There are several types of liens that medical providers and health insurance companies can assert in a personal injury case. This blog covers the basics.
Health Insurance and Hospital Liens (Statutory Liens)
In California, a health insurance company can assert a statutory lien pursuant to Civil Code § 3040 and a hospital can assert a statutory lien pursuant to Civil Code § 3045.1. These statutory liens entitle the insurance companies and hospitals to recover the amount paid and/or billed to a person when there is a third-party defendant responsible for causing injuries. These statutory liens, however, also require the insurance companies and hospitals take a mandatory reduction on the amount of their lien when the case settles. For example, under Civil Code § 3040, insurance companies are only entitled to one-third of your total recovery; and under Civil Code § 3045.1, hospitals are limited to one-half of your total recovery after any other liens are paid.
There are also Medicare and Medi-Cal liens. Pursuant to the Medicaid Act, attorneys (for both the plaintiff and defendants) and insurance companies are required to notify government-subsidized health insurance plans of a personal injury case. Once notified, Medicare/Medi-Cal will send out confirmation and an itemization of the payments made on the injured person’s behalf. The parties are then responsible for reimbursing Medicare/Medi-Cal at the conclusion of the case.
Another type of lien that can be asserted is an ERISA lien. ERISA stands for Employee Retirement Income Security Act, which is a federal law that was passed after the closure of several automobile manufacturers in the 1960s that did not have sufficient funds to pay the pension plans for the company’s workers. Thousands of people lost their retirement benefits, so the government created the ERISA laws that require companies create funds that collect and pay out benefits to workers. If you are covered by a health insurance plan through an ERISA fund, then California state laws (such as Civil Code § 3040 requiring a mandatory reduction) may not apply because federal law supersedes state law. Thus, the ERISA plan administrator will request full reimbursement of any health insurance lien.
Private Contractual Liens
Lastly, there are private contractual liens. These are liens that the injured person voluntarily enters into with medical providers such as doctors, physical therapists, chiropractors, massage therapists, and/or acupuncturists. These contracts are usually entered into because the injured person does not have health insurance or their health insurance does not cover the type of treatment sought and the person does not have the ability to pay out of pocket for the services. Because it is a private contract, the providers are not required by law to take any sort of reduction at the conclusion of the personal injury case.