When you sustain injuries due to someone else's negligence, it triggers a number of legal rights. You have a right to recover damages from the person who negligently injured you. If you have health insurance, you have a right to submit a claim for your medical bills. When your health insurer pays those bills, they have a few rights as well. ERISA lien personal injury claim subrogation rights operate under authority granted by the Employee Retirement Income Security Act. These rights allow them to recover a portion of your settlement.
When an employer-sponsored health plan pays medical bills on your behalf, they have legal rights that are equal to yours. ERISA grants them the authority to recover the amounts they paid from the negligent person who injured you. When your health plan places you on notice, they are advising that of their ERISA lien against your personal injury settlement. As they are subrogated to your right to recover damages, they usually expect you to recover money on their behalf.
When your attorney is working to recover damages from a catastrophic injury, health insurance subrogation and ERISA liens sound like complex insurance concepts that don't concern you. Unfortunately, it's when you sustain life-changing injuries that a health benefits plan's subrogation lien affects you most profoundly. Their lien amount includes payments they make to the medical professionals who treat you for your injuries. If you're hospitalized for a lengthy period or you need years of follow-up care, a subrogation lien can add up to hundreds of thousands of dollars.
When your attorney settles your claim or delivers a court judgment, your health plan's right to recover money often displaces your legal rights. For example, consider what happens if your attorney recovers a one million dollar settlement for your injury claim. If your health plan paid $500,000 in medical bills, they would seek to recover their lien amount before you receive your payment.
Once the health benefits plan collected their lien amount, it would leave only $500,000 in your settlement fund. That amount must cover your remaining economic damages such as lost wages and replacement services. It must also cover your non-economic damages (pain and suffering, permanent scarring, emotional trauma, etc), legal fees, and other recovery costs.
Health plans often have an absolute right to recover 100% of the amount they paid, but that's not always the case. You have ways to protect your settlement.
Federal ERISA statutes give health plans the power to execute an ERISA lien against your personal injury settlement. Over the years, litigation has confirmed this right. U.S. Supreme Court cases have also established a line of exception between Insurance plans and Self-funded plans.
Self-Funded Health Plans: A self-funded plan functions like insurance but it's actually a pool of money created with employer and/or employee contributions. A Plan Administrator oversees the fund and makes payments when a covered member submits medical bills. When a self-funded plan seeks to recover the money they've paid, they are recovering money contributed by individuals. ERISA's subrogation rights are often unassailable when the health plan is self-funded.
Insured Health Plans: When an employer offers an insurance-backed plan, employers and employees pay premiums to an insurance company. When an employee has medical treatment, the insurance company pays the bills. When an insurance company pays a plan's health benefits, the federal government relinquishes much of its control to individual states. Each state has a Department of Insurance and an Insurance Commissioner to oversee insurance company operations in their state. When a health insurance company pays your medical bills, state laws don't always enforce subrogation liens. Insured plans don't always have a right to subrogate unless it's included in the insurance contract.
To determine if your health benefits plan is an insurance contract, a self-funded plan, or has subrogation rights, you must review a copy of your benefits plan. All employees receive a copy of a Summary Plan Document but the Master Plan Document often contains more complete and accurate information. As a beneficiary of a health plan, Federal Labor Codes require plan administrators to provide a copy for your review. Your attorney can then assess their actual subrogation rights.
Sometimes you can reduce a lien amount by hiring a medical bill audit service. Medical professionals examine hospital bills searching for unnecessary, unrelated, and overcharged items and services. They look for codes that tell why they received the treatment. Hospital bills sometimes include treatment for managing underlying, unrelated, or pre-existing conditions. Even if the health plan covers these items, they shouldn't be included in your subrogation lien.
If a claim settlement considers questionable liability, comparative negligence, or contributory fault, your settlement will likely be for less than the 100% value of your claim. If your recovery is based on 50% of your damages, the lien payment should not include more than 50% of your total paid medical bills. Depending on your particular liability considerations, you should attempt to negotiate a reduced ERISA personal injury lien.
To protect your settlement from medical liens, consider settling your claim for non-economic or general damages only. An ERISA medical lien isn't valid if you received no payment for medical bills. You accomplish this by negotiating, mediating, or resolving your claim based solely on non-economic damages. Your claim settlement documents must clearly show that you received no financial consideration for medical bills. Before you try this strategy, make sure you have no contractual duty to protect your insurer's or medical plan's subrogation rights.
Whatever arguments you have for reducing or eliminating the ERISA lien, you will likely receive pushback from the person seeking to recover the money. Some self-funded plans hire companies who specialize in lien recoveries only. Some insurers have subrogation departments and attorneys dedicated to subrogation tasks. When you negotiate with accurate information to support you, you often have success in reducing or completely eliminating a lien.
An ERISA lien can take a big chunk out of your injury settlement. It reduces the money you have available for living expenses and ongoing medical costs. Although it's not easy to eliminate a lien or negotiate a reduction, it's worth whatever effort it takes. If you're concerned about a pending subrogation action or ERISA lien, reach out right away to speak with a personal injury lawyer.
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