Insider Tips for Negotiating a Medical Lien Against Your Settlement

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Many states are enacting new laws strengthening Health Management Organizations' (HMOs) rights to enforce medical liens. These liens are often placed to recover the treatment costs paid out on behalf of their insured, that are then recovered through their insured's third-party personal injury claim. Similar federal laws exist for Medicare and Medicaid liens.

A third-party claim is one where you're injured due to the negligence of another person or company, such as in a car accident or slip and fall. If your HMO or PPO (Preferred Provider Organization), Medicaid, or Medicare paid for any of your medical treatment, you'll probably have to reimburse them for at least part of the amount.

You can usually negotiate, or "compromise" the amount of a lien. Some states actually require HMOs and PPOs to compromise liens by certain percentages, depending on the settlement amount. Be sure to check with your state insurance board to find out if those percentages apply to you.

Plan for Liens

Don't be one of those short-sighted victims who spends all their settlement money, only to later realize they have to pay a large amount of it back. Before you spend any of the settlement, review all documentation related to your claim.

Be sure to check if you received any letters from your health insurance company or the Medicare Benefits Coordination and Recovery Center (BCRC) notifying you of their intent to file a lien. If you received a lien notice, you'll have to pay at least some of the amount back (you can negotiate the amount).

If you don't pay back the liens, you'll either be hounded by collection agencies or sued.

Negotiating a Medical Lien

You can contact the lien holder to try and negotiate a compromise agreement. If you have a written notice of lien, call the insurance company or BCRC. Have your call directed to the department administering liens. Use the reference or claim number at the top of your notice to identify your case.

Always try to compromise an insurance company lien. You have nothing to lose and everything to gain. The amount you can compromise depends on the amount of your settlement. You'll have to convince them there is a good reason for your request.

Here are some time-tested arguments for compromise:

  • You need the settlement money to pay your bills while searching for a new job, especially if one of the consequences of the injury was losing your job.

  • Your continuing treatment costs still have to come out of the settlement.

  • A portion of the settlement is compensation for your continuing pain and suffering.

  • You could need future treatment, which may not be covered by your insurance plan.

Let's look at two examples of circumstances when it's likely you can and can't negotiate a compromise...

Example 1: Not Enough for Pain and Suffering

Jim settled his car accident claim without an attorney for $20,000, and his insurance company's medical lien is $15,000. If he reimbursed his health insurance company the full $15,000, he'd only be left with $5,000 for his pain and suffering, which is way too low.

Traditionally, settlement amounts including pain and suffering can be anywhere from one-and-a-half to five times the total medical bills.

In Jim's case, if the settlement amount came to three times his medical costs, he'd have about $45,000. This would leave him with plenty of money after paying the full $15,000 lien. Since he only settled for $20,000 however, he should try very hard to negotiate his lien to a lower amount.

Example 2: Ample Settlement Funds

Sarah settled her claim for $15,000, and the amount of her insurance company's medical lien is $5,000. Unless she can come up with a very strong argument as to why the insurance company should compromise her lien, she won't get any discounts.

Sarah could try to argue that $15,000 isn't close to the amount she should have been paid for her injuries, or that the accident will continue to result in mounting personal losses. But unless she's a very good negotiator, Sarah will probably have to pay the full amount of her lien.

HMO Liens

Negotiating with an HMO is often easier than with a PPO. HMOs operate by paying hospitals, doctors, and other health care providers a specific amount each year for every patient they see, regardless of the amount of treatment any single patient receives. This is sometimes thought of as a "retainer." HMOs don't have to pay anything above those pre-set amounts.

When you negotiate a medical lien reduction with your HMO, they'll be negotiating with their own money, not the providers' money. They've already paid the provider their fee. Because HMOs don't have to answer to anyone but themselves, they are free to negotiate without any outside influence. This gives you an advantage.

The HMO representative you're negotiating with has to consider the possibility of not reaching an agreement with you. Like a claims adjuster, the representative knows if she doesn't compromise, and you decide not to pay at all, they'll have to spend more money on collection costs and attorneys, and still may only end up with a fraction of the original lien amount.

PPO Liens

PPOs differ from HMOs in their ability to compromise medical liens. Unlike HMOs, PPOs don't have flat-rate agreements with hospitals, doctors, and other health care providers. A PPO pays providers separately for each of the services they provide.

These are like the traditional fee-for-service insurance plans, but the providers agree to accept lower fees in exchange for being part of the PPO network (with the potential for attracting more patients).

Basically, HMOs negotiate with their own money, whereas PPOs negotiate with the medical provider's money. HMOs generally lose less money than PPOs when they compromise liens. When you extrapolate the amounts over time, it can add up to millions in lost profits. Because of this, you may find a PPO is less willing to negotiate your lien.

Medicaid and Medicare Liens

If Medicaid or Medicare paid any of your treatment costs related to the accident, they have the right to place a lien on your settlement proceeds. By federal law, their liens must be paid within 60 days of your receiving notice. If you don't pay, you can be charged penalties and interest up to double the original amount of the lien.

Medicaid and Medicare liens are administered through the Benefits Coordination and Recovery Center (BCRC). If you can prove any kind of hardship, it's very likely you'll be able to negotiate your lien substantially downward with a BCRC representative.

Medicaid and Medicare liens can often be compromised well below those of HMOs and PPOs. In fact, if you ask the representative for a payment plan with minimal monthly installments, she'll probably accept your offer. You shouldn't have to pay any interest either.

If you haven't received their notice yet, don't go spending all the settlement money. Medicaid and Medicare have up to six years to notify you of a lien. Keep this in mind, since many government agencies move at a slower pace than private industry.

To protect yourself, set their money aside in a separate savings account. That way, if they later demand their money, you'll have it ready. You'll even get to keep the interest earned in the meantime. If they forget about you, after six years you'll get to keep the money and the interest.

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