Many practitioners believe that a private health insurance carrier operates just like the U.S. Medicare system when it comes to healthcare liens. This is not true. A private health insurance carrier does not have automatic subrogation rights to settlement funds recovered by its beneficiaries. Instead, the Summary Plan Document (“SPD”) must be reviewed to see what rights, if any, the plan has to the settlement award.
There are two ways in which the ERISA plan may recover benefits under the contract language:
- Definition of Subrogation – This type of clause empowers the health plan to stand in the shoes of the beneficiary and enforce the beneficiary’s rights and remedies against third parties through litigation;
- Right to Reimbursement – this affords the plan a right of recovery against the plan beneficiary directly. In this type of clause the beneficiary has an obligation to “pay the plan back” if the plan pays for an injury where the beneficiary later recovers for the same injury from the 3rd party. Most people call this a lien.
Neither of these types of provisions is required in a plan document, so it is important to comprehensively review the plan language to see what rights the ERISA plan has over settlement funds. The first step in assessing this language is to request a copy of the SPD. Once you have reviewed the language, you will then have the ability to negotiate with the plan administrator to determine what charges may be owed to the plan. Many administrators attempt to include “everything but the kitchen sink.” As a result, you must review, audit, and analyze the list of charges that it is trying to collect. The charges must be related to the underlying injury, otherwise recovery should not be allowed. An insurance carrier will try to recover as many expenses as it can to cover its costs.
ERISA liens should not be ignored. Serious implications and penalties exist to protect the plan administrator’s rights. More important to your client is that an ERISA lien could eat the entire amount of a settlement. It is better to inform your client from the beginning of the case that these liens could exist. When a client is taken by surprise at the time of settlement or beyond, the remainder of your attorney-client relationship will likely be an unpleasant one.www.lienresolutionusa.com https://lienblog.wordpress.com MSpitz@lienresolutionusa.com
This Blog/Web Site is made available by the publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the Blog/Web Site publisher. The Blog/Web Site should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.