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I just got hit with a health insurance lien. What is it, and what are my options?

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Q:

I just got hit with a health insurance lien. What is it, and what are my options?

A:

A health insurance lien typically happens after a legal settlement has been received in a personal injury case. In a nutshell, these liens give your insurance provider the opportunity to recover the money that they previously paid to cover your related health care costs. Although this may seem unfair to someone who has gone through a lawsuit with the intention of recovering their personal lost time and expenses, it is legal for insurance providers to include a provision for liens within their contracts.

The legal term that enables this process is called "subrogation," and you are likely to hear this phrase from your insurance company if you have filed a personal injury lawsuit. Essentially, subrogation means that a party or person is standing in for another party or person. For example, your insurance company stands in for you by providing payments for your medical care.

Where this gets difficult during legal proceedings is that it is commonly believed that people should not be entitled to double compensation for their medical bills. In other words, if your insurance company provides $10,000 worth of payments as a direct result of your injury, they are likely to believe that you should not be eligible to further recover $10,000 from another party because of the expenses you accrued.

A health insurance lien can be placed against your settlement in this scenario, and the insurance company may be legally granted a repayment from the money that you receive. In other words, if you get a settlement for $15,000 to cover your medical expenses, lost wages, and pain and suffering, it is possible that you will only end up receiving $5,000. Your attorney will most likely get paid out of this remaining $5,000, which will again reduce your portion of the settlement.

It is important to note that every state has its own specific guidelines regarding when and how these liens can be utilized, so it is important to consult with a local attorney to find out exactly what your options are. However, if your insurance contract gives your provider the right to file a lien, then you will have a contractual obligation to fulfill your end of the deal in the event that you win your personal injury case.

Keep in mind that your health insurance provider almost never pays the full amount that hospitals and other medical professionals put on the bill. It is not legal for your provider to attempt to recover more than what they actually paid. Therefore, if the bill was for $15,000 but only $10,000 was paid, your provider cannot put a lien against your settlement for more than $10,000.

Failure to notify your insurance company about your lawsuit will not prevent them from discovering the case and placing a lien against you, so it is best not to attempt to fly under the radar. Your attorney may be able to successfully negotiate a smaller repayment in order to get the lien removed and settle everything. This is possible with standard health insurance, but negations are not allowed with Medicare.

Again, your state’s specific laws will have a big impact on the ultimate outcome of your lien. In some cases, the health insurance company is only eligible for two-thirds of the settlement amount if it is equal or less than the amount they paid for your medical bills. Other states allow providers to recover 100%. Either way, though, it is always wise to have your attorney attempt to negotiate a smaller repayment so that you can keep a larger portion of your settlement. In cases where the anticipated settlement is similar to the amount your provider paid, it may be best not to move forward with a lawsuit in the first place.

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