In this article, you will learn everything you need to know about medical liens in North Carolina (also called “Physician’s Liens”) and how subrogation works.
As I’ve mentioned before, reaching a negotiated settlement for your personal injury or automobile accident case is only the first step towards recovering the compensation you are lawfully entitled to. There remain a number of minefields that you must be aware of or else risk losing your settlement entirely, or worse, getting pulled into a Federal lawsuit.
You are probably wondering what in the world I am talking about… you just settled your case. Don’t you get to keep the money from the insurance company?
Yes and no.
While you were receiving your medical treatment, you were also incurring medical bills. These bills need to be paid. Some of them may have already been paid through your MedPay coverage. Other bills may have been paid through your health insurance or Medicare. Other bills may not have been paid at all.
Once you settle your personal injury claim, it is important that all of these medical providers and insurance companies are repaid – and typically this repayment comes out of your settlement proceeds. There are two main types of payments that need to be made.
The first is to your health insurance company to reimburse them for the money they paid your medical providers. The second is to your providers themselves, provided that they still have outstanding bills.
Let’s tackle these issues one at at time.
Who Can Seek Reimbursement from Your Settlement Proceeds?
Even though we have dumbed this down to insurance companies and medical providers, here is a full list of everyone that may want to get a piece of your settlement proceeds:
- Any unpaid healthcare providers who have “perfected” their medical lien. This could include doctor’s offices, hospitals, emergency rooms, specialists, urgent care clinics, testing facilities (MRI, x-rays, etc.), chiropractors (maybe) and more;
- Medicare, Medicaid, and the Veteran’s Administration;
- Worker’s Compensation insurance; and,
- Your Health Insurance company, provided it is an ERISA plan.
These liens arise in one of two situations. The first, and most common situation, is where the person who was injured did not have any medical insurance to pay for their medical expenses. In this case, their providers may agree to continue treatment provided they are able to recover the cost of the treatment out of your insurance proceeds. In order to recover the cost of treatment, they must have “perfected” their lien or asked you to sign an “assignment of benefits”.
The second situation is where you do have health insurance, but you are covered under an ERISA plan. In this case, your health insurance probably has what is called a right to subrogation. That’s a fancy legal way of saying that they are entitled to be repaid from your settlement. If you don’t receive a settlement, they can’t do anything but send you to collections (or sue you), but if you do receive a settlement, they can ask you to reimburse them.
If you don’t, they can sue you in Federal Court.
How a Can a Medical Provider Perfect Their Lien in North Carolina?
In order to recover a portion of a personal injury settlement, a medical provider must perfect their lien under North Carolina law. The statutes governing this practice are N.C.G.S. §§ 44-49 and 44-50. You should note that under N.C.G.S. § 44-50, a medical provider may not seek more than 50% of your total net settlement as reimbursement.
Now, on to the liens…
There are two basic requirements for a medical provider to perfect their lien under § 44-49. First, they must provide a copy of the medical records and itemized bills related to the claim to the attorney or plaintiff’s lawyer upon request, and second, they must provide a written notice of the lien amount claimed.
If either of these two conditions is not satisfied, the medical provider has not perfected their lien and they cannot recover from the settlement proceeds.
Let’s look at an example so that you can get a better understanding of how this works in practice.
Assume you were hit by another driver and went to the hospital emergency room to treat for your injuries. When you went to check out, the hospital did not ask you for payment or to provide any insurance. After hiring a lawyer to help you, the lawyer contacts the hospital to ask for a copy of your medical records and billing statements. The hospital provides these to the attorney free of charge, along with a written statement asserting the amount they are claiming as a medical lien on your recovery. Because the hospital did not charge for your medical records, and they asserted the amount of their claimed lien in writing, they have perfected their lien and are permitted to recover from your settlement.
But what if, under the same fact pattern, the hospital turned over the medical records to your attorney with a bill for $50 for the cost of copying those records? Let’s also assume that they never sent a written assertion of the amount they are claiming as a lien. Under this fact pattern, the hospital would not have perfected their lien, and would not be able to recover from your settlement because not only did they charge your attorney for the cost of the medical records, but they also failed to provide a written demand for the amount of the lien.
However, that isn’t the end of the story as the medical provider may have asked you to sign an “assignment of benefits”.
A Medical Provider May Also Seek an Assignment of Benefits
If you are thinking that you don’t have to pay a medical provider back because they didn’t properly perfect their lien, you should think again. Many providers will ask you to sign a contract called an “assignment of benefits” before you begin treatment. You may have signed this and not ever realized it. This is a document that basically says that you will direct anyone responsible for handling your settlement funds to pay back your medical provider what they are owed from your settlement proceeds, and if they don’t, then that is a breach of contract and you will be liable for anything that you owe them.
Sounds a lot like a medical lien, doesn’t it?
It does, but in this case it arises out of contract, and not out of the North Carolina Statutes. But fear not, the North Carolina courts have held that an assignment of benefits contract will basically stand on equal footing with a medical lien, so that a provider will not be able to recover more than they would have recovered had they properly perfected their lien.
Can You Health Insurance Plan Seek Reimbursement?
If you are injured in a car accident, and you have health insurance, it is entirely appropriate and typical for you to provide your health insurance card to your medical provider to bill for your treatment. Certain health insurance plans may be able to seek reimbursement from your settlement proceeds while others are prohibited from doing so. Figuring out whether or not you must repay your health plan is a complicated and confusing process, and you may need the assistance of a personal injury lawyer to help with this.
North Carolina strictly prohibits privately funded health insurance companies from placing subrogation language in their insurance policies. This means that if your health plan is a privately funded plan, they cannot seek reimbursement for amounts paid for your treatment.
However, that isn’t the end of the story. There is an exception that will allow certain health plans to seek subrogation, notwithstanding the state law surrounding this issue. The exception is for health plans that are governed by a Federal Law known as the Employee Retirement Income Security Act or “ERISA”.
ERISA Health Insurance Plans May Seek Subrogation
If your health insurance plan is an ERISA self-funded plan, as opposed to a private health plan governed by North Carolina law, then it will not have to adhere to state law in North Carolina that prohibits subrogation language in the language of the insurance contract.
The reason for this is that an ERISA self-funded health plan is governed by Federal Law, not state law. Therefore, an employer that provides an ERISA health plan may seek reimbursement of medical expenses paid on behalf of an employee that was injured in an automobile accident.
This is a very complicated area of the law, and we highly recommend that you seek out the opinion of an experienced personal injury lawyer before agreeing to settle your case.
Medicaid is federally funded program that is administered by the states. To qualify for Medicaid, the applicant must meet very rigid income and asset limits. If you are covered by Medicaid and use that coverage to pay for your medical treatment, then Medicaid will have a lien on the amount that they paid on your behalf. This means that Medicaid may recover from the amount that you receive as a settlement or judgement for your case.
However, Medicaid may not recover more than ⅓ of the amount of your settlement and you are also permitted to petition the court to further decrease the amount that Medicaid may recover.
If you are injured and use Medicaid to pay for your treatment, it is highly recommended that you seek out the guidance of a personal injury lawyer to assist in negotiating your Medicaid lien.
Medicare is a Federal Program that is used to provide health insurance for the elderly and disabled. Medicare is considered a “secondary payor” which means that they will not pay for your treatment unless or until all other payment options have been exhausted.
You must be very careful if Medicare paid for a portion of your treatment and therefore has a lien on your settlement because Medicare will take precedence over all other liens that may exist. And failure to pay back Medicare can have severe financial consequences, including paying back double the amount owed. Yikes.
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