By Guest Author Teresa Kenyon, Esq. – Director of Lien Resolution for Synergy Settlement Services
When handling a third-party liability case and you know your client had health insurance that paid the medical expenses, should you check to see if there is a lien interest on the settlement funds? Or maybe you have settled a case and you just received a notice letter from a possible lienholder, what do you do about it? What about Medicare or other federally governed interests? Do you treat them differently? These are critical questions to answer prior to disbursing funds to your client.
Medical liens or reimbursement demands from health insurance carriers are generally an unwelcomed part of the whole settlement process. Lien resolution is the case after the case for most trial attorneys. The target is always moving, there is a lot of information to process and there are different laws to apply. It can be complicated. Each health benefit provider has a possible right of reimbursement from the underlying settlement that should be assessed, and that possible right is governed by distinct laws–whether it be from case law, statutory, contractual, or otherwise.
As you approach the handling of your client’s medical liens, take note that each type of medical lien needs to be handled in a different way based upon applicable law. Employee Retirement Income Security Act (ERISA) requires a different approach and cadence for follow up than a Medicare or a Tricare claim. Each are governed by their own set of laws and processes. And these laws often change. And so do the processes. Sometimes this is to the benefit of the injured party, but unfortunately, often these changes solely benefit the collecting medical benefit program.
Theory of Health Insurance Subrogation
The idea of subrogation is that the health carrier “steps in the shoes” of the injured party and presents their claim directly against the liable party or their insurance carrier. A more formal definition of subrogation is the substitution of one person in the place of another with reference to a lawful claim or right. Essentially, the health insurance carrier stakes claim to all or part of the available settlement funds as if they are an injured party/entity. Allegedly, they were injured because they had to pay for medical treatment that “should have” been paid for by the at-fault party, and/or their insurance carrier. No consideration is given to the fact that the injured party paid premiums for health insurance coverage and received the expected coverage when they required medical treatment. Instead, simply because someone else was at fault, the insurance carrier wants their money back or in some cases denies payment for the treatment at all. Health plan subrogation has one goal: to move settlement funds away from the injured party and give those funds to health insurance carriers. It is often a windfall to those insurance carriers, a gift from injured part.
When someone is injured and requires medical treatment, a health insurance card is presented to secure payment of those services rendered by a health care provider. This insurance card could be from Medicare, Tricare, Medicaid, or a private health insurer like United, Blue Cross Blue Shield, Cigna, Kaiser, etc. It is important to note that even Medicaid and Medicare, including Advantage, RX and supplement plans can be handled by these private health insurance carriers. It can be mystifying to try to keep it all straight. Most medical providers (hospitals, doctors, rehabilitation centers, physical therapists, etc.) have contractual arrangements with the health insurance carriers which predetermine the payment amounts. And remember, the insured / beneficiary paid premiums for this coverage. But when someone is injured due to the negligence of another, and if other insurance coverage is responsible for compensating the injured party, then these insurance carriers and government agencies want their money returned.
The thought is that without subrogation or reimbursement, the injured party is obtaining a double recovery. When performing subrogation functions, health insurance providers of all kinds (ERISA plans, Medicare, Medicaid, etc.) feed on the mantra that they are collecting the medical damages they paid for that should not have been paid by them and instead should have been paid for by another–the tortfeasor or another insurance carrier. The problem is that most settlements received by the injured person do not fully compensate them or make the injured party whole. This is especially the case with a limited policy limit settlement. In those cases, when the subrogator does not adjust their claim or acknowledge that their medical damage is only one small part of the total damages suffered by the injured party or that their medical damages were not included at all, a huge injustice can occur for the injured party. Where a , subrogating carrier doesn’t adjust their claim based upon the recovery of the injured party, it potentially results in them taking much more than their fair share of that settlement. This is one of the reasons that health insurance lien resolution has continued to develop into a multibillion-dollar industry. Unfortunately, it is not going away.
Possible Health Insurance Liens
In our experience, how an attorney handles liens often depends on his/her own individual risk tolerance. Some attorneys want to follow every rule to the letter of the law and if the lienholder says the lien must be paid in full, they pay it. Others want to operate in the gray space, push the envelope and make the lienholder prove every aspect of their claim. Some attorneys want to place every possible lienholder on notice whereas others only want to communicate with those who reach out to them first. A common question we hear is: “Do I have to place X health insurance carrier on notice of the third-party claim? I only want to contact the ones that I have to reach out to, by law.”
Synergy’s recommendation is to tackle every lien head-on armed with the best possible arguments/techniques to reduce. The best way to handle any possible lien is to resolve it; reach an agreement with the lien holder thereby fully and completely bringing the matter to a close. If the lienholder does not have a right to the settlement funds, tell them so. Fight it and make them submit. Without a doubt, that does take time and it could become a protracted battle. But there is nothing worse for the client experience than receiving their settlement funds, and then the postman delivers a letter or the phone rings repeatedly from a lienholder subrogation vendor like Optum or Conduent demanding thousands of dollars for a “lien” that was not properly addressed. The remainder of this article will focus on ERISA and Medicare resolution issues to be keenly aware of in terms of compliance with the applicable plan when dealing with the resolution of a case involving those types of reimbursement claims.
ERISA and Private Insurance Resolution Issues
A subrogation vendor asserting a lien for an ERISA plan will likely refer to their policy language wherein there is a duty to cooperate, and often more specifically, a duty to notify the health insurance carrier when a third-party claim is being pursued. By extension, that duty could reach the attorney representative. Subrogation vendors have been known to pursue the attorney or law firm for not handling the lien before disbursing funds. The risk is there, albeit a smaller one. the threat to take action against the injured party and/or the law firm representing is commonplace, but actual litigation is rare. When it does occur, it is no doubt used as an example of what not to do when it comes to potential medical lien interest.
The policy language is the most important part of every ERISA plan’s possible recovery claim. You must obtain the plan documents. It usually provides a duty to report the pursuit of a third-party claim and to also cooperate with the plan’s efforts to collect on their subrogation / reimbursement interest. Here are some examples.
Some are vague:
- Cooperate fully with the Health Plan in its exercise of its rights under this provision, do nothing that would interfere with or diminish those rights and furnish any information required by the Health Plan.
- You agree to cooperate with the Plan, or any representatives of the Plan, in protecting its rights, including discovery, attending depositions, and/or cooperating in trial to preserve the Plan’s rights; in providing to provide the Plan with pertinent information regarding the sickness, disease, disability, or Injury, including accident reports, settlement information and any other requested additional information; and do nothing to prejudice the Plan’s rights of Subrogation and reimbursement.
Some are very detailed:
- You agree to cooperate fully with the Plan’s efforts to recover benefits paid. It is your duty to notify the Plan within 30 days of the date when any notice is given to any party, including an insurance company or attorney, of your intention to pursue or investigate a claim to recover damages or obtain compensation due to your injury, illness or condition. You and your agents agreed to provide the Plan or its representatives notice of any recovery you or your agents obtain prior to receipt of such recovery funds or within five days if no notice was given prior to receipt. Further you and your agents agree to provide notice prior to any disbursement of settlement or any other recovery funds obtained. You and your agents shall provide all information requested by the plan, the claims administrator, or its representative including but not limited to completing and submitting any applications or other forms or statements as the Plan may reasonably request and all documents related to or filed in personal injury litigation.
The consequences for failure to comply with the cooperation section of an ERISA plan vary. Remember that every ERISA plan has different rights to recover and pursue because it is based upon their policy language. Some plans do not provide a consequence. Others will indicate that failure to provide information, failure to assist the plan in pursuit of its recovery rights or failure to reimburse the plan from any settlement received may result in the denial of future benefit payments or claims until the plan is reimbursed, termination of health benefits or the institution of court proceedings against the insured. There is also the risk that the plan pursues the attorney or the firm who knew, should have known or otherwise disregarded the plan’s possible interest.
Medicare Direct Action Against Plaintiff Attorneys
For Medicare, the consequences for lack of compliance can also be steep. Once a Final Demand has been issued by Medicare, it must be paid within 60 days. Failure to respond within the specified time frame may result in the initiation of additional recovery procedures, including the referral of the debt to the Department of Justice (DOJ) for legal action and/or the Department of the Treasury for further collection actions.
Medicare has pursued attorneys directly as well. It is important to note that most of Medicare’s direct action against plaintiff attorneys through the DOJ have been focused on Maryland and Pennsylvania law firms. In January 2020, a Pennsylvania law firm agreed to pay $6,604.59 for the unresolved Medicare debts. The DOJ stated: “Lawyers need to set a good example and follow the rules of the road for Medicare reimbursement. If they do not, we will move aggressively to recover the money for taxpayers.” In November 2019, a Maryland law firm agreed to pay $91,406.98 to resolve allegations it failed to pay back Medicare for conditional payments. The DOJ “intends to hold attorneys accountable for failing to make good on their obligations to repay Medicare for its conditional payments, regardless of whether they were the ones primarily handling the litigation for the plaintiff.” In March 2019, a Maryland law firm agreed to pay $250,000 to resolve claims that it did not reimburse Medicare on behalf of the firm’s clients. And in June 2018, a Pennsylvania law firm agreed to pay $28,000 for outstanding Medicare reimbursement claims. The DOJ stated that when “an attorney fails to reimburse Medicare, the United States can recover from the attorney—even if the attorney already transmitted the proceeds to the client. Congress enacted these rules to ensure timely repayment from responsible parties, and we intend to hold attorneys accountable for failing to make good on their obligations.”
In our experience, the most harmful action an attorney can take is to begin to negotiate a lien without having a full understanding of the rights of recovery of the carrier. Or worse yet, to ignore the possible right and disburse funds without a showing of due diligence. But it is important to note that just because a health insurance provider is claiming reimbursement, does not mean they have a right to request it. Nor does it mean that they have a right to the entire amount they are asserting is owed. Careful analysis is required to ensure that you protect your client and preserve as much of the net settlement funds as possible.
In many instances, lien resolution experts such as Synergy can get the best possible result for your client. Synergy’s years of experience and insider knowledge is a competitive edge against overreaching plans trying to take dollars out of your client’s pocket. Instead of fighting subrogation vendors alone, let Synergy be your lien resolution partner. We will fight for the greatest possible reduction
Jason D. Lazarus is the managing partner and founder of the Special Needs Law Firm; a Florida law firm that provides legal services related to public benefit preservation, liens and Medicare Secondary Payer compliance. He is also a founding Principal and Chief Executive Officer of Synergy Settlement Services, which offers healthcare lien resolution, Medicare secondary payer compliance services, pooled trust services, settlement asset management services and structured settlements.