LIENS
Welcome to Synergy’s blog page dedicated to the topic of lien resolution. Our team of subrogation experts share their InSights and knowledge on the latest developments and best practices in lien resolution. Stay up-to-date with the latest trends and strategies to ensure that you have the information you need to navigate the complexities of lien resolution.
Navigating the intricacies of subrogation and reimbursement for ERISA-governed health plans demands a comprehensive understanding of statutory frameworks, plan documentation, and pertinent case law. Attorneys representing clients facing such liens must employ meticulous strategies to effectively negotiate reductions. Reducing these claims can be complex but is often achievable with the right strategies.. Here are some approaches commonly used to assess the strength of an ERISA plan in their right to demand reimbursement.
The Employee Retirement Income Security Act of 1974 (ERISA) governs employer-sponsored health plans, including self-funded plans where employers assume direct financial responsibility for employee healthcare claims. A critical aspect of these plans involves subrogation and reimbursement rights, which allow plans to recoup medical expenses paid on behalf of participants who later recover funds from third parties responsible for their injuries. The fact that a plan is self-funded under ERISA does not automatically grant it full recovery from an injured party’s settlement funds.
In all cases, a full assessment is required before fully engaging in any negotiations with an ERISA self-funded plan. Once appropriate steps have been taken, you can enter the battlefield.
ERISA Preemption and Self-Funded Plans
ERISA includes a preemption clause that supersedes state laws relating to employee benefit plans. However, the “savings clause” exempts state laws regulating insurance from this preemption, and the “deemer clause” specifies that self-funded plans are not considered insurance companies, thereby shielding them from state insurance regulations. This framework grants self-funded ERISA plans broad authority to enforce subrogation and reimbursement provisions, often overriding state laws designed to limit such recoveries.
With that said, self-funded means something more. But they have to earn it!
Steps for the Battlefield
1. Early Identification and Assessment of Potential Liens
- Initial Client Consultation: During the initial client meeting, inquire about any health insurance coverage that may have paid for medical expenses related to the injury. Understanding the source of these payments is crucial for anticipating potential liens.
- Documentation Request: Promptly request relevant plan documents, including the Master Plan Document (MPD) and the Summary Plan Description (SPD), from the plan administrator. Under 29 U.S.C. § 1024(b)(4), plan administrators are obligated to provide these documents upon written request. Failure to comply can result in penalties, which may be leveraged in negotiations. So the earlier you request, the better!
2. Conduct a Thorough Review of Plan Documentation
- Obtain Essential Documents: Request the Master Plan Document (MPD) and the Summary Plan Description (SPD) as obtained from the plan administrator to assess the lien’s compliance with the plan’s terms.
- Scrutinize Subrogation and Reimbursement Clauses: Identify explicit provisions that grant the plan rights to reimbursement. The specificity and clarity of these provisions can significantly impact the plan’s ability to enforce a lien. Absence of such language weakens the plan’s enforcement capabilities.
- Assess Applicability of Equitable Doctrines: Determine whether the plan explicitly disclaims equitable doctrines such as the “Made Whole” and “Common Fund” doctrines. In US Airways, Inc. v. McCutchen, the Supreme Court held that while plan terms generally govern, equitable principles may apply in the absence of clear plan language to the contrary. If the language does not appropriately address, the plan would lack entitlement to reimbursement if the claimant hasn’t been fully compensated for their damages or had to pay attorney fees.
- Challenge Ambiguities: Identify vagueness or silence in the plan’s reimbursement provisions, particularly regarding equitable doctrines, argue that they apply.
3. Evaluate the Validity of the Lien and Applicable Law
- ERISA Applicability: Confirm if the Plan is truly governed by ERISA. Church or government plans may not qualify under ERISA and might have weaker lien rights.
- Funding Type Identification:Ascertain whether the Plan is Self-Funded or Insured. Self-funded plans, in which the employer assumes financial risk, are governed by federal law under ERISA, which preempts state laws and grants them broad but distinct reimbursement rights. In contrast, fully insured plans are subject to state insurance regulations that have the tendency to restrict their reimbursement rights.
4. Leverage Hardship in Negotiations
- Use Equitable Arguments: Highlight financial hardship, particularly if the injured party’s recovery was limited or if future medical care costs are substantial.
- Limited Recovery: Use a settlement’s insufficiency to cover all damages (e.g., policy limits or comparative fault) as leverage to reduce the lien.
5. Invoke the Common Fund Doctrine
- Demand Contribution for Attorney Fees Reduction: Argue that the plan must contribute to attorney fees and litigation costs incurred in securing the settlement, thereby reducing the net lien amount. The Plan would not be collecting a reimbursement if it were not for the efforts of the attorney.
- The Court in McCutchen reinforces this idea: “The rationale for the common-fund rule reinforces that conclusion. Third-party recoveries do not often come free: To get one, an insured must incur lawyer’s fees and expenses. Without cost sharing, the insurer free rides on its beneficiary’s efforts—taking the fruits while contributing nothing to the labor.”
6. Analyze the Nature of the Recovery
- Differentiate Compensation Types: Emphasize that portions of the settlement (e.g., pain and suffering, lost wages) are not subject to reimbursement. A thorough review of the plan language may reveal an assist for this argument.
- Comparative Fault: Highlight the claimant’s percentage of fault. For instance, if a claimant is deemed 30% at fault, resulting in a 30% reduction in their actual settlement, it is reasonable to request a corresponding 30% reduction in the ERISA lien.
7. Seek Professional Assistance
- Work with a Lien ResolutionExpert: Partner with lien resolution companies or professionals who specialize in negotiating ERISA liens. They may have established relationships with plan administrators, claims administrator, insurance companies etc and deep experience with navigating these claims.
8. Build Rapport with the Plan Administrator
- Open Communication: Maintain a cooperative tone and provide documentation (e.g., settlement breakdown, hardship affidavits) to support your case for a reduction.
- Ask for Discretion: Many plan administrators have discretionary authority to compromise claims, especially in hardship cases or when full reimbursement would seem inequitable. The plan language may clearly indicate that it is the plan administrator and not the claims administrator that has ultimate decision-making power.
9. Time the Negotiations Carefully
- Although it may be enticing to secure the lien reduction prior to settling the case, you will not get the deepest reduction from a lien holder prior to the case settling.
- Finalize settlement negotiations with the third party before addressing the lien, as lienholders may initially demand a higher amount if they believe more money is available.
Utilizing Case Law – Key Supreme Court Decision
US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013): Why the Plan Documents Matter
In US Airways, Inc. v. McCutchen, the Supreme Court underscored the paramount importance of the explicit language within ERISA plan documents. ERISA self-funded plans benefit when their language comprehensively addresses reimbursement, whereas injured parties benefit when plan language is vague or incomplete. The Court held that plan terms must govern, but where they are silent or ambiguous, principles like the “common fund” rule can fill the gaps.
The case involved James McCutchen, a US Airways employee who sustained severe injuries in a car accident. The company’s health plan covered $66,866 of his medical expenses. Subsequently, McCutchen secured a $110,000 settlement from third parties, from which $44,000 was allocated to attorney’s fees. US Airways sought full reimbursement of the medical expenses it had paid, as stipulated in the plan’s terms. McCutchen contended that such full reimbursement, without accounting for attorney’s fees and other costs, would result in unjust enrichment to the plan.
The Supreme Court held that the clear terms of an ERISA plan must be enforced as written, even if they lead to outcomes that might seem inequitable. However, the Court also noted that when a plan’s terms are silent or ambiguous regarding the allocation of costs such as attorney’s fees, equitable doctrines like the “common fund” rule should be applied. This rule ensures that parties benefiting from a recovery contribute proportionally to the associated legal expenses. On remand, the Third Circuit applied this principle, reducing US Airways’ reimbursement to reflect its share of the attorney’s fees incurred during the recovery process.
Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, 577 U.S. 136 (2016): Active Participation and Traceability of Dissipated Settlement Funds
The Montanile decision further delineated the boundaries of an ERISA plan’s reimbursement rights, particularly concerning the traceability of settlement funds. Plans can only enforce reimbursement claims on settlement funds that remain intact and identifiable. The Court ruled that if a participant dissipates settlement funds on non-traceable items, the plan cannot enforce reimbursement from the participant’s general assets. This case highlights the necessity for plans to act promptly in asserting their reimbursement rights before the settlement funds are spent.
Implications for Legal Practitioners
These landmark cases highlight critical considerations for attorneys handling ERISA-related subrogation and reimbursement issues:
- Strict Adherence to Plan Language: The McCutchen ruling reinforces that the explicit terms of the plan govern reimbursement rights. Attorneys must meticulously review plan documents to understand the scope of the plan’s claims and identify any ambiguities that could be leveraged in negotiations.
- Timeliness in Asserting Claims: As established in Montanile, delays in pursuing reimbursement can result in the dissipation of funds, thereby limiting the plan’s ability to recover. Legal counsel should advise clients on the importance of prompt action to preserve their rights.
- Application of Equitable Doctrines: When plan terms are ambiguous or silent on certain issues, equitable principles such as the “common fund” doctrine may be invoked to ensure a fair allocation of costs. This approach can be instrumental in negotiating reductions in the plan’s reimbursement claims.
Conclusion
Navigating the complexities of ERISA self-funded plan subrogation and reimbursement requires a strategic and informed approach. By meticulously reviewing plan documents, understanding the nuances of ERISA applicability, and employing equitable arguments, you can effectively approach the battlefield to negotiate lien reductions. Engaging with plan administrators transparently and considering professional assistance further enhances your position. Understanding and interpreting case law, such as US Airways, Inc. v. McCutchen and Montanile v. Board of Trustees, is crucial, as these decisions significantly influence reimbursement rights and strategies. Through diligent application of these methods, you can ensure your due diligence on obtaining the most appropriate outcome that honors both the interests of the plan and the rights of your injured client.
Written by: Teresa Kenyon, Esq. | Vice President of Lien Resolution Services
Let’s talk about something that keeps personal injury attorneys up at night: cash flow. Personal injury firms work hard to win recoveries for clients, but then it’s like a slow drip waiting for those funds to be ready to be disbursed. One of the biggest culprits? Healthcare lien resolution.
These things are a handful. Medicare, Medicare advantage, Medicaid, ERISA plans, hospitals, and private insurance plans – they all want a piece of the pie. And while resolving these liens is crucial to maximize your client’s recovery, it’s also a massive drain of time for your team. Time that could be spent on, you know, actually practicing law. And most importantly, using your team’s time to resolve more cases for greater value – delivering great client results along with improved efficiency as well as profitability.
Think about it:
- Hours wasted: Your paralegals and lawyers are drowning in to-dos, paperwork, chasing down medical records, and haggling with lienholders.
- Delayed disbursements: While you’re wrestling with liens, your clients are waiting (impatiently) for their money, and your firm’s recognition of revenue is delayed.
- Missed opportunities: That time spent on lien resolution? It’s time you could be spending on increasing the value of existing cases, bringing in new clients and building your business.
The solution? Outsource it.
Look, I get it. We attorneys like to control every aspect of a case. But outsourcing healthcare lien resolution is a game-changer for personal injury law firms. Here’s why:
- Expertise: Specialized lien resolution firms like Synergy have dedicated teams with deep knowledge of subrogation laws and negotiation tactics. It is all about knowing the inside baseball. They’ll usually get you better results than you could on your own.
- Efficiency: Companies, like Synergy, have streamlined systems to handle the entire process painlessly and efficiently, freeing up your staff.
- Faster resolution: This means quicker disbursements to your clients, which keeps them happy and boosts your firm’s cash flow velocity.
Bottom line: Outsourcing healthcare liens is a win-win. You get faster resolution, improved efficiency, and happier clients. And let’s face it, wouldn’t you rather be focusing on winning cases than battling with healthcare insurance companies and their subrogation recovery agents over liens?
Written by: Jason D. Lazarus, J.D., LL.M., MSCC | CEO
Introduction
Effective lien resolution is pivotal in personal injury cases. Liens—claims from healthcare providers, insurers, or government agencies against a plaintiff’s settlement—can significantly impact the net recovery. Understanding and managing these liens is crucial for maximizing the client’s recovery and ensuring compliance with legal requirements.
What is a Lien?
In personal injury cases, a lien represents a claim by an entity seeking reimbursement for medical expenses or benefits provided to the injured party. These claims must be addressed to avoid compromising the client’s net settlement.
Overview of Various Lien Types
Medicare Liens Conditional Payments: Medicare’s conditional payments for medical expenses necessitate reimbursement from settlement proceeds under the Medicare Secondary Payer Act. The resolution process is managed by the Medicare Secondary Payer Recovery Contractor (MSPRC), which involves reporting the settlement to the MSPRC and resolving the reimbursement obligation with them through their normal process.
Medicare Advantage (Part C) Liens: Medicare Advantage plans, administered by private insurers, can assert liens for covered medical expenses. To resolve, you negotiate directly with the private insurer or their recovery contractor. The process is governed by the same laws as traditional Medicare but involves private insurance entities.
Medicaid Liens: Medicaid liens are asserted by state programs for medical expenses paid on the plaintiff’s behalf, with each state having distinct laws. To resolve, you contact the state Medicaid agency to determine the lien amount, negotiate reductions, and comply with state-specific procedures.
ERISA Liens: ERISA liens arise from employer-sponsored plans, often with strong subrogation rights if self-funded. In resolving these liens, first understand the ERISA plan terms, then engage with the plan administrator, and negotiate reductions under federal law (if self-funded), which can be complex. If the plan isn’t self-funded, then state law will apply.
FEHBA/Military Liens: FEHBA and military plans like TRICARE may assert liens for medical expenses. To resolve, contact the relevant federal agency or military plan administrator to understand lien rights and negotiate reductions where feasible.
Private Health Insurance Liens: Private insurers may assert subrogation claims based on their policy’s provisions. To resolve, first review the insurance policy, then negotiate directly with the insurer, and argue for reductions based on equitable principles or other legal related arguments for reduction based upon state law.
Hospital and Provider Liens: Hospitals and providers may assert direct liens for unpaid medical bills. To resolve, negotiate with providers, leveraging financial hardship or equitable distribution arguments, and the reasonable cost of care.
Conclusion
Navigating the complexities of various liens requires a thorough understanding of their unique characteristics and resolution processes. From Medicare to ERISA and military liens, each type demands specific strategies for effective resolution. Understanding these nuances ensures that personal injury lawyers can protect their clients’ interests and secure the highest possible net recovery.
If you want to do further reading on the subject, our white paper is a detailed guide to the different lien types and all of their nuances. You can download “Advanced Lien Resolution Techniques – Medicare, Medicare Advantage, Medicaid, ERISA, FEHBA, Military Liens and Hospital Liens” by clicking HERE. If however you are ready to partner with Synergy and outsource lien resolution today, contact us NOW.
Written by: Jason D. Lazarus, J.D., LL.M., MSCC | CEO
Resolving healthcare liens is essential to ensuring that personal injury clients receive their maximum net recovery. A structured approach to negotiating and resolving these liens helps protect clients’ interests and comply with legal requirements. Here’s a streamlined guide to managing healthcare liens effectively:
Pre-Negotiation Preparation
Start with a case analysis. Evaluate the total settlement and the client’s recovery to understand the impact of each lien. Assess the legal enforceability and negotiability of liens. Inform the client about the liens and their potential effects on the settlement. Discuss negotiation strategies and secure approval for lien reductions.
Engagement with Lienholders
The first step in resolution, is to contact lienholders directly via phone, letter, or meetings. Clearly present your case for lien reductions and provide supporting documentation.
Negotiation Strategies
Once you have made contact and started the negotiation process, use legal arguments to negotiate lien reductions. This may involve challenging the lien’s validity, arguing for equity-based reductions, or applying state-specific reduction statutes. A couple of key arguments are:
- Financial Hardship: For government liens (e.g., Medicare, Medicaid), you can present evidence of financial hardship to negotiate reductions based on certain statutory provisions.
- Equitable Distribution: Advocate for proportional reductions based on the client’s net recovery and not being made whole to ensure a fair share of the settlement proceeds remains with the client.
Documentation and Compliance
As part of your resolution process, you should document all agreements in writing, detailing reduced amounts and payment terms. Obtain confirmation from lienholders that their claims are satisfied. Ensure adherence to legal and regulatory requirements throughout the negotiation process. Maintain accurate records of all activities.
Payment and Finalization
Once agreement has been reached with the appropriate lien holder, facilitate payment of the negotiated lien amounts from the settlement proceeds. Obtain lien waivers or releases from health insurers to confirm that the lien is fully satisfied and no further claims will be made.
File Closure
As your last step in the resolution process, you need to have a closure process. First, verify that all resolution requirements are met in the final stage. Keep all relevant documents for future reference and potential audits. Update records to reflect the final lien resolution outcome and ensure accurate final distribution in the closing statement. Notify the client of the lien resolution outcome and provide a final closing statement detailing the distribution of funds.
Conclusion
Implementing these steps ensures an effective management for negotiating and resolving healthcare liens. The end result maximizes the client’s net recovery and results in compliance with legal requirements. While outsourcing can be beneficial, mastering the in-house lien resolution process for liens that aren’t outsourced is crucial.
To read more on the topic of negotiating and resolving healthcare liens, click HERE to download our white paper titled “Negotiating and Resolving Healthcare Liens – Best Practices for Personal Injury Law Firms”. If you are ready to outsource, partner with Synergy today by CONTACT us now.
Navigating hospital and provider liens in personal injury cases can be a labyrinthine process. These liens trigger ethical considerations, generally involve inflated charges, and have intricate state-specific regulations to navigate. For personal injury attorneys, understanding these liens and devising effective strategies to manage them is crucial.
The Challenge with Hospital Liens
Hospital bills often include charges that greatly exceed actual costs. Many hospitals leverage lien rights, often supported by statutes, to attempt to secure payment for these excessive charges. Negotiating from full billed charges is a strategic mistake; these figures are often inflated and not reflective of the true cost of care. Instead, the focus should be on negotiating from a reasonable value standpoint.
Is the claim a lien or debt?
The first step in resolving hospital/provider claims is understanding whether you’re dealing with a lien or a debt. A lien is a legal claim on settlement proceeds, generally established by statute or contractual agreement. Conversely, a debt arises from unpaid medical care. When you are dealing with a debt, the question for the personal injury victim as a starting point is whether they want to resolve the debt from their settlement proceeds. In most instances it does make sense to encourage resolution so as to avoid having debt collection pursued in the future.
In contrast, liens are a legal claim against the personal injury recovery, borne out of statutes and ordinances. For example, while California has consumer-friendly lien laws, Florida’s regulations vary by county. Familiarizing yourself with state-specific lien statutes and common law is essential for effective resolution for a valid lien.
Best Practices for Resolution
- Identify and verify the existence of any hospital lien claims versus just a debt.
- Once identified, check to see if the hospital has properly “perfected” the lien under appropriate state law. Also, determine under your state law the legal limitations on a hospital’s right to reimbursement.
- Confirm whether the hospital has already received any payments from insurance and whether there is a balance.
- Dispute any attempts to balance bill if payments were received from insurance.
- Engage in negotiations using the following as a guide to different available arguments (Note: Not all will apply, assess your case and use appropriate arguments):
- Challenge any unrelated charges in the hospital billing.
- Use reasonableness arguments for the charges.
- Make any arguments available under state statutes for limitations on reimbursement.
- Argue equitable doctrines like common fund or made whole, if available under state law. Raise arguments related to client hardship, limited insurance policy limits, and comparative fault to negotiate further reductions in the lien.
- Use pro rata share types of arguments in cases with multiple lienholders, argue for a pro rata distribution of a set amount of the settlement pool of funds.
- Finalize resolution by obtaining a complete release of the lien from the hospital.
Conclusion
Resolving hospital/provider claims is indeed a complex task, but with a strategic approach, attorneys can effectively manage these claims. By focusing on reasonable charges, understanding local lien laws, and employing robust negotiation strategies, you can mitigate the impact of hospital/provider claims and ensure that your client’s net recovery is protected.
Working with specialized lien resolution companies can provide essential expertise and prevent costly mistakes when it comes to hospital & provider claims. If you want to find out more, contact us today to Partner with Synergy for lien resolution.
Written by: Jason D. Lazarus, J.D., LL.M., MSCC | CEO
When settling cases involving clients with federal or military healthcare coverage, understanding the complex landscape of lien recovery rights is crucial. This blog highlights key issues and strategies related to federal employee and military healthcare liens.
FEHBA Liens
The Federal Employees Health Benefits Act (FEHBA) covers federal employees, retirees, and their families through specialized health plans administered by private carriers under the Office of Personnel Management (OPM). FEHBA’s preemption of state laws is pivotal; as affirmed by the Supreme Court in Coventry Health Care of Missouri Inc. v. Nevils, FEHBA preempts state laws that might limit these plans’ subrogation rights. This ruling solidified that FEHBA plans can demand full reimbursement from settlements, similar to ERISA plans, although FEHBA plans typically contain more lenient recovery provisions.
To address FEHBA liens, start by reviewing the plan’s language. While FEHBA liens are strong, potential reductions are still possible, given that the plan’s recovery provisions may provide needed negotiating leverage.
Military Liens
Military healthcare programs—such as Veterans Health Administration (VHA), Champ VA, and Tricare—each have distinct reimbursement rights governed primarily by the Federal Medical Care Recovery Act (FMCRA). Unlike other types of liens, these programs do not involve traditional liens but rather direct claims against responsible third parties.
Veterans Health Administration: Recovery rights stem from 38 U.S.C. § 1729 and FMCRA. The VA can pursue reimbursement claims connected to third-party settlements. For the VA, the resolution process involves requesting bills and navigating a tiered review system for compromise or waiver requests.
Tricare: Governed by similar provisions, Tricare’s recovery rights are outlined in 32 C.F.R. §199.12. Tricare does not require set-asides but considers future medical expenses, and recovery claims are managed through the JAG office. Challenges with Tricare include managing attorney fees and determining the military’s right to recover from first-party auto insurance policies.
Key Issues:
- Attorney Fees: Tricare’s form protection agreement often prohibits the government from paying attorney fees, creating complications in settlement negotiations.
- First-Party Auto Insurance: The right to recover from uninsured motorist (UM) coverage is debated and often hinges on specific policy language, as demonstrated in Government Employees Ins. Co. v. Andujar.
Conclusion
FEHBA and military healthcare liens present distinct challenges. FEHBA’s federal preemption necessitates focus on plan-specific language to negotiate reductions, while military liens involve navigating direct claims under FMCRA and managing complex issues like attorney fees and UM insurance recovery.
Working with specialized lien resolution companies can provide essential expertise and prevent costly mistakes when it comes to FEHBA & military liens. If you want to find out more, contact us today to Partner with Synergy for lien resolution.
Written by: Jason D. Lazarus, J.D., LL.M., MSCC | CEO
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