Settlements or judgments in personal injury claims may be subject to various liens or claims by third parties such as hospitals, governmental agencies or entities that have paid for medical expenses or services on behalf of the injured party. Insurers paying benefits to insureds as a result of injuries caused by third persons often claim an interest in recovering those costs if the insured obtains a settlement or collects upon a judgment against a third party. A medical lien is a claim that requires you to pay for your treatment when you settle your claim. This can be created by statute, by policy or even by something you do. Insurers frequently attempt to draft policy provisions or establish requirements that allow them to seek reimbursement from the insured in such situations.
Insurance coverage disputes and requests for reimbursements from health insurance carriers can be complicated. The result differs depending on the type of policy and the law that applies to the particular claim. Health insurance generally falls into two general categories: those regulated by state law and those regulated by federal law. The injured party that is covered by a healthcare policy regulated by Missouri law, will generally have more rights regarding reimbursement than a person covered by a federal (ERISA) plan.
Federal Law controls insurance policies that are created by and regulated under the Employee Retirement Income Security Act of 1974 (ERISA). Generally, an ERISA plan is an employer or group of employers that have a common fund to pay for medical expenses of their employees. The employers can actually run the fund, but usually hire insurance companies to run it for them. The ERISA plan for most purposes (except the reimbursement issue) acts very similar to traditional insurance.
Under federal law, an ERISA insurance plan, if it has the proper language in its plan, may be entitled to priority reimbursement over an injured party in regards to a settlement or award. See, Sereboff v. Mid Atl. Med. Servs., 126 S. Ct. 1869 (U.S. 2006).
On the other hand, in Missouri, a health insurance carrier does not have a lien against the proceeds of a tort settlement because of Missouri’s public policy that prohibits the assignment of a personal injury claim.
It is therefore important to determine whether the insurance paying for the medical bills is state regulated or ERISA regulated. This requires careful analysis of the plan documents as well as ensuring that the written language of any purported ERISA plan is in compliance with ERISA law.
In an interesting Missouri case, Scroggins v. Red Lobster, 325 S.W.3d 389, the Missouri Court of Appeals, Southern District, upheld Missouri’s continuing public policy which prohibits subrogation on personal injury claims. In Scroggins, the self-funded health plan asserted a lien against a personal injury settlement that occurred following a fall at a Red Lobster. The court held that the health insurance carrier did not have a lien against the proceeds of the tort settlement. The Court’s comments included the following:
- “In 1913, this court explained that ‘there is every reason for holding that a cause of action for personal injuries, where the gist of the damages recovered in physical pain and mental anguish, should not be the subject of barter or trade, or a matter of profit to the creditors of the injured party.'”
- “Missouri’s courts have long felt it is outside the province of our courts to coin into money an injured party’s pain and suffering for the profit of others.”
- “In short, allowing the assignment of claims would lead to a secondary market where speculators would profit off of the pain and suffering of others.”
The Scroggins court found that the proposed lien of the health insurer was an invalid attempt to require assignment of the participant’s personal injury claim and therefore was contrary to longstanding Missouri public policy. This particular plan was not subject to the Employee Retirement Income Security Act of 1974 (“ERISA”), because the Insurer was a religious institution and a non-profit corporation and, accordingly, the Plan was determined to be a church plan. 29 U.S.C. Section 1001, et seq. (2006); 29 U.S.C. Section 1002(33)(A) (2006); 29 U.S.C. Section 1003(b)(2)(2006).
Thus, in Missouri, it is particularly important, to review the plan carefully to determine what, if any, right of reimbursement exists.
Finally, a medical lien can be created by something you do. Frequently, persons who are injured may be asked to sign a lien agreement with your medical provider obligating your attorney to pay the medical expenses billed by that provider directly from the proceeds of your claim. Keep in mind that when your medical expenses are paid by your own medical insurance, a benefit you have paid for, your medical insurer may have an agreement with providers for standard charges for similar services. With medical bills on a lien, there is less oversight to assure that charges and services are appropriate. You may be asked to pay charges that exceed what would normally be covered or charged. The signing of a medical lien should be something that is done with caution and only if you have no ability to otherwise pay the bills.