Clients are not happy to hear that money their health insurance company paid for treatment of accident related injuries must be paid back to the insurance company out of their settlement. However, more and more insurers are aggressively seeking to recover medical expenses through health care liens in Pennsylvania.
The tangled web of medical expense reimbursement is enough to send lawyers to full-day seminars which may still leave them with more questions than answers. In the next couple of blogs, I will try to give a layman’s overview of key points so that when a client hears “lien” related to his or her accident lawsuit, the client will understand that the attorney is simply complying with the law.
A lien is simply a right of one party to be paid back out of money received by another party. Liens may arise for a variety of reasons from civil judgments to unpaid taxes. Most people are more familiar with liens placed on property which are collected when the property is sold. However, money a health insurer pays for medical treatment may become a lien against money the accident victim receives from the defendant through a lawsuit.
The right to recover medical expenses breaks down into two categories: automobile accidents and everything else. In any accident other than an automobile accident, your insurance company will always have the right to recover money it paid on your behalf. It may try to recover the money directly from the defendant (what we lawyers call “subrogation”) or it may have a right to get the money from your settlement (a “lien”) depending on the language in the insurance policy. But they always have a right to get the money back from someone.
With automobile accidents, however, automobile insurance companies are prohibited by law from recovering medical expenses paid because of an accident (a good reason to carry as high a medical expense benefit on your automobile policy as you can afford!). If your accident treatment is significant enough to exhaust your automobile insurance benefits, then your health insurance kicks in. This is where it gets interesting.
In Pennsylvania, the courts have held that HMOs and certain employer provided health plans have the right to recover money paid on behalf of an accident victim. Therefore, expect your lawyer to ask you about your health insurance. Your lawyer must investigate the health insurer’s right to enforce a lien. If a lien is enforceable, the attorney must keep track of the current amount of a lien and include it in any settlement discussions. The attorney must review the lien to make sure it includes only expenses for medical treatment and not fees for examinations requested by the insurance company or administrative expenses. The attorney must also determine whether the insurance company will pay a fair share of the attorney fee and legal expenses. Some insurance companies insist on receiving 100% reimbursement leaving the client to pay the full fee or forcing the lawyer to work for free for the insurance company to keep the client happy. In those circumstances, the lawyer may tell the insurance company to go hire its own attorney. Yet, the lien must still be considered because the defendant is unlikely to settle with a claim for medical expenses still unresolved. All these factors unfortunately go into the calculus of what money the client will ultimately receive and often increase the length of time it takes the lawyer to settle a case.
Sound confusing? Your attorney isn’t any happier than you are, but better you both know the calculus at the beginning of the case than have an unexpected claim for medical expenses arise after the case has settled. Your settlement will not extinguish the insurance company’s rights and they will come after you.
In the next blog, I will cover Medicare liens which add yet another level of complexity for a lawyer trying to settle an accident case.