Health Insurance and Other Liens

Every personal injury claim involves an “injury,” and as a result, virtually every personal injury claim involves treatment for that injury. That treatment has to be paid for -- the doctors don’t work for free. So, in addition to the personal injury “tort” law involved in securing a settlement, award, or verdict for the personal injury claim, virtually every personal injury case also involves issues of law related to health insurance, medical payments insurance, and/or ordinary debtor-creditor law that may be involved with getting the medical bills paid and the health insurance reimbursements resolved.

This is an area of law impacting personal injury claims that have been growing and evolving rapidly in recent years and decades -- especially the parts related to health insurance -- and an experienced personal injury attorney must be just as familiar with these legal issues related to health insurance and debt payment law as with the law related to the underlying personal injury claims. An attorney who is not familiar with these areas of law – or an individual personal injury victim who may be handling his or her own claim without being aware of these issues – can create significant problems affecting the injury claim's bottom-line results.

These claims cannot be ignored – doing so can potentially result in a personal injury victim being sued directly for reimbursement, having their health insurance canceled, or other significantly bad results.

Provider Bills and Liens, Statutory and Non-Statutory

Not everyone has health insurance to pay for medical expenses, and not all medical providers choose to accept all health insurance coverage. One important category of medical expenses related to personal injury claims is as simple as an ordinary bill owed for services we have received. If we visit a doctor and don’t have health insurance that will cover the bill, the doctor will simply bill us for the service -- sometimes they will require payment upfront, sometimes they are willing to bill us for payment later. This type of charge is covered by ordinary debtor-creditor law, the same as any other type of bill we might receive for a service that has been provided.

Many medical providers recognize that personal injury claims will eventually generate funds for the injury victim through a settlement, award, or verdict. For more expensive treatments, these providers will often be willing to provide medical care on a “lien basis” by a written agreement with the injury victim. The provider is legally entitled to payment out of the eventual proceeds from the personal injury claim. Some medical providers will be willing to execute a lien agreement directly with the patient. However, most will prefer that the patient have an attorney involved to ensure that the claim will be resolved and the provider paid.

In a lien for medical services, the patient gives the medical provider a guarantee, somewhat like the way collateral is used to guarantee a loan. Some categories of liens for medical services are guaranteed by specific laws. For example, in California, section 3045 of the Civil Code – established by the California Hospital Lien Act – provides a lien to a hospital for care provided on an “emergency and ongoing” basis against any eventual recovery from a third party who caused the treated injuries. Liens like this have their own specific laws that are generally referred to as “statutory liens,” differentiated from ordinary or “non-statutory” liens such as the simple direct lien agreement between a doctor and patient.

Statutory liens often have particular procedures that must be followed. They will usually spell out the maximum amounts that the medical provider/lienholder may be entitled to recovery from the injury victim’s settlement. However, all these liens (statutory and non-statutory) and bills are typically open to negotiating and bargaining. Knowing how to negotiate repayment of these bills and liens and knowing how to establish leverage for that bargaining is a key service that an experienced personal injury attorney can provide for clients.

Subrogation and Repayment

Subrogation assumes one person or party’s right to collect a debt or damages by another person or party. Virtually every health insurance contract and every liability insurance policy contract offering medical payments coverage will give the insurer “subrogation rights” against any recovery from a third party responsible for causing the injuries for which payment of medical care was provided. Essentially, in our health insurance contracts, we have given our health insurance companies the right to collect some amount of repayment of benefits out of any settlement, award, or verdict that we receive in a personal injury claim.

In general, the “subrogation rights” of the health insurance company or medical payments insurance will be spelled out in the insurance policy itself. However, many of these rights may be further detailed or limited by particular statutes and case law. For example, in California, section 3040 of the Civil Code provides limits on most (but not all) health insurers and medical payments insurers on how much of an injury victim’s settlement, award, or verdict the insurer may demand reimbursement. And beyond these statutory limitations in the code itself, there is a large body of additional case law that further specific how, when, and how much the insurer may recover.

Again, familiarity with the details of the subrogation procedure and limitations will provide the experienced personal injury attorney a definite edge in successfully negotiating and resolving these repayment claims on clients’ behalf.

MedPay Coverage

One of the common optional elements of most automobile liability insurance policies is medical payments coverage. This coverage is typically available to the named policyholders whenever they are injured in a traffic incident and any non-policyholders who are in the covered vehicle when that vehicle is involved in a crash.

In the past, many auto liability insurance companies simply provided medical payments as a direct benefit and did not seek reimbursement. Over the last few decades, however, this has changed to the point where virtually all auto liability insurers require reimbursement and have their reimbursement rights written into their insurance policy language.

Subrogation/reimbursement rights for medical payments coverage is generally limited by the requirements of state law (Civil Code 3040, for example) and case law, as well as additional direct negotiations.

Health Insurance Through Work (ERISA)

Many Americans get their health insurance through their employers. The legal subrogation/reimbursement rights for these health insurance companies from personal injury victims may depend on how that employer-provided health insurance is funded. All employer benefits for private employers are covered by the federal Employee Retirement Income Security Act (ERISA). As the name suggests, this law addresses many things other than just health insurance subrogation rights – its primary focus was on pension and retirement plans -- but these health insurer rights are based largely within the ERISA language. ERISA health insurance plans come in two different types, which are very important to identify early on in a personal injury claim involving health insurance payments under an employer-provided plan. A “self-funded” health insurance plan is one in which the employer itself acts as the source of funds for payment of health benefits – these are typically substantial employers, big corporations with thousands of employees because it is that very size that makes “self-funded” plans economical for the employer. Although the employer will usually hire an outside service – often one of the large health insurance companies – to actually provide service for the plan, the employer provides the pool of funds from which the medical provider bills are paid.

The other type of employer-sponsored health plan under ERISA law is the “non-self-funded" health insurance. In this type, the employer simply provides recurring premium payments to a traditional health insurance company that insures the employees and services the benefit payments. Most small and medium-sized businesses that offer health plans to employees will be in the “non-self-funded" category simply because they don’t have a large enough pool of employees and money to make the self-funded type of plan economical.

Subrogation rights under self-funded ERISA plans can be very different from subrogation rights under non-self-funded ERISA plans. Self-funded plans typically have much stronger rights established under federal law to recover a greater amount of the benefits that have been provided. In some cases, there is strong law establishing their right to recover each and every penny that has been provided in medical provider payments out of an injury victim’s settlement, award, or verdict. Therefore, these self-funded plans have to be identified and dealt with as early as possible in a personal injury claim to protect the injury victim’s settlement funds. Non-self-funded ERISA plans, in contrast, are much more likely to be covered by the greater reimbursement right limitations available under state law.

Private Health Insurance

Those folks who can’t or choose not to get health insurance through their employers can still elect to get private health insurance directly. As with all health insurance plans, the private insurance policies will specify the insurers' subrogation and lien rights within the language of the insurance policies. Generally, however, these will be limited by the applicable state statutes and case law addressing reimbursement from personal injury claim settlements, awards, and verdicts.

Public Insurance Programs (Medicare and Medicaid/Medi-Cal)

The two largest public health insurance programs in the United States are Medicare and Medicaid – Medicaid in California is called “Medi-Cal.” Medicare is generally the health insurer for folks over a certain age or qualified for Social Security disability. Medicare reimbursement rights from personal injury claims are generally managed by the Centers for Medicare and Medicare Services (CMS), a federal agency. However, some insurance companies providing Medicare services will also do this directly.

Medicaid is primarily funded by the federal government but administered at the state level. In California, this health coverage is known as Medi-Cal, and reimbursements from personal injury claims are managed through the state Department of Health Care Services (DHCS).

Medicare and Medi-Cal – being government health programs – have solid laws requiring reimbursements for benefits out of personal injury claims.

Tricare and VA Healthcare

Active members of the military and their families and some retirees receive health care through the Tricare health care program (formerly known as “CHAMPUS”). At the same time, veterans generally have access to health care through the Veterans Administration (VA) health care system. Both have their own rules and internal offices for reimbursements and are subject only to federal law as to limitations on their reimbursement rights, making this another category of a health insurer that needs to be identified and dealt with early in a personal injury claim.

An experienced personal injury attorney will know all the “in’s and out’s” of health insurance, med-pay insurance, provider lien reimbursements, and the specific laws and procedures that apply to each. This knowledge directly benefits clients by assuring that the necessary reimbursements are made to protect the client. No more than is legally required is paid out of the client’s settlement, award, or verdict.

For more information on insurance companies, their claim tactics, and how an experienced personal injury attorney should deal with them, see:

• Types of Auto Coverage and First-Party vs Third-Party
• Insurance Company Tactics: Dirty Tricks Insurance Companies Play in Accident Claims
• Our Tools: How an Experienced Personal Injury Attorney Deals with Insurance Company Tactics
• The Insurance Industry and Individual Companies: Huge and Hugely Profitable

Image by Tumisu from Pixabay 

:GM cha [cs 1908]

Additional Resources: