sum, it seems clear from
the Commission’s draft legislation and its report that the Commission intended to
eliminate the subrogation rights of collateral sources.
What complicates matters is the fact that the legislature then amended the
bill based on the Commission’s draft legislation to get rid of the sentence expressly
eliminating collateral source subrogation rights.29 It is possible that the legislature viewed
that sentence as redundant in light of the common law rules for subrogation: because the
claimant could not recover amounts compensated by a collateral source, the principles of
equitable subrogation would normally preclude the subrogated collateral source from
doing so.30 Yet it seems unlikely that the legislature eliminated a proviso expressly
enacting the legislature’s desired policy simply because that policy could be implied by
the interaction between other statutory provisions and the common law.
Therefore it seems more plausible that the legislature’s amendment was
intended to be meaningful. In other words, the legislature may have made a different
policy choice than the Commission. Rather than reduce the liability of a physician found
to be negligent by eliminating all recovery of collateral source payments, the legislature

28
See, e.g., Hines v. Davidowitz, 312 U.S. 52, 67 (1941) (explaining, in case
concerning federal Alien Registration Act, that state law is preempted if it “stands as an
obstacle to the accomplishment and execution of the full purposes and objectives of
Congress”).
29
Committee Substitute for House Bill (C.S.H.B.) 574, (L&C) 9th Leg., 2d
Sess. (1976), at 1, 16-17.
30
See 16 COUCH ET AL., supra note 10, § 222.5 (“[A] subrogated insurer
stands in [the] shoes of an insured, and has no greater rights than the insured . . . .”).

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may have intended to eliminate the potential for double recoveries by injured persons
while allowing their insurers to recover the losses caused by the negligent physician.31
Unfortunately, there appears to be no explanation of this change in the legislative history.
It is fair to ask why, if the legislature intended to permit collateral sources
to pursue subrogated claims directly against the tortfeasor, the legislature retained the
“federal program” exception. The legislature may have been concerned that even limiting
the insured’s recovery would be enough to create preemption problems. By limiting the
plaintiff’s recovery, AS 09.55.548(b) would in some cases impair a federal program’s
ability to assert a subrogation lien on damages recovered by the insured; the federal
program would therefore have to secure its interest by pursuing a claim directly against
the tortfeasor. The legislature may have feared that this degree of interference would
result in preemption. Alternatively, the legislature may not have viewed the federal
program exception in terms of preemption at all. Instead, the exception may reflect the
view that when a federal program is required by law to seek subrogation, there will be no

31
This would be a reasonable policy choice, even as part of a statutory
scheme that seeks to limit malpractice awards overall. Allowing health insurers to
recover such costs would theoretically lower the cost of health insurance overall,
effectuating a different allocation of the loss than the Commission chose. As the
Commission itself observed, “every change in the tort law required the conscious
recognition that the burden of loss was being wholly or partially shifted to a new or
different class of persons[,] and the Commission struggled hardest on the equities of who
should bear the loss.” COMMISSION REPORT, supra note 23, at 10-11. The legislature
could reasonably reach different conclusions on that question than the Commission. The
federal district court for the Southern District of New York, interpreting New York’s
similarly worded statute, pointedly described its understanding of that legislature’s policy
choice: “Section 4545 prevents double recoveries; it was not intended to deprive
insurers of their basic subrogation rights . . . . Certainly, § 4545 was not intended to
create a windfall for the tortfeasor, granting it the benefit of the injured party’s insurance,
for which it did not pay, as a reward, in effect, for committing a tort and injuring
another.” In re Sept. 11 Litig., 649 F. Supp. 2d 171, 180 (S.D.N.Y. 2009).

-19- 7631
chance of double recovery, so the rationale for modifying the collateral source rule does
not apply to these claimants. Either way, interpreting AS 09.55.548(b) to preserve
collateral source subrogation rights does not create an irrational result, so it is a plausible
interpretation of the statute.32 And because the legislature amended the Commission’s
draft of the legislation in such a significant way, we cannot confidently ascribe the
Commission’s intent regarding collateral source subrogation rights to the legislature.
Courts in other jurisdictions have concluded, when interpreting statutes
worded similarly to AS 09.55.548(b), that those statutes did not abrogate insurers’ rights
of subrogation. The Supreme Court of Florida, for example, reached this conclusion with
respect to Florida Statute 627.7372(1), which requires the trial court to “instruct the jury
to deduct from its verdict the value of all benefits received by the claimant from any
collateral source.”33 The court reasoned that the statute “does not bar a cause of action
by either the plaintiff insured or his insurer, it merely limits the plaintiff’s recovery to
monies to which he is equitably entitled.”34 Thus the court saw no reason “why a health
insurer should not be entitled to a single recovery of costs caused by the tortfeasor.”35

32
Cf. Martinez v. Cape Fox Corp., 113 P.3d 1226, 1230 (Alaska 2005) (“We
‘will ignore the plain meaning of an enactment . . . where that meaning leads to absurd
results or defeats the usefulness of the enactment.’ ” (quoting Davenport v. McGinnis,
522 P.2d 1140, 1144 n.15 (Alaska 1974))).
33
Blue Cross & Blue Shield of Fla., Inc. v. Matthews, 498 So. 2d 421, 422
(Fla. 1986).
34
Id. at 422-23.
35
Id.

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 The federal district court for the Southern District of New York reached the
same conclusion with respect to New York’s statute modifying the collateral source rule.36
The New York statute, like Alaska’s, requires reducing the plaintiff’s damages award by
the amounts “replaced or indemnified . . . from any collateral source.”37 The court
rejected the argument that because a subrogated insurer “stands in the shoes” of its
insured and has only the “derivative and limited rights of the insured,” the statute
abrogates insurers’ right of subrogation.38 The court reasoned that “[t]he principle of
subrogation is so embedded in the common law, and would be so radically affected, that
a very clear legislative intent to disrupt it is required,” yet “[t]he statute contains
absolutely no language that effects th[at] disruption.”39 Observing the clarity with which
the statute modified the collateral source rule, the court concluded that “the absence of

36
In re Sept. 11 Litig., 649 F. Supp. 2d at 183-84.
37
N.Y. C.P.L.R. § 4545(c) (MCKINNEY 2021) (“In any action brought to
recover damages for personal injury, injury to property or wrongful death, where the
plaintiff seeks to recover for the cost of medical care, dental care, custodial care or
rehabilitation services, loss of earnings or other economic loss, evidence shall be
admissible for consideration by the court to establish that any such past or future cost or
expense was or will, with reasonable certainty, be replaced or indemnified, in whole or
in part, from any collateral source, except for life insurance and those payments as to
which there is a statutory right of reimbursement. If the court finds that any such cost
or expense was or will, with reasonable certainty, be replaced or indemnified from any
such collateral source, it shall reduce the amount of the award by such finding, minus an
amount equal to the premiums paid by the plaintiff for such benefits for the two-year
period immediately preceding the accrual of such action and minus an amount equal to
the projected future cost to the plaintiff of maintaining such benefits.”) (amended 2009).
38
In re Sept. 11 Litig., 649 F. Supp. 2d at 179-83 (quoting Winkelman v.
Excelsior Ins. Co., 650 N.E.2d 841, 844 (N.Y. 1995)).
39
Id. at 183.

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any similar clarity” about eliminating insurers’ subrogation rights weighed against
interpreting the statute to do so.40
As that court observed, subrogation is rooted in the common law,41 a
“creature of equity” with the purpose to “work[] out . . . an equitable adjustment between
the parties by securing the ultimate discharge of a debt by the person who in equity and
good conscience ought to pay it.”42 “[S]tatutes will not be interpreted as changing the
common law unless they effect the change with clarity.”43 We see no clear intent in the
text or legislative history to abrogate collateral sources’ subrogation rights, and therefore
we must conclude the legislature intended to preserve them. Accordingly
AS 09.55.548(b) limits the injured party from recovering the amount of collateral source
payments received but does not preclude the collateral source itself from seeking these
amounts in a direct action against the tortfeasor.
C. AS 09.55.548(b) Bars A Medical Malpractice Plaintiff From Recovering
Damages Paid By A Subrogated Insurer.
The plain language of AS 09.55.548(b) bars medical malpractice plaintiffs
from recovering damages compensated by a collateral source such as, in McCollum’s
case, an insurer: “a claimant may only recover damages from the defendant that exceed
amounts received by the claimant as compensation for the injuries from collateral sources,
whether private, group, or governmental, and whether contributory or noncontributory.”
The statute does not contain an exception for collateral sources with a contractual right

40
Id.
41
Id.
42
16 COUCH ET AL., supra note 10, § 222:8.
43
ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE
INTERPRETATION OF LEGAL TEXTS 318 (West 2012).

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of subrogation or reimbursement, but only “federal program[s] that by law must seek
subrogation and . . . death benefits paid under life insurance.”44 The existence of an
exception for death benefits and federal programs that by law must seek subrogation
indicates that the legislature did not intend to exclude compensation paid by other kinds
of collateral sources from the statute’s limitation on recovery.45
McCollum argues that the statute’s proviso for depleted coverage allows
plaintiffs to recover past medical expenses paid by collateral sources. She focuses on the
following language in AS 09.55.548(b):
The court may take into account the value of claimant’s rights
to coverage exhausted or depleted by payment of these
collateral benefits by adding back a reasonable estimate of
their probable value, or by earmarking and holding for
possible periodic payment under (a) of this section that
amount of the award that would otherwise have been
deducted, to see if the impairment of claimant’s rights actually
takes place in the future.
McCollum argues that this language means that the trial court has “the option of replacing
collateral sources ‘exhausted or depleted’ in the post-trial offset hearing if it is established
that the ‘claimant’s rights’ were actually ‘impaired’ by either reimbursement or
subrogation.”
This interpretation is not persuasive. “[C]overage exhausted or depleted by
payment of these collateral benefits” refers to a situation in which the claimant has a
limited amount of insurance coverage and the collateral benefits at issue have

44
AS 09.55.548(b).
45
The principle of expressio unius est exclusio alterius “establishes the
inference that, where certain things are designated in a statute, ‘all omissions should be
understood as exclusions.’ ” Alaska State Comm’n for Hum. Rts. v. Anderson, 426 P.3d
956, 964 n.34 (Alaska 2018) (quoting Croft v. Pan Alaska Trucking, Inc., 820 P.2d 1064,
1066 (Alaska 1991)).

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substantially used up that coverage. The statutory text simply does not refer to
subrogation or reimbursement.
McCollum also argues, relying on the legislative history of AS 09.55.548(b),
that the legislature had no intent to force injured persons to bear the loss of the injury so
as to protect negligent physicians. Therefore, she argues, interpreting AS 09.55.548(b)
to preclude a claimant like her from recovering damages compensated by a collateral
source with a contractual right to reimbursement is contrary to legislative purpose. As
explained further below, we agree with McCollum that the legislature’s purpose in
enacting AS 09.55.548(b) was to eliminate the potential for a claimant to receive the
windfall of double recovery, not to force her to shoulder the loss of injury.46 But despite
this overall purpose, we cannot ignore the plain language of the statute. The legislature
clearly was aware that collateral sources could have rights of subrogation and exempted
only certain types of collateral source compensation from the statute. McCollum does not
point to any legislative history that would suggest the legislature meant something
different.47
McCollum also relies on decisions from other jurisdictions to argue that
AS 09.55.548(b) cannot be interpreted to allow a double deduction. But these decisions
interpreting laws that modify the collateral source rule in other states are not a persuasive
guide to interpreting AS 09.55.548(b). In Toomey v. Surgical Services, P.C. the Iowa
Supreme Court ruled that a statute modifying the collateral source rule precluded the

46
See section IV.G. below.
47
Although the parties did not address the canon of constitutional avoidance
in their briefing, the canon cannot support the interpretation McCollum argues for here,
which is directly contrary to the plain meaning of the statutory text and is unsupported
by legislative history. Res. Dev. Council for Alaska, Inc. v. Vote Yes for Alaska’s Fair
Share, 494 P.3d 541, 548 (Alaska 2021) (explaining that statute cannot be interpreted
unreasonably to avoid a ruling of unconstitutionality).

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recovery of a statutory workers’ compensation lien that would have resulted in the
claimant receiving a double deduction.48 This conclusion flowed from that court’s
attempt to harmonize the two statutes.49 In this case, Lowe’s reimbursement right is
contractual, not statutory, and McCollum does not point us to another statute that would
require us to interpret AS 09.55.548(b) contrary to its plain terms in order to effectuate
legislative intent. The Iowa law at issue in Loftsgard v. Dorrian, the second case
McCollum cites, expressly permitted plaintiffs to present evidence of collateral source
indemnification or subrogation rights.50 Our statute has no comparable language. These
decisions therefore do not tell us what the Alaska legislature intended when enacting
AS 09.55.548(b).
In re Sept. 11 Litigation51 does not support McCollum’s argument either.
In that case a federal district court ruled that New York’s similarly worded statute does
not bar insurers from directly pursuing their subrogated claims against tortfeasors.52 But
it does not suggest that a claimant could recover these amounts and therefore does not
suggest that AS 09.55.548(b) should be interpreted that way. Alaska Statute 09.55.548(b)
does not permit medical malpractice plaintiffs to recover damages already paid by a
subrogated insurer.

48
558 N.W.2d 166, 167-68, 170 (Iowa 1997).
49
Id. at 170.
50
476 N.W.2d 730, 733 (Iowa App. 1991) (citing Iowa Code § 668.14(2)).
51
649 F. Supp. 2d 171 (S.D.N.Y. 2009).
52
Id. at 183.

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 D. The Lowe’s Plan Does Not Fall Within The Statutory Exception For
Federal Programs Required By Law To Seek Subrogation.
The superior court ruled that the Lowe’s Plan is a “federal program that by
law must seek subrogation” for purposes of AS 09.55.548(b). This ruling allows
McCollum to recover damages compensating for the medical expenses covered by the
Lowe’s Plan, which the Lowe’s Plan may then recoup from McCollum pursuant to its
contractual right of reimbursement. Knolmayer argues that AS 09.55.548(b)’s federal
program exception does not apply to self-funded health benefit plans governed by ERISA,
including the Lowe’s Plan. On this point we agree with Knolmayer.
1. The plain meaning of “federal program that by law must seek
subrogation” does not encompass a privately funded, privately
administered benefit plan with contractual rights of subrogation
and reimbursement.
According to the plain meaning of the statutory text, the Lowe’s Plan is not
a federal program. “Federal” refers to the federal government;53 “program” is defined by
Merriam-Webster as “a plan or system under which action may be taken toward a goal.”54
The United States Supreme Court has referred to Medicare and Medicaid — each an
amalgamation of federal legislation and regulations that provide for federal funding of
individual health benefits through administration by federal agencies — as “federal
programs.”55 By contrast, the Lowe’s Plan is created and funded by Lowe’s Companies,
Inc., a private corporation, and is administered by its agent. “[N]o agency of the United
States administers ERISA plans; private employers may administer their own ERISA

53
See Federal, BLACK’S LAW DICTIONARY (11th ed. 2019).
54
Program, WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY (1969).
55
Fischer v. United States, 529 U.S. 667, 671 (2000); Nat’l Fed’n of Indep.
Bus. v. Sebelius, 567 U.S. 519, 578 (2012); 42 U.S.C. §§ 1396a-1396v, §§ 1301­
1320b-21 (Medicaid); 42 U.S.C. §§ 1301–1320d-8, 1395–1395lll (Medicare).

-26- 7631
plans or may contract for administration of plans from an independent company.”56 A
privately funded and operated entity does not fall within the common understanding of
the term “federal program.”
McCollum offers an array of arguments for why the Lowe’s Plan is a
“federal program.” First, she argues that if the legislature intended to limit the exception
to Medicaid, it would have done so explicitly. Although true that the phrase “federal
program” is broader than Medicaid alone, that does not mean that the legislature intended
it to encompass an entity that was not created, funded, or administered by the federal
government.
Second, it is not the case, as McCollum argues, that the Lowe’s Plan is a
“federal program” simply by virtue of being governed by ERISA. ERISA is a federal
law, but that does not mean that every plan or “program” established under its authority
is a “federal program” in the straightforward sense of the term: a program of the federal
government. Many private actors are comprehensively regulated by the federal
government — airlines, auto manufacturers, banks — yet are not themselves commonly
thought of as “federal programs.” McCollum argues that the Lowe’s Plan is a federal
program because ERISA gives it “the force of federal law.” She points to the fact that
ERISA allows insured parties, fiduciaries, and plan administrators to sue to enforce the
terms of ERISA and of specific ERISA plans.57 Yet the existence of a federal cause of

56
Botsford v. Blue Cross & Blue Shield of Mont., Inc., 314 F.3d 390, 398 (9th
Cir. 2002).
57
29 U.S.C. § 1132(a)(3) (“A civil action may be brought . . . by a participant,
beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision
of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable
relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or
the terms of the plan.”). See, e.g., Sereboff v. Mid Atl. Med. Servs., Inc., 547 U.S. 356,
(continued...)

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action to enforce a contract does not make the parties to the contract themselves “federal
program[s].” Ultimately, the ordinary meaning of the phrase “federal program” does not
encompass a privately funded and administered health benefit plan.
The Lowe’s Plan does not satisfy the second element of AS 09.55.548(b)’s
exception either: it is not an entity that “by law must seek subrogation.” The terms of the
Plan state that “[t]he Plan may, at its discretion, . . . commence a proceeding or pursue a
claim against any party or coverage for the recovery of all damages to the full extent of
the value of any such benefits or conditional payments advanced by the Plan.” Further,
if the insured party brings her own suit, “[t]he Plan shall be entitled to recover 100% of
the benefits paid.” McCollum argues that these provisions mean that although the Lowe’s
Plan has the discretion to seek either subrogation or reimbursement, it is required by law
to seek one or the other. Not so: the terms assert the Plan’s contractual right to recovery,
not its obligation to pursue recovery. There is a clear distinction between having the right
to do something and being compelled by law to do something
Amicus curiae Premera Blue Cross argues that the assumption that the
Lowe’s Plan will seek either reimbursement or subrogation is “built into” Lowe’s
financial reporting to the U.S. Department of Labor,58 pointing to the plan administrator’s
duty to make sure that the terms of ERISA plans are enforced.59 But although prudent

57
(...continued)
361 (2006) (concluding that plan administrator is a fiduciary under ERISA and able to
bring a suit to enforce the terms of a reimbursement provision).
58
See Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 321 (2016) (describing
the “extensive . . . reporting, disclosure, and recordkeeping requirements” imposed by
ERISA on ERISA plans).
59
See Heimeshoff v. Hartford Life & Accident Ins. Co., 571 U.S. 99, 108
(2013) (stating that “once a plan is established, the administrator’s duty is to see that the
(continued...)

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financial management of the Lowe’s Plan may call for the Plan administrator to pursue
subrogation and reimbursement whenever available, financial dictates are not legal
dictates. And even if the terms of the Lowe’s Plan could be read to require the
administrator to always seek subrogation or reimbursement, these requirements are still
only contractual, not legal. “ ‘Law’ connotes a policy imposed by the government, not
a privately-negotiated contract.”60 The Lowe’s Plan administrator is not required “by
law” to seek subrogation.
2. The legislative history and apparent purpose of AS 09.55.548(b)
do not support interpreting “federal program that by law must
seek subrogation” beyond its plain meaning.
McCollum and Premera argue that the phrase “federal program required by
law to seek subrogation” should be construed broadly to encompass any entity that by
virtue of federal law has subrogation and reimbursement rights, such as health benefit
plans governed by ERISA. Premera focuses on the seeming purpose of the “federal
program” exception, arguing that the legislature “intended to make an exception for when
federal law intervened to require reimbursement out of a tort recovery.” Otherwise,
Premera reasons, the law would impair “claimants’ ability to obtain even a single
recovery for loss.” McCollum echoes this point, arguing that legislative history indicating
an intent to balance claimants’ interests against those of insurers and doctors warrants
interpreting the “federal program” exception broadly enough to include ERISA plans.
Neither McCollum nor Premera points to any legislative history material that directly

59
(...continued)
plan is ‘maintained pursuant to [that] written instrument’ ” (alteration in original)
(quoting 29 U.S.C. § 1102(a)(1))).
60
Empire HealthChoice Assurance, Inc. v. McVeigh, 396 F.3d 136, 144 (2d
Cir. 2005).

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explains the intent of the “federal program” exception. Instead, their arguments focus on
the broader purposes of the statute.
As explained above, the “federal program” exception in AS 09.55.548(b)
may have originally stemmed from the recognition that any attempt to impair the
subrogation rights of federal programs would be preempted. And federal programs like
Medicaid are not the only entities with federally protected subrogation rights. In 1990 the
U.S. Supreme Court ruled in FMC Corp. v. Holliday that ERISA preempted a
Pennsylvania statute expressly abolishing insurers’ rights of subrogation and
reimbursement.61 Accordingly, Premera argues that the “federal program” exception
should be interpreted to include payments made by ERISA plans that require
reimbursement because the reimbursement requirement is enforceable by federal law.
This interpretation, Premera argues, would be consistent with the overall legislative
purpose of eliminating double recoveries because an ERISA plan is virtually certain to
exercise its reimbursement rights, precluding any windfall to the claimant.
But there is scant support for the notion that the legislature considered
ERISA plans and drafted AS 09.55.548(b) around them. The legislature passed
AS 09.55.548(b) in 1976.62 ERISA was enacted only two years prior, ERISA itself does
not address rights of subrogation and reimbursement,63 and the law’s broad preemptive

61
498 U.S. 52, 65 (1990).
62
Ch. 102, § 35, SLA 1976.
63
See, e.g., Admin. Comm. for Wal-Mart Stores, Inc. Assocs.’ Welfare Plan
v. Salazar, 525 F. Supp. 2d 1103, 1113 (D. Ariz. 2007) (“ERISA does not address
reimbursement of medical expenses paid out by a plan.”); Hotel Emps. & Rest. Emps.
Int’l Union Welfare Fund v. Gentner, 815 F. Supp. 1354, 1357 (D. Nev. 1993) (“ERISA
itself is silent on the issue of subrogation agreements.”), aff’d, 50 F.3d 719 (9th Cir.
1995).

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scope was not established until years later. It was not until 1990 that the Supreme Court
decided FMC Corp. So there is little reason to think that the legislature was aware that
AS 09.55.548(b) might be preempted when applied to claimants covered by ERISA health
benefit plans. That is why the language of AS 09.55.548(b) exempts payments made by
a “federal program required by law to seek subrogation” rather than payments by “any
entity with federally protected rights of subrogation.” Although interpreting the “federal
program” exception to include ERISA plans may be consistent with the purpose of that
exception, there is no evidence that is what the legislature intended. Absent such
evidence, it is not reasonable to interpret “federal program that by law must seek
subrogation” to include a private entity with a contractual right to seek subrogation.64
Therefore the Lowe’s Plan — a self-funded health benefit plan governed by
ERISA, with contractual rights of subrogation and reimbursement — is not a “federal
program that by law must seek subrogation.” Compensation paid to McCollum by the
Lowe’s plan is not exempt from AS 09.55.548(b)’s recovery limitation on that ground.
E. A Claimant Cannot Recover The Value Of Collateral Source Payments
That AS 09.55.548(b) Precludes Her From Recovering By Having The
Collateral Source Assign Its Subrogated Claim To Her.
In the superior court, McCollum suggested that the Lowe’s Plan could
assign its subrogated claim to her, enabling her to recover the damages that
AS 09.55.548(b) would otherwise preclude her from recovering. Our order granting the

64
See Res. Dev. Council for Alaska, Inc. v. Vote Yes for Alaska’s Fair Share,
494 P.3d 541, 548 (Alaska 2021) (“[W]e may not read into a statute that which is not
there, even in the interest of avoiding a finding of unconstitutionality, because the extent
to which the express language of the provision can be altered and departed from and the
extent to which the infirmities can be rectified by the use of implied terms is limited by
the constitutionally decreed separation of powers which prohibits this court from
enacting legislation or redrafting defective statutes.” (quoting Alaskans for a Common
Language v. Kritz, 170 P.3d 183, 192 (Alaska 2007))).

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petition for review asked the parties to discuss whether an insurer may assign a
contractually subrogated claim to a plaintiff for collection purposes in a medical
malpractice lawsuit.65 We conclude that even if a subrogated insurer may assign its claim
to the insured for collection purposes,66 the claim is still subject to the limitation imposed
by AS 09.55.548(b). The claimant cannot use assignment to circumvent the statute’s
limitation on her recovery.
To resolve this question, it is helpful to consider precisely what occurs when
an insurer is subrogated to the insured’s claim. As we explained in Ruggles ex rel. Estate
of Mayer v. Grow, “[w]hen an insurer pays expenses on behalf of an insured it is
subrogated to the insured’s claim. The insurer effectively receives an assignment of its
expenditure by operation of law and contract.”67 Accordingly, the insured’s claim is
assigned to the insurer at the precise moment the insurer pays the costs stemming from
the incident.68 From that point on, “the subrogated claim belongs to the insurer.”69 “If the
insurer does not object, the insured may include the subrogated claim in its claim against

65
See Knolmayer v. McCollum, No. S-17792 (Alaska Supreme Court Order,
Sept. 29, 2020).
66
Knolmayer argues that the Lowe’s Plan did not assign its subrogated claim
to McCollum and that any assignment now would be barred by the statute of limitations
applicable to malpractice claims. McCollum argues that the Lowe’s Plan effectively
assigned its subrogated claim to her when it ratified her suit against Knolmayer, so that
her timely suit includes the Lowe’s Plan’s subrogated claim. We assume without
deciding that the Plan’s ratification of McCollum’s suit was an effective assignment of
its subrogated claim.
67
984 P.2d 509, 512 (Alaska 1999).
68
See In re Sept. 11 Litig., 649 F. Supp. 2d 171, 179-80 (S.D.N.Y. 2009).
69
Ruggles, 984 P.2d at 512.

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a third-party tortfeasor.”70 In other words, a partially subrogated insurer may ratify a
claim brought by its insured.71 By enacting AS 09.55.548(b) the legislature made
ratification fruitless because the statute precludes the insured from recovering the amounts
to which the insurer is entitled.
McCollum argues, in effect, that a claimant can evade the statutory bar by
having the subrogated insurer assign the claim to the claimant instead of ratify the
claimant’s pursuit of the claim. The distinction between “assign” and “ratify” in this
context is semantic: in both cases, the insurer permits the injured person to pursue the
insurer’s claim in exchange for the right to recoup the proceeds of the claim from the
insured. It is quite unlikely that the legislature, which clearly understood the concepts of
subrogation and ratification when it adopted AS 09.55.548(b),72 intended to allow
claimants to evade the bar on recovery through the use of this semantic distinction.
Therefore a claimant cannot recover damages compensated by a collateral source by
having the collateral source assign its subrogated claim to the claimant.
F. ERISA Does Not Preempt AS 09.55.548(b)’s Bar On Claimants’
Recovery Of Collateral Source Payments.
Although our order granting the petition for review did not ask the parties
to address preemption, the parties have devoted a substantial portion of their briefing to
this question. McCollum and Premera argue that because AS 09.55.548(b) limits a

70
Id.
71
See Mun. of Anchorage v. Baugh Constr. & Eng’g Co., 722 P.2d 919, 925
(Alaska 1986) (describing effect of partially subrogated insurer’s ratification of insured’s
suit against party causing injury).
72
COMMISSION REPORT, supra note 23, at 19 (describing problem of
subrogation); see also Young v. Embley, 143 P.3d 936, 945 (Alaska 2006) (“We presume
the legislature is aware of the common law when enacting statutes.”).

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claimant’s recovery, the claimant’s insurer may not be able to fully recover its
expenditures by relying on its contractual reimbursement rights. In these cases the insurer
would have to pursue its subrogated claim directly against the tortfeasor in order to fully
recover its interest. Because the statute has the potential to impair insurers’ contractual
reimbursement rights in this way, McCollum argues, ERISA preempts the statute’s
application when the collateral source is an employer’s self-funded health benefit plan
like the Lowe’s Plan. Under this theory McCollum must be allowed to recover from
Knolmayer the compensation she has received from the Lowe’s Plan, which the Lowe’s
Plan will in turn recover from her through its contractual right of reimbursement.
“ERISA pre-empts ‘any and all State laws insofar as they may now or
hereafter relate to any employee benefit plan’ covered by ERISA.”73 The U.S. Supreme
Court has explained that ERISA’s pre-emption clause is “conspicuous for its breadth.”74
The test for ERISA preemption has three steps. First, ERISA preempts
“every state law that ‘relate[s] to’ an employee benefit plan governed by ERISA,” so a
court must determine whether a given law “relates to” an ERISA plan.75 If the law does
not “relate to” a plan governed by ERISA, it is not preempted. Second, under the “saving
clause,” state laws that would otherwise be struck down are “saved” from ERISA
preemption if they “regulat[e] insurance.”76 Third, under the “deemer clause,” an ERISA
plan “shall not be deemed an insurance company, an insurer, or engaged in the business

73
Rutledge v. Pharm. Care Mgmt. Ass’n, 141 S. Ct. 474, 479 (2020) (quoting
29 U.S.C. § 1144(a)).
74
FMC Corp. v Holliday, 498 U.S. 52, 58 (1990).
75
Id. (alteration in original) (quoting Metro. Life Ins. Co. v. Massachusetts,
471 U.S. 724, 739 (1985)).
76
Id. (alteration in original).

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of insurance for purposes of state laws ‘purporting to regulate’ insurance companies or
insurance contracts.”77 Thus, even a state law that is “saved” as a law regulating
insurance is nonetheless preempted as applied to an ERISA plan. ERISA plans are
“bound by state insurance regulations insofar as they apply to the plan’s insurer,” but may
not be directly regulated by such regulations.78
In the first step of the preemption analysis we ask whether AS 09.55.548(b)
relates to an ERISA plan.79 The U.S. Supreme Court has held that a law relates to an
ERISA plan “if it has ‘a connection with or reference to such a plan.’ ”80
1. AS 09.55.548(b) does not “refer to” ERISA.
In FMC Corp. v. Holliday the U.S. Supreme Court ruled that ERISA
preempted Pennsylvania’s antisubrogation law.81 The statute at issue maintained that
there would be no right to subrogation or reimbursement “with respect to . . . benefits . . .
paid or payable” by “[a]ny program, group contract or other arrangement for payment of
benefits,” which “includ[e], but [are] not limited to, benefits payable by a hospital plan
corporation or a professional health service corporation.”82 This language — into which
an ERISA plan, as a “program . . . for payment of benefits,” falls — led the Court to

77
Id.
78
Id. at 61.
79
The superior court erred by applying this test to determine whether
McCollum’s claim related to ERISA, rather than whether AS 09.55.548(b) does so. The
preemption analysis properly focuses on the state law, not a plaintiff’s claim.
80
FMC Corp., 498 U.S. at 58 (quoting Shaw v. Delta Air Lines, 463 U.S. 85,
97 (1983)).
81
Id. at 65.
82
Id. at 59 (emphasis and alterations in original) (quoting 75 PA. CONS. STAT.
§§ 1719, 1720 (1987)).

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conclude that the law “ha[d] a ‘reference’ to benefit plans governed by ERISA.”83 The
FMC Corp. decision thus suggested that any statute that applies to ERISA plans satisfies
the first step of the preemption analysis.
But the Court has retreated somewhat from such a sweeping rule. Its most
recent decisions on ERISA preemption articulate a different test: “[a] law refers to
ERISA if it ‘acts immediately and exclusively upon ERISA plans or where the existence
of ERISA plans is essential to the law’s operation.’ ”84 The Court’s recent decision in
Rutledge v. Pharmaceutical Care Management Association provides a useful
illustration.85 The Arkansas law at issue in Rutledge effectively required pharmacy
benefit managers to reimburse pharmacies at a price equal to or higher than that which the
pharmacies paid to buy the drug from wholesalers.86 Rejecting the pharmacies’ argument
that the law referred to ERISA plans simply because it applied to them, the Court held that
this law did not refer to ERISA “because it applie[d] to [pharmacy benefit managers]
whether or not they manage an ERISA plan.”87 Nor was ERISA “essential to the law’s

83
Id.
84
Rutledge v. Pharm. Care Mgmt. Ass’n., 141 S. Ct. 474, 481 (2020) (quoting
Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 319-20 (2016)).
85
Id.
86
Id. at 479. Pharmacy benefit managers (PBMs), the Court explained, are
“intermediaries between prescription-drug plans and the pharmacies that beneficiaries
use. When a beneficiary of a prescription-drug plan goes to a pharmacy to fill a
prescription, the pharmacy checks with a PBM to determine that person’s coverage and
copayment information. After the beneficiary leaves with his or her prescription, the
PBM reimburses the pharmacy for the prescription, less the amount of the beneficiary’s
copayment. The prescription-drug plan, in turn, reimburses the PBM.” Id. at 478.
87
Id. at 481.

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operation” for largely the same reason: the law regulated pharmacy benefit managers
regardless of whether the plans they served fell under ERISA.88
Accordingly the Court has ruled that laws of general applicability — those
that do not exclusively affect ERISA plans — do not refer to ERISA plans for preemption
purposes. In New York State Conference of Blue Cross and Blue Shield Plans v.
Travelers Insurance Co., the Court considered a law imposing a surcharge on hospital
billing rates for patients covered by insurers others than Blue Cross/Blue Shield,
presuming such surcharges would be passed on to insurance buyers, including ERISA
plans.89 The Court rejected the argument that the law referred to an ERISA plan because
“[t]he surcharges are imposed upon patients and [health maintenance organizations
(HMOs)], regardless of whether the commercial coverage or membership, respectively,
is ultimately secured by an ERISA plan.”90 And in California Division of Labor
Standards Enforcement v. Dillingham Construction, N.A., the Court weighed a law
permitting public works contractors to pay lower wages to apprentices in approved
apprenticeship programs.91 “Because it seems that approved apprenticeship programs
need not necessarily be ERISA plans,” the Court found the law did not “refer to” ERISA
plans.92
Alaska Statute 09.55.548(b) does not act immediately and exclusively upon
ERISA plans. The law does not apply “exclusively” to ERISA plans but to all collateral

88
Id. (quoting Gobeille, 577 U.S. at 319-320).
89
514 U.S. 645, 650, 659 (1995).
90
Id. at 656.
91
519 U.S. 316, 319-20 (1997).
92
Id. at 325.

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sources other than federal programs that by law must seek subrogation and death benefits
under life insurance. Nor is ERISA essential to the law’s operation: if ERISA were
abolished AS 09.55.548(b) would function without a problem. Instead the statute is like
the pharmacy reimbursement law in Rutledge, the prevailing wage statute in Dillingham,
or the billing surcharge law in Travelers, all of which were “indifferent” to ERISA.93
AS 09.55.548(b) does not relate to ERISA under this test.
2. AS 09.55.548(b) does not have an impermissible connection with
ERISA.
The U.S. Supreme Court’s case law on what constitutes an impermissible
connection with ERISA plans is more complicated but follows a similar trajectory. In
FMC Corp. the Court held a Pennsylvania law abolishing collateral source subrogation
rights had an impermissible connection with ERISA plans because the statute would
require plans “to design their programs in an environment of differing state regulations.”94
This, in turn, “would complicate the administration of nationwide plans, producing
inefficiencies that employers might offset with decreased benefits.”95 The Court
concluded that such inefficiencies were sufficient to establish a connection to ERISA,

93
Id. at 325-26, 328 (holding that California’s prevailing wage statute made
no reference to ERISA plans because it “functions irrespective of . . . the existence of an
ERISA plan” and “is indifferent to the funding, and attendant ERISA coverage, of
apprenticeship programs” (quoting Ingersoll-Rand Co. v. McClendon, 498 U.S. 133, 139
(1990)); Travelers, 514 U.S. at 656 (holding that New York law applying surcharges on
insurance plans did not refer to ERISA plans because they were imposed on plans
“regardless of whether the commercial coverage or membership . . . is ultimately secured
by an ERISA plan”); Rutledge, 141 S. Ct. at 481.
94
498 U.S. 52, 60 (1990).
95
Id.

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reflecting its belief that ERISA’s “pre-emptive scope was as broad as its language.”96 A
state law, the Court explained, has a connection with ERISA benefit plans if it “risk[s]
subjecting plan administrators to conflicting state regulations.”97
The Court clarified the scope of this holding in a series of decisions
culminating in Rutledge, in which it explained what it means for a law to have an
“impermissible connection” with an ERISA plan.98 The Court noted that ERISA is
“primarily concerned with pre-empting laws that require providers to structure benefit
plans in particular ways, such as by requiring payment of specific benefits . . . or by
binding plan administrators to specific rules for determining beneficiary status.”99 ERISA
also preempts a state law “if ‘acute, albeit indirect, economic effects of the state law force
an ERISA plan to adopt a certain scheme of substantive coverage.’ ”100 In analyzing
preemption, “th[e] Court asks whether a state law ‘governs a central matter of plan
administration or interferes with nationally uniform plan administration.’ ”101 If so, the
law is preempted.102
“Crucially, not every state law that affects an ERISA plan or causes some
disuniformity in plan administration has an impermissible connection with an ERISA

96
Id. at 59-60 (quoting Shaw v. Delta Air Lines, 563 U.S. 85, 98 (1983)).
97
Id. at 59.
98
141 S. Ct. at 480-81.
99
Id. at 480 (quoting Gobeille v. Liberty Mut. Ins. Co., 577 U.S. 312, 320
(2016)).
100
Id. (quoting Gobeille, 577 U.S. at 320).
101
Id. (quoting Gobeille, 577 U.S. at 320).
102
Id.

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plan,” especially “if a law merely affects costs.”103 Therefore the Court ruled in Travelers
that ERISA did not preempt the surcharge on hospital billing rates for non-Blue
Cross/Blue Shield insurers, which the Court presumed would be passed on to insurance
buyers, among them ERISA plans.104 Although the financial effects of the law would
incentivize ERISA plans to choose Blue Cross/Blue Shield over alternatives, the Court
held such an indirect economic influence did not create an impermissible connection
because it did not “bind plan administrators to any particular choice.”105 In other words,
“ERISA does not pre-empt state rate regulations that merely increase costs or alter
incentives for ERISA plans without forcing plans to adopt any particular scheme of
substantive coverage.”106 Accordingly in Rutledge the Court determined that a law
regulating pharmacy benefit managers by requiring them to reimburse pharmacies at a
minimum rate “[was] merely a form of cost regulation.”107 Although such costs may be
passed on to ERISA plans, the Court explained that “cost uniformity was almost certainly
not an object of pre-emption.”108 “Nor is the effect of [the law] so acute that it will
effectively dictate plan choices.”109 The Court concluded that the pharmacy

103
Id.
104
N.Y. State Conf. of Blue Cross & Blue Shield Plans v. Travelers Ins. Co.,
514 U.S. 645, 659 (1995).
105
Id.
106
Rutledge, 141 S. Ct. at 480.
107
Id. at 481.
108
Id. (quoting Travelers, 514 U.S. at 662).
109
Id.

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reimbursement law was a simple cost regulation and did not have an impermissible
connection with an ERISA plan.110
Because AS 09.55.548(b) does not abrogate collateral sources’ subrogation
rights, it does not have the kind of “impermissible connection” with ERISA described by
the U.S. Supreme Court. The Court’s preemption analysis is concerned with whether a
state law affects ERISA plans by “dictat[ing] the choices”111 of the plan or “forcing plans
to adopt [a] particular scheme of substantive coverage.”112 Reducing plaintiffs’ recovery
by the amount of collateral source payments does potentially increase costs for ERISA
plans. If AS 09.55.548(b) results in a claimant recovering an amount of damages less
than the value of collateral source payments, then the ERISA plan will be unable to
completely recoup its costs through reimbursement. For example, if a plaintiff receives
$100,000 from her plan but is limited to collecting $80,000 from a tortfeasor by
AS 09.55.548(b), the ERISA plan will be short $20,000 following reimbursement.
But ERISA plans may still recover the full amount expended by pursuing
the subrogated claim directly against the tortfeasor. Though there will be legal costs
associated with seeking recovery through subrogation, “ERISA does not pre-empt state
rate regulations that merely increase costs or alter incentives for ERISA plans.”113 Just
as the surcharge on non-Blue Cross/Blue Shield insurers passed on costs to ERISA plans

110
Id.
111
Cal. Div. of Lab. Standards Enf’t v. Dillingham Constr., N.A., 519 U.S.
316, 334 (1997).
112
Rutledge, 141 S. Ct. at 480.
113
Id.

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but did not “bind plan administrators to any particular choice,”114 AS 09.55.548(b) may
increase the cost to ERISA plans of obtaining full recovery but does not prevent them
from doing so. For that reason AS 09.55.548(b) is quite unlike the Pennsylvania anti-
subrogation law struck down in FMC Corp. v. Holliday.115 There, the law did dictate
choices: ERISA plans were barred from seeking recovery of expenses via subrogation
or reimbursement.116 By contrast, as explained above the Alaska Legislature rejected the
Medical Malpractice Commission’s proposal to abolish collateral sources’ subrogation
rights.117 Therefore AS 09.55.548(b) “does not bind plan administrators to any particular
choice.”118 The economic effects of the statute — the costs associated with collateral
sources recovering costs via subrogation instead of reimbursement in some instances —
are not so severe as to effectively “force an ERISA plan to adopt a certain scheme of
substantive coverage.”119
For that reason we conclude that AS 09.55.548(b) does not have an
impermissible connection with ERISA plans. And because the statute neither refers to
nor has an impermissible connection with ERISA plans, it is not preempted.

114
Id. (quoting N.Y. State Conf. of Blue Cross & Blue Shield Plans v.
Travelers Ins. Co., 514 U.S. 645, 659 (1995)).
115
498 U.S. 52, 59-60 (1990).
116
Id. at 60.
117
See section IV.B. above.
118
Travelers, 514 U.S. at 659.
119
Rutledge, 141 S. Ct. at 480 (quoting Gobeille v. Liberty Mut. Ins. Co., 577
U.S. 312, 320 (2016)).

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 G. AS 09.55.548(b) Violates The Alaska Constitution’s Equal Protection
Guarantee.
In our order granting Knolmayer’s petition for review, we asked the parties
to address whether AS 09.55.548(b) violates the equal protection guarantee of the Alaska
Constitution when applied to a plaintiff whose insurer has a contractual right to
reimbursement from the plaintiff’s recovery. Having considered the parties’ and amici
curiae’s briefing on this point, we conclude that AS 09.55.548(b) is unconstitutional as
applied to such claimants.120
Article 1, section 1 of the Alaska Constitution provides “that all persons are
equal and entitled to equal rights, opportunities, and protections under the law.” “We
interpret the equal protection clause ‘to be “a command to state and local governments
to treat those who are similarly situated alike.” ’ ”121 “The guarantee of equal protection
under the Alaska Constitution is more robust than that under the United States
Constitution and so ‘affords greater protection to individual rights than’ its federal
counterpart.”122

120
“An as-applied [constitutional] challenge requires evaluation of the facts
of the particular case in which the challenge arises,” while a facial challenge means “that
there is no set of circumstances under which the statute can be applied consistent with
the requirements of the constitution.” Ass’n of Vill. Council Presidents Reg’l Hous. Auth.
v. Mael, 507 P.3d 963, 982 (Alaska 2022) (quoting Dapo v. State, Off. of Child’s Servs.,
454 P.3d 171, 180 (Alaska 2019); State v. ACLU of Alaska, 204 P.3d 364, 372 (Alaska
2009)).
121
Watson v. State, 487 P.3d 568, 570 (Alaska 2021) (quoting Pub. Emps.’
Ret. Sys. v. Gallant, 153 P.3d 346, 349 (Alaska 2007)).
122
Id. (quoting Alaska Civ. Liberties Union v. State, 122 P.3d 781, 787 (Alaska
2005)).

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 “Under our equal protection analysis, ‘we first decide which classes must
be compared.’ ”123 “As a matter of nomenclature we refer to that portion of a [statute] that
treats two groups differently as a ‘classification.’ ”124 “Once we have identified the
relevant classes, we determine whether the statute discriminates between them by treating
similarly situated classes differently.”125
After identifying the classes to be compared, we then apply “a flexible three­
step sliding-scale.”126 First, we determine “what weight should be afforded the
constitutional interest impaired by the challenged enactment.”127 Second, we examine
“the purposes served by a challenged statute.”128 Third, we evaluate “the state’s interest
in the particular means employed to further its goals.”129 How closely the statute is
scrutinized at these second and third steps depends on the standard chosen by the court
at the first step.130

123
Id. (quoting Planned Parenthood of the Great Nw. v. State, 375 P.3d 1122,
1135 (Alaska 2016)).
124
Id. (alteration in original) (quoting Planned Parenthood of the Great Nw.,
375 P.3d at 1135).
125
Id.
126
Planned Parenthood of the Great Nw., 375 P.3d at 1137.
127
Id. (quoting Alaska Pac. Assurance Co. v. Brown, 687 P.2d 264, 269
(Alaska 1984)).
128
Id. (quoting Alaska Pac. Assurance Co., 687 P.2d at 269).
129
Id. (quoting Alaska Pac. Assurance Co., 687 P.2d at 269).
130
See id.

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 1. The statute classifies claimants based on the existence and origin
of collateral source compensation.
A legislative classification “is defined by the terms of the statute at issue.”131
Alaska Statute 09.55.548(b) creates two classifications. First, it distinguishes between
those claimants who receive compensation from collateral sources and those who do not.
Claimants who receive compensation for their injuries from collateral sources are subject
to a limitation on their recovery: they cannot recover amounts from the tortfeasor that
correspond to the amounts of compensation received from the collateral source. By
contrast, claimants who do not receive collateral source compensation are not so limited
in their recovery. Second, the statute distinguishes between those whose collateral source
compensation comes from a “federal program that by law must seek subrogation” and
those whose compensation comes from all other kinds of collateral sources.132 The former
group are exempt from the recovery limitations that otherwise apply to those who receive
compensation from collateral sources.133

131
Watson v. State, 487 P.3d 568, 571 (Alaska 2021).
132
The statute also distinguishes those who receive life insurance payments,
but that distinction is not relevant to our constitutional analysis. See AS 09.55.548(b)
(“Except when the collateral source is a federal program that by law must seek
subrogation and except death benefits paid under life insurance, a claimant may only
recover damages from the defendant that exceed amounts received by the claimant as
compensation for the injuries from collateral sources . . . .”).
133
Knolmayer argues that the classification “between medical malpractice
plaintiffs with certain collateral sources and those without is a classification that is the
result of a series of choices made by Ms. McCollum,” including the decision to accept
health coverage from her husband’s employer’s self-funded health benefit plan, along
with the accompanying subrogation and reimbursement terms of the plan. But the
classification between those who receive collateral source compensation from a “federal”
program, those who receive collateral source compensation from other sources, and those
(continued...)

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 2. These classifications are subject to minimum scrutiny.
The interests affected by AS 09.55.548(b) are financial, so the lowest level
of scrutiny applies to the statute’s classifications. We explained in Reid v. Williams —
also concerning whether AS 09.55.548(b) violated the equal protection clause — that “[a]
medical malpractice plaintiff’s right to damages is an economic interest, which
traditionally receives only minimal protection under our equal protection analysis.”134
This is because the alleged discrimination did not involve a protected class and thus
merited only “minimal judicial protection.”135 The recovery limits set by AS 09.55.548(b)
“impose[] only economic burdens, and allocate[] these burdens using criteria that are not

133
(...continued)
who receive no collateral source compensation at all is expressly drawn by the text of
AS 09.55.548(b). And the suggestion that these classifications are immaterial because
a person is free to choose a particular health insurance plan and the precise terms and
conditions that go with it is not persuasive. Almost half of Alaskans, like McCollum,
receive health insurance through their employer. Health Insurance Coverage of the
Total Population (2019), KAISER FAMILY FOUNDATION, https://www.kff.org/other/
state-indicator/total-population/?currentTimeframe=0&sortModel=%7B%22colId%
22:%22Location%22,%22sort%22:%22asc%22%7D (last visited Oct. 21, 2022). Many
others are insured by Medicare or Medicaid. Id. These individuals generally are not
choosing among health care plans based on their preferences; rather, the health care
coverage they receive is based on where they are employed or what federal eligibility
guidelines they meet. Their power to select among plans or negotiate plan provisions is
negligible at best. In reality, most people have little freedom to choose the terms and
conditions of their health insurance coverage, and the classifications drawn by
AS 09.55.548(b) are significant in light of that reality.
134
964 P.2d 453, 458 (Alaska 1998); see also Evans ex rel. Kutch v. State, 56
P.3d 1046, 1053 (Alaska 2002) (“[R]estrictions on the types or amounts of damages that
a plaintiff can pursue in court only infringe upon economic interests. Such economic
interests do not count as ‘important’ interests under our equal protection analysis.”).
135
Reid, 964 P.2d at 458

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presumptively suspect,” so our scrutiny as to the legislature’s aims is “minimal.”136 Thus,
we must ask whether the classifications created by AS 09.55.548(b) bear “a ‘fair and
substantial relation’ to attaining ‘legitimate’ government objectives.”137
3. The legislative purpose of AS 09.55.548(b) is to reduce the size of
malpractice awards by eliminating double recoveries.
The next step of the analysis is to determine the purpose of AS 09.55.548(b).
We have once before addressed this issue in Reid.138 In that case an injured claimant
argued that AS 09.55.548(b)’s recovery limitation violated equal protection because it
unreasonably distinguished between negligent doctors, who were protected by the
statute’s recovery limitations, and other tort defendants, who are subject to a different
statute modifying the collateral source rule.139 Applying the “fair and substantial”
relationship test, we upheld the statute.140 We reasoned that AS 09.55.548(b) was part of
a broad package of medical malpractice reforms designed to “control medical malpractice
insurance costs and increase the availability of health care.”141 And we concluded that the
statute bore a fair and substantial relationship to that goal.142 The special problem of
medical malpractice insurance and the availability of health care justified the legislature’s

136
C.J. v. State, Dep’t of Corr., 151 P.3d 373, 380 (Alaska 2006).
137
Reid, 964 P.2d at 458 (quoting Pan-Alaska Constr., Inc. v. State, 892 P.2d
159, 162 (Alaska 1995)).
138
Id. at 456-60.
139
Id. at 458-60; see also AS 09.17.070(a).
140
Reid, 964 P.2d at 458-60.
141
Id. at 459.
142
Id.

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decision to pare down the collateral source rule more aggressively in medical malpractice
cases than in other tort cases.
Our conclusion in Reid that AS 09.55.548(b) had the purpose of reducing
damages awards against medical providers is not the end of the story in this case. Given
the differential treatment we focused on in Reid — between physicians and other
tortfeasors — it was sufficient to consider the statute’s purpose at a high level of
generality. In other words, all we had to consider was why the legislature treated medical
malpractice suits differently from other tort lawsuits. To consider the justification for
how AS 09.55.548(b) treats different classes of medical malpractice claimants based on
the existence and nature of collateral source compensation, we must dig deeper by closely
examining the statutory scheme and legislative history.143
As explained above, the overall goal was to adjust the legal framework for
medical malpractice claims to control the cost of malpractice insurance.144 Yet it is clear
that neither the Commission nor the legislature sought to reduce damages awards at all
costs. For instance, the Commission rejected an absolute limit on the discovery period

143
See Com. Fisheries Entry Comm’n v. Apokedak, 606 P.2d 1255, 1264 n.39
(Alaska 1980) (disavowing notion that “the judiciary is required to hypothesize or invent
purposes” for equal protection review because “[c]lose examination of the statutory
scheme will usually yield several concrete legislative purposes having a substantial basis
in reality, even if these purposes are not specifically identified in a statutory purpose
clause”).
144
See COMMISSION REPORT, supra note 23, at 15 (proposing changes to
medical malpractice law “because Alaska would soon be faced with the same frequency
and severity of problems which [were] genuinely threatening the system in many of the
other states” and because “many carriers ha[d] designated certain tort law reforms as a
necessary precondition to underwriting malpractice in a state”).

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in malpractice cases in part to avoid overly burdening the plaintiff.145 It declined to raise
the burden of proof in medical malpractice cases because doing so “would make it more
difficult for the legitimate cases to be adjudicated.”146 And it professed it sought to do “no
violence to the legitimate rights of persons injured as a result of negligent conduct.”147
With respect to the provision that became AS 09.55.548(b), the Commission
explained that it was “unwilling to place arbitrary roadblocks that would preclude the
legitimate claimant from having recourse to counsel and the courts for redress,” but had
“discovered that frequently a person would be allowed an award predicated upon out-of­
pocket losses which, in fact, were wholly or partially compensated from other or collateral
sources.”148 The clear goal was to reduce damages awards by “eliminating the double
recovery or subrogation problem.”149
Knolmayer argues that the legislature had a different, more aggressive
purpose: to reduce malpractice awards in all cases regardless of the claimant’s potential
for a double recovery. Echoing the Commission’s observation that “every change in the
tort law required the conscious recognition that the burden of loss was being wholly or
partially shifted to a new or different class of persons,”150 Knolmayer argues that the
legislature sought to reduce the size of damages awards by forcing the injured person to
bear the loss. He maintains that the legislature’s decision to preserve collateral source

145
Id. at 17-18.
146
Id. at 24.
147
Id. at 52.
148
Id. at 19.
149
Id.
150
Id. at 10-11.

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subrogation rights — a different policy choice than the Commission had endorsed — is
evidence of a legislative purpose to allow collateral sources to be made whole at the
expense of their insured.
Yet it is hard to view the legislature’s decision to preserve collateral source
subrogation rights as a policy of protecting negligent physicians at the expense of the
injured person. By preserving collateral source subrogation rights the legislature
increased the likelihood that the negligent physician would be liable for the full measure
of harm caused. Under the Commission’s draft legislation, neither the injured claimant
nor the collateral source could recover compensated medical expenses from the
tortfeasor.151 Under the version of AS 09.55.548(b) ultimately enacted, a subrogated
collateral source may collect these amounts directly from the tortfeasor. This shift in the
statute’s operation — restoring the physician’s liability for the full amount of harm caused
— undercuts Knolmayer’s argument that AS 09.55.548(b) was intended to shift the
burden of loss to the claimant. Instead it confirms the view that the legislative purpose
was to prevent claimants from receiving awards “predicated upon out-of-pocket losses
which, in fact, were wholly or partially compensated” — i.e. the “potential for double
recovery” — while preserving insurers’ right to recover these amounts from the
tortfeasor.152
Another change the legislature made to the Commission’s draft legislation
supports the conclusion that the legislature’s purpose for AS 09.55.548(b) was solely to
eliminate double recoveries rather than shift the burden of loss to the injured person. The
legislature added a provision to protect against depletion of the claimant’s insurance
coverage by being forced to rely on the collateral source payments:

151
H.B. 574, 9th Leg. 2d Sess. (1976).
152
COMMISSION REPORT, supra note 23, at 19.

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 The court may take into account the value of claimant’s rights
to coverage exhausted or depleted by payment of these
collateral benefits by adding back a reasonable estimate of
their probable value, or by earmarking and holding for
possible periodic payment under (a) of this section that
amount of the award that would otherwise have been
deducted, to see if the impairment of claimant’s rights actually
takes place in the future.[153]
With this provision, the legislature intended to avoid a situation in which the claimant
would be adversely affected by being forced to rely on compensation from her insurance
provider rather than from the tortfeasor. This protection is hard to square with
Knolmayer’s argument that the purpose of AS 09.55.548(b) was to force injured
claimants to bear the loss.
Knolmayer’s argument also relies on a contrast between AS 09.55.548(b)
and AS 09.17.070, which modified the collateral source rule for other kinds of tort claims.
The latter statute exempts payments from “collateral sources that do not have a right of
subrogation by law or contract” from that statute’s recovery limitations.154 Knolmayer
suggests that the express mention of subrogation in AS 09.17.070 indicates that the
legislature consciously chose in AS 09.55.548(b) to limit claimants’ damages irrespective
of the effect of subrogation on their recovery. But AS 09.17.070 was enacted ten years

153
AS 09.55.548(b).
154
AS 09.17.070(a) provides:
After the fact finder has rendered an award to a
claimant, and after the court has awarded costs and
attorney fees, a defendant may introduce evidence of
amounts received or to be received by the claimant as
compensation for the same injury from collateral
sources that do not have a right of subrogation by law
or contract.

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after AS 09.55.548(b) and is therefore not a strong guide as to the legislative purpose
behind the earlier statute.155 Knolmayer argues further that the legislature amended
AS 09.55.548 in 1992, after the enactment of AS 09.17.070. But the 1992 amendment
to AS 09.55.548 was merely a corrective amendment to subsection (a) and had nothing
to do with the collateral source provisions of subsection (b).156 Thus neither
AS 09.17.070 nor the 1992 amendments to AS 09.55.548(a) shed light on the legislative
purpose behind AS 09.55.548(b).
Given the stated purpose, structure, and drafting history of what became
AS 09.55.548(b), there is no reason to think that the legislature’s purpose was to reduce
malpractice damages awards by shifting the burden of loss onto the injured person.
Instead we conclude that the purpose behind AS 09.55.548(b) was to reduce malpractice
damages awards by eliminating double recoveries.
4. The statutory classifications lack a fair and substantial
relationship to the legitimate purpose of eliminating double
recoveries.
We must therefore consider whether the distinctions drawn by
AS 09.55.548(b) — limiting the recovery of those who receive compensation from a non-
federal collateral source — have a fair and substantial relationship to the purpose of
preventing double recoveries. Under this test, “less important governmental objectives
will suffice and a greater degree of over/or underinclusiveness in the means-to-ends fit

155
Compare Ch. 139, § 1, SLA 1986, with Ch. 30, § 7, SLA 1992; see also
Girdwood Mining Co. v. Comsult LLC, 329 P.3d 194, 199 n.21 (Alaska 2014) (“Post­
enactment legislative history is disfavored because ‘the views of a subsequent Congress
form a hazardous basis for inferring the intent of an earlier one.’ ” (quoting Consumer
Prod. Safety Comm’n v. GTE Sylvania, Inc., 447 U.S. 102, 117 (1980))).
156
See Ch. 30, § 7, SLA 1992.

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will be tolerated.”157 “As a minimum, we require that the legislation be based on a
legitimate public purpose and that the classification ‘be reasonable, not arbitrary, and . . .
rest upon some ground of difference having a fair and substantial relation to the object of
the legislation.’ ”158 In other words, “a substantial relationship between means and ends
is constitutionally adequate.”159
The equal protection decisions that Knolmayer cites in defense of
AS 09.55.548(b) are not controlling here. In Reid we concluded that paring down the
collateral source rule more for medical malpractice claims than for other tort claims was
justified by the special problem of the malpractice insurance crisis.160 But we did not
examine the precise mechanisms by which AS 09.55.548(b) modified the collateral source
rule for these claims, nor was the issue of subrogation squarely addressed. In C.J. v.
State, Department of Corrections161 and L.D.G., Inc. v. Brown,162 we upheld statutory
caps on non-economic damages, deeming them sufficiently related to the legislative
purpose of lowering liability insurance premiums.163 But the blunt legislative purpose
behind the damages caps — reducing damages awards by limiting compensation for a
type of loss viewed as subjective and difficult to measure regardless of whether particular

157
State v. Ostrovsky, 667 P.2d 1184, 1193 (Alaska 1983).
158
Id. (quoting Isakson v. Rickey, 550 P.2d 359, 362 (Alaska 1976)).
159
Harris v. Millenium Hotel, 330 P.3d 330, 336 (Alaska 2014) (quoting State
v. Schmidt, 323 P.3d 647, 662-63 (Alaska 2014)).
160
Reid v. Williams, 964 P.2d 453, 459 (Alaska 1998).
161
151 P.3d 373 (Alaska 2006).
162
211 P.3d 1110 (Alaska 2009).
163
C.J., 151 P.3d at 381; L.D.G., Inc., 211 P.3d 1110.

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claimants are fully compensated164 — is not the purpose behind AS 09.55.548(b). Rather
AS 09.55.548(b) was intended to reduce damages awards by eliminating double
recoveries. Because of this statute’s distinct purpose, we must independently assess its
means-to-ends fit.
Preventing medical malpractice claimants from receiving double recoveries
in order to limit the size of malpractice damages awards is a legitimate public purpose.
But the distinctions drawn by AS 09.55.548(b) do not bear a fair and substantial
relationship to this goal. The statutory classifications are premised on the assumption that
claimants who receive compensation for their injuries from non-federal collateral sources
would receive a double recovery if permitted to recover damages for those injuries from
the tortfeasor. But this assumption does not reflect reality.165 A claimant like McCollum
is obligated by the terms of her insurance contract to reimburse her insurer out of any
recovery.166 These terms are commonplace in health insurance contracts.167 So in the vast

164
See C.J., 151 P.3d at 381-82 (crediting legislative judgment that
noneconomic damage awards are “susceptible to over-estimates of the dollar value of a
victim’s noneconomic loss” but observing “there will be severely injured persons who
are under-compensated as a result of this legislation”).
165
The legislature clearly was aware of the role of contractual subrogation in
the medical malpractice context. See COMMISSION REPORT, supra note 23, at 19
(discussing “subrogation problem”). Yet the legislature may have wrongly assumed a
subrogated insurer could never recoup its costs from an insured who could not recover
those costs directly from the tortfeasor in the first place. See 16 COUCH ET AL., supra
note 10, § 223:145 (“Accordingly, an insurance contract providing generally that the
insurer is subrogated to the rights of the insured does not itself permit an insurer to
recover from a third-party tortfeasor until the insured has been made whole by the
combination of insurance payments and the amount recovered from the tortfeasor, and
there must be specific language to the contrary to avoid the make whole rule.”).
166
It is true, as Knolmayer suggests, that McCollum could have refused
(continued...)

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majority of cases, allowing claimants to recover damages from the tortfeasor
corresponding to the amount of medical expenses paid by their insurers would not create
a double recovery. Rather, those amounts would flow straight to the insurer through its

166
(...continued)
medical benefits from the Lowe’s Plan and instead sought the entire amount of her
medical costs from Knolmayer, thereby avoiding the potential for a double deduction
caused by AS 09.55.548(b). But the possibility that a medical malpractice claimant
might try to avoid the harmful effects of the statute with such a risky wager has little
bearing on whether the distinctions drawn by the statute are substantially related to its
purpose.
167
See, e.g., Best v. Fairbanks N. Star Borough, 493 P.3d 868, 871 (Alaska
2021) (describing “100% First-Dollar Right of Recovery” provision in health plan for
borough employees giving plan “the right to recover or subrogate 100% of the benefits
paid . . . that the claimant is entitled to receive from any third party . . . on a priority first-
dollar basis, . . . regardless of whether the total recovery amount is less than the actual
loss suffered.” (emphasis added)); New Orleans Assets, L.L.C. v. Woodward, 363 F.3d
372, 374 (5th Cir. 2004) (“Insurance contracts typically provide for [an insured’s
entitlement to both insurance benefits and damage recovery from tortfeasors] in at least
two ways: subrogation and reimbursement. With subrogation, an insurer acquires the
right to assert the actions and rights of the insured against the liable tortfeasor. . . . With
reimbursement, the insurer has only a right of repayment against the insured.”); Perreira
v. Rediger, 778 A.2d 429, 439 (N.J. 2001) (explaining that New Jersey’s Commissioner
of Insurance, having declined for years to approve “subrogation and reimbursement
provisions” in certain health insurance policies, finally allowed their inclusion in 1993);
Principal Mut. Life Ins. Co. v. Baron, 964 F. Supp. 1221, 1222-25 (N.D. Ill. 1997)
(permitting insurer to seek compensation from the insured for medical expenses it paid
pursuant to reimbursement clause); Marshall v. Emps. Health Ins. Co., 927 F. Supp.
1068, 1075 (M.D. Tenn. 1996) (permitting insurer to recover under reimbursement
clause after finding insurer was precluded from exercising right of subrogation), aff’d,
1997 WL 809997 (6th Cir. Dec. 30, 1997); see also 16 COUCH ET AL., supra note 10,
§ 226:3 (observing that “insurers have in past decades become increasingly concerned
with their ability to recover back their payments directly from their own insureds, by
means of ‘reimbursement’ ”).

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contractual reimbursement right. There is little reason to think insurers will simply leave
easy money on the table.
For that reason, malpractice claimants who receive compensation from non­
federal collateral sources are scarcely more likely to receive a double recovery than those
covered by Medicaid, which is required by law to seek subrogation, or those whose
medical expenses were not paid by any collateral source. It is true that not all claimants
who receive collateral source compensation for their injuries will have to pay it back.168
A small number of claimants may receive compensation for their injuries from collateral
sources that are not health plans, such as family members or charity.169 It is also possible
that some health benefit plans do not give the plan a right of reimbursement, although it
is hard to imagine why a health plan would forgo that straightforward approach to
improving its bottom line. But for the most part malpractice claimants who receive
collateral source compensation for their injuries are not poised to make a double recovery
when suing a negligent medical provider in tort.
In a world where subrogation and reimbursement provisions are the norm,
the statute’s differential treatment of medical malpractice claimants based on the existence
and type of collateral source compensation is not fairly and substantially related to the

168
The statute modifying the collateral source rule for general tort claims
tracks this distinction, which is key to the likelihood of double recovery. See
AS 09.17.070(a) (“[A] defendant may introduce evidence of amounts received or to be
received by the claimant as compensation for the same injury from collateral sources that
do not have a right of subrogation by law or contract.” (emphasis added)).
169
However, it is worth noting that another major source of collateral source
compensation — workers’ compensation — also gives the collateral source subrogation
and reimbursement rights that minimize the likelihood of double recovery. See
AS 23.30.015(b), (g), (i) (permitting an employer or employer’s insurer to recoup its
workers’ compensation expenditures directly from the third party or from an employee’s
tort recovery).

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legitimate purpose of preventing double recoveries.170 We therefore conclude that
AS 09.55.548(b)’s limitation on recovery of collateral source compensation violates
Alaska’s equal protection clause when applied to a claimant who receives compensation
from a collateral source that exercises a right of reimbursement against the claimant’s
recovery.171
V. CONCLUSION
We VACATE the superior court’s order of April 30, 2020 and REMAND
for further proceedings consistent with this opinion.

170
Cf. Gilmore v. Alaska Workers’ Comp. Bd., 882 P.2d 922, 928 (Alaska
1994) (holding formula for calculating injured worker’s weekly wage for award of
workers’ compensation lacked substantial relationship to legislative goal of achieving
“quick, efficient, fair, and predictable delivery” of benefits and therefore failed minimum
equal protection scrutiny (emphasis in original)), superseded by statute as observed in
Schiel v. Union Oil Co. of Cal., 219 P.3d 1025, 1031 n.26 (Alaska 2009).
171
We express no opinion on how the superior court is to determine whether
a claimant falls into this category to which AS 09.55.548(b) cannot constitutionally be
applied. That is for the superior court to decide in the first instance.

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