Getting a Recovery in Your Accident Case; Exceptions to the New Health Insurance Lien Law


New York enacted General Obligations Law section 5-335 which abolishes health insurance liens in personal injury settlements.  See our prior post.

See full size image   The new law provides that a health insurer will not have a lien on the client’s net recovery.  In the past, the client’s health insurance company sought to recoup its medical bills paid for injuries and treatments arising from the accident.

This post discusses exceptions to the law.

I.  Cases that go to verdict

If a case goes to verdict, the health insurance company will have a lien.  This is because the injured plaintiff can prove and recover the medical bills, and that recovery gets passed along to the insurance company.

II.  “Self-funded” health plans under ERISA

A “self-funded” plan provided by the client’s employer would still have a lien under the federal law of ERISA which controls employee benefits, such as pensions and medical insurance.  The ERISA statute creates a lien.  The new New York law cannot overrule this lien.

The rationale for this lien is that the plan’s recouping of medical bills will keep the costs down of the medical plan for both the employer and its employees.

A “self-funded” plan is a health plan which the employer funds.  There is no insurance company although the plan may be administered by an insurance company, such as Aetna or Cigna.  This insurance company is called a Third-Party Administrator.  In a “self-funded” plan, the employer pays the employees’ medical bills.  The employer is not buying a group insurance policy with an insurance company, such as Empire Blue Cross/Blue Shield.

Generally, only very large national employers with thousands of employees provide healthcare through a “self-funded” plan.  Large employers, such as JP Morgan Chase Bank and Walmart, have the numbers and economies of scale to “self-fund” their employees’ medical bills.  It is safe to say that only employers with at least 5,000 employees will have the ability to “self’-fund” its medical plan.  It is also safe to say that small employers who employ less than 1,000 employees will have a “self-funded” plan.

III.  Medicare

If the client’s medical bills were paid by Medicare, then Medicare would have a lien for such bills.  Again, federal law creates the lien, and the new New York statute cannot overrule it.

         A recent federal rule mandates that insurance companies, defendants, and their counsel advise Medicare of a settlement involving an injured client receiving Medicare.  Therefore, many insurance companies refuse to make a settlement payment unless the issue of the Medicare lien is resolved.

IV.  Medicaid

The new statute provides that liens created by statute will not be affected.  This includes medical bills paid by Medicaid.  The New York City Human Resources Administration can have a lien for its medical bills under the Social Services Law.

Conclusion

At the end of a client’s case we have to consider either a healthcare lien, a Medicare lien, Medicaid lien, or any other liens against the recovery (such as public assistance).  Often, these liens can be negotiated and reduced. 

In every case, we attempt as negotiation and lien reduction as possible.

If you have been injured in an accident, please feel free to contact me for a free consultation at 800-581-1434 or write to letters@seitelman.com.

Mark E. Seitelman, 4/26/10, www.seitelman.com.

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