August 13, 2020
By: Teresa Kenyon
Medical liens or reimbursement demands are generally an unwelcomed part of the whole recovery process for personal injury attorneys. It’s the case after the case. The target is always moving and there is a lot of information to process and laws to apply. This is generally not the chore that most personal injury attorneys have a strong desire to conquer. You must meticulously ensure that the liens or claims are addressed before disbursing funds or else you have greater problems well after your case has concluded. Medical liens can even pop up when you least expect it. And they can wreak havoc on a case and ruin the overall client experience after you have masterfully secured a recovery. For a personal injury attorney representing an injured client, these medical liens are no fun.
In reality, health plan subrogation has one goal: to move settlement funds away from the injured party and give those funds to health insurance carriers. When someone is injured and requires medical treatment, a health insurance card is produced to secure payment of those medical services. This insurance card could be from Medicare, Tricare, Medicaid or through a private health insurer like Aetna, Blue Cross Blue Shield, Kaiser, etc. It is important to note that even Medicaid and Medicare, including Advantage, RX and supplement plans, can be handled by private health insurance carriers. It can be mystifying. The medical providers (hospitals, doctors, rehabilitation centers, physical therapists, etc.) have contractual arrangements with the health insurance carriers and payment amounts are predetermined according to those contracts. When someone is injured due to the negligence of another and if other insurance coverage is responsible for compensating the injured party, these insurance carriers and government agencies want their money returned.
Subrogation versus Reimbursement
There are two general legal theories for the attempt to receive money back: subrogation and reimbursement. The terms are sometimes used interchangeably, even in case law. Subrogation has the health carrier “stepping in the shoes” of the injured party and presenting their claim directly against the liable party or their insurance carrier. The more formal definition is the substitution of one person in the place of another with reference to a lawful claim or right. On the other hand, reimbursement is when the health carrier directs their attention to the injured party (the beneficiary of the medical treatment) after the injured party has collected settlement funds from the liable party or responsible insurance carrier.
For example, subrogation involves the injured party’s insurance carrier Aetna (or their recovery vendor) going directly to GEICO (the liable third party insurance carrier) and demanding that GEICO reimburse Aetna for the $20,000 in medical expenses paid to various providers by Aetna after the car accident in which the GEICO insured was found liable / accepted liability. On the other hand, reimbursement is when Aetna goes to the injured party directly and demands repayment for the $20,000 in medical expenses paid for medical treatment from the $100,000 policy limits received from GEICO. These concepts are similar but different. The result is unfortunately the same. The injured party receives less money for their injuries.
The thought is that without subrogation or reimbursement, the injured party is obtaining a double recovery. When performing subrogation functions, these health insurance carriers tell themselves that they are collecting the medical damages paid for that should be paid for by another entity – the responsible insurance carrier. The problem is that most recoveries do not fully compensate or make the injured party whole. This is especially the case with a limited settlement. In those cases, the subrogator does not then adjust their claim when medical damages are only one small fraction of the total damages. As a result, there is a huge inequity with the subrogating carrier taking much more than their fair share of that limited settlement.
The idea of subrogating has been around for years as it relates to property damage. In the health insurance context, subrogating by going directly to a liable insurance carrier is a fairly new idea in practice. It is also not readily accepted by most auto, premise or other types of liability insurance carriers. Many subrogation vendors make a big push for their employees to focus on subrogation and obtain the reimbursement directly from the insurance carrier. They treat it more like a coordination of benefits thereby cutting out the plaintiff attorney representing an injured party and sidestepping any need for reduction due to equitable doctrines. The irony here is that subrogation itself is an equitable doctrine.
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 slightly different way. ERISA requires a different approach and cadence than a Medicare or a Tricare claim. Each are governed by their own set of laws whether it be statutory, contractual or equitable. These laws often change. Sometimes this is for the benefit of the injured party but unfortunately, more often these change benefit the collecting medical benefit program. 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. Given that fact, below is an outline of issues to be concerned about in that regard as it relates to ERISA liens.
ERISA Liens: Funding Matters
For ERISA plans, fully understanding recovery rights means verifying the funding source, knowing which law is applicable, obtaining pertinent governing documents and identifying any and all arguments that can result in reduction of the lien. ERISA reimbursement claims stem from employer-based health plans; however, there are exceptions. Religious employers and government employers do not fall under the ERISA framework and would be subject to state law.
ERISA plans are either fully-insured or self-funded. This is the very first assessment that must be done to validate an ERISA plan’s recovery rights. Both plans may have recovery rights in some states. Only the self-funded plan may have recovery rights in every state. Where these rights are derived varies based on this funding status. In some situations, a plan may be governed by the contract language, but that policy may be overridden by state law in some states. It certainly gets complicated. For a deeper read, review the Preemption Clause (29 U.S.C. § 1144(a) (2012)), Savings Clause (§ 1144(b)(2)(A)) and Deemer Clause (§ 1144(b)(2)(B)).
Plan Document Request
The first step to determine funding status and recovery rights is a document request pursuant to the ERISA statute. There is the laundry list of items that the plan participant is entitled to receive under the ERISA statute 29 USC § 1024(b)(4):
The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.
An administrator is required to provide the requested documents. The ERISA statute has created a civil penalty under 29 U.S.C. § 1132(c)(1) which has been increased to $110/day under 29 CFR § 2575.502(c)–(3).
Subrogation vendors and defense firms that represent self-funded plans will often state that they do not have the documents in-house, therefore they are not the proper party for requesting the documents. They add that the documents are not necessary to ascertain the funding status or recovery rights of the plan and therefore unnecessary. Essentially, they shake off any penalty for their client’s failure to comply. Some of these vendors refer you directly to the plan administrator to obtain the documents. Other vendors readily express their aversion if you send the request to the proper party which is the employer/plan sponsor. It is tricky to know which approach should be used with which vendor.
Aside from the ERISA statute, case law has developed about the various documents and how they relate to the right of recovery. The Master Plan Document (MPD) is the controlling document and many times the plan’s-favorable terms are contained in the more readily available Summary Plan Description (SPD) but not present in the MPD. This is a big deal—attorneys should use this to their advantage.
Recovery vendors will often cite the US Airways, Inc v McCutchen case as the reason why they are entitled to 100% recovery. The irony here is that McCutchen actually required a reduction for attorney fees because the policy language did not clearly state that it would not bear any attorney fee or litigation cost incurred to obtain the recovery. The U.S. Supreme Court found that in the absence of clear language in the policy, equitable principles fill the gaps. Those equitable principles most commonly include the Common Fund and Made Whole rules.
McCutchen was remanded and new issues arose as in the interim, the U.S. Supreme Court decided Cigna Corp v Amara, 563 US 421 (2011). It was found to be inappropriate to use the SPD to explain the terms of the plan and instead pointed to ERISA 102(a) which obliges plan administrators to furnish SPDs, but indicated that it does not suggest that information about the plan provided by those disclosures (the SPD) is itself part of the plan.
On remand, it was discovered that SPD had recovery provisions which supported the plan’s claim of an equitable lien under ERISA but the MPD did not. There were several deficiencies. The MPD did not mention reimbursement and instead only allowed subrogation. It also did not reference first-party insurance recoveries and instead specified only third-party recoveries. Because the MPD did not support it, US Airways’ claim was only applicable as to his third-party recovery of $10,000.00 and not his larger first party recovery. That claim was then subject to the Common Fund doctrine. This part of the story is not usually mentioned by the subrogator and sometimes seemingly not even known by the analyst/examiners citing the case.
The lesson is to dig into those plan documents. Not just the SPD. The first response of 99% of self-funded plans is to say they are entitled to 100% simply because they are ERISA self-funded. Synergy is your partner to find the cracks in the policy and create leverage based on the deficiencies found therein.
Although a lien may be the last thing on your mind when you are settling the underlying case, there are some steps you can take during your handling of the case that can solidify certain sticking points to enable more effective, leveraged lien negotiation later.
As you have no doubt have experienced, there are cases where you cannot obtain the full amount of damages. What that also means is that you did not collect the full amount of any alleged medical damages. This could be because of a pre-existing condition that were exacerbated by the loss or it could be because liability was not accepted 100%. If there is a range of accepted treatment but the carrier refused to agree that, for example, a neck surgery 2 years later was causally related to the loss, have that documented by the defense or insurance carrier like in an email thread etc. Unfortunately, a defense medical exam usually does not carry much weight for a lien holder. They will say that it only proves the defense was doing their job, denying relatedness as a means of decreasing the overall settlement they would have to pay out. On the other hand, the actual communications leading to the eventual deceased settlement could show the disconnect and help you secure a well-deserved reduction.
The Claim/Lien Statement
Review the lienholder claim summary closely. Lien statements come in all sizes and with varying pieces of information. You should at a minimum require that the lienholder provide the treatment dates, billing codes (ICD and CPT), provider names, billed amount and paid amount to determine the validity and relatedness of their included claims.
Lienholders do not always accurately present their claims. Be careful of bundled charges or claim lines that show a lump sum with a large payment. Get the breakdown showing individual claim payments, procedure codes, etc., to ensure all are related. Claims can be backed out or adjusted and a lien holder may still show them on their lien statement. The claim summaries need to be carefully reviewed to ensure that duplicate claims or unrelated claims are not included. This is especially important for medical malpractice cases and pre-existing injuries.
The predominant piece of advice is to not negotiate until you have analyzed all the above pieces of the puzzle and how they fit together. Negotiating before assessing everything will place you at a huge disadvantage and then when you turn the lien over to Synergy, we are much more limited in our ability to obtain the biggest reduction.
Synergy Settlement Services is your ERISA lien expert. The ERISA team has over 100 years of combined experience and many have come from the other side. We will tirelessly work to reduce the lien claim, bring the matter to a close and eliminate any risk and additional expense for you or your client. Luckily, Synergy’s day in and day out handling of liens with the same vendors repeatedly gives us insider knowledge to get the best result.