By Chuck Geerhart
1) When is it a lien?
A lien is a security interest in property. “Lien” is defined as “[a] legal right or interest that a creditor has in another’s property, lasting usu. until a debt or duty that it secures is satisfied.”* (Black’s Law Dict. (9th ed. 2009) p. 1006, col. 1.)
A lien is defined in the Civil Code 2872 as “a charge imposed in some mode other than by a transfer in trust upon specific property by which it is made security for the performance of an act.” Behniwal v. Mix (2007) 147 Cal. App. 4th 621, 635
If it is not a lien, it is only a claim for reimbursement.
Don’t use the term lien loosely. Don’t ever sign any “letters of protection”– the health plan language controls the rights and responsibilities of the insurer and the insured.
2) Do You Notify the Health Plan and Wake the Sleeping Giant?
Advise client that she may have contractual obligation to notify health carrier
What to do if claimant shows up after case resolved
3) Situations Where You the Attorney Must Notify the Lienholder (based on statute)
- a) Medi-Cal – Welfare and Inst. Code §14124.73(a)
- b) Medicare 42 U.S.C. 1395Y (b)(2)(B); 42CFR §§ 411.24(g), (h), and (I)
- c) Workers Comp: Employee must notify the employer of the pending settlement in order to allow the employer to assert its statutory reimbursement/lien rights. Lab. Code § 3860(a)
If lawsuit is filed, you must send a copy of the complaint to the employer. Labor Code § 3853
- d) SF General Hospital:
SF Health Code sec. 124.5:
“When any recipient who has been billed for the cost of medical care rendered by the San Francisco Department of Public Health or the San Francisco Fire Department fails to pay in full for such care and asserts an action or claim for damages against a third party or insurance carrier, the recipient’s attorney retained to assert the action or claim shall provide written notice of such action or claim by personal delivery or first-class mail to the Bureau of Delinquent Revenue Collection in the Office of the Treasurer-Tax Collector within 10 days of asserting such action or claim” (Official text available at www.amlegal.com/nxt/gateway.dll?f=templates&fn=default.htm&vid=amlegal:sanfrancisco_ca)
SF County could also pursue a lien under 23004.1 of Govt Code, but that lien is good only against a judgment and not a settlement. See Mares v. Baughman case.
4) Get the Entire Plan
The Plan language controls, not the Summary Plan Description (SPD)
Prichard v. Metropolitan Life Insurance Company 783 F.3d 1166 (9th Cir. 2015) held that a provision in an ERISA plan’s SPD that was not contained in the formal plan document
(insurance certificate) was unenforceable. Emphasizes the importance of getting both the SPD
and the formal plan document in evaluating ERISA liens.
Make sure you have the right year– plans change
Ask for proof the member signed off on the Plan.
4) Read the Plan
Made whole doctrine– when plaintiff not getting full value of the case from the settlement (e.g., policy limits case)– can bar reimbursement claim entirely. Sapiano v. Williamsburg Nat. Ins.
Co (1994) 28 Cal.App.4th 533. Also, if the plan is silent as to “made whole,” there is a presumption that made whole is available to plaintiff. Progressive West Insurance Co. v. Yolo County Sup. Ct. (2005) 135 Cal.App.4th 263, and Barnes v. Independent Auto Assn. of CA H&B Plan (9th Cir.1995) 64 F.3d 1389.
Common fund– pro rata reduction of the claim for fees and costs
Does it restrict itself to recoveries from 3rd parties?
7) Why does ERISA matter, or not?
ERISA plans are employer sponsored plans (but not governmental entities or church)
If it’s an insured plan (not just administered by what looks like an insurance carrier), then it is subject to state law, such as Civ. Code sec. 3040, common fund, made whole etc. However, the plan language can exempt itself from made whole or common fund.
If it’s a self-insured plan, it can be as Draconian as the employer wants it to be. U.S. Airways v. McCutcheon 133 S.Ct. 1537 (2013) It can seize the entire settlement. And UM/UIM payments (unless it restricts itself to recoveries from 3rd parties)
6) Interplay with CC 3040, 3045.1
Civil Code sec. 3045.1– Hospital liens. Must be served by certified mail (CC 3045.3) Recovery limited to 50% of net proceeds to plaintiff.
Civil Code §3040:
- a) Capitation reduction (Kaiser)
- b) Limits recovery
3040 (c) If the enrollee or insured engaged an attorney, then the lien subject to subdivision (a) may not exceed the lesser of the following amounts:
(1) The maximum amount determined pursuant to subdivision (a) or (b), whichever is applicable.
(2) One-third of the moneys due to the enrollee or insured under any final judgment, compromise, or settlement agreement.
3040(e)– further reduces lien for adjudicated comparative fault
9) Federal Employees Health Benefits Act (FEHBA)
Empire Healthchoice Assurance v McVeigh, 547 US 677 (2006). Held: No federal jurisdiction
for reimbursement claims. Claim is subject to state law governing reimbursement as long as not
inconsistent federal law. There is nothing spelled out in FEHBA re reimbursement, so if the plan involved is an insured plan, that makes state law and Civil Code sec. 3040 applicable.
10) VA and TriCare (military) Liens
“Super lien”– no obligation to reduce, but they will depending on how much the service member is getting
11) SF General Hospital Balance Billing
SF General will often attempt to bill for amounts above what the patient’s private health insurance paid. This is known as “balance billing.” In Prospect Medical Group, Inc. v. Northridge Emergency Medical Group (2009) 45 Cal.4th 497, the California Supreme Court held that emergency room physicians may not bill service plan members directly for sums that the member’s HMO plan regulated by the Knox-Keen Act has failed to pay for the members’ emergency room treatment.
Prospect is not the end of the inquiry, however. Some policies fall outside the holding of Prospect. To benefit from the Prospect bar on balance billing, the plan must fall under the aegis of the Department of Managed Health Care, which then makes it subject to the Knox-Keen Act. An example of this type of policy is Anthem Blue Cross of California.
On the other hand, Anthem Blue Cross Life and Health Insurance is regulated by the California Department of Insurance, and is not subject to Knox Keen, and thus a provider could balance bill the patient.
The good news is that about 80% of the market is DMHC regulated.
12) Healthy SF
Health program available to low income city residents. Unlike SF General liens, Healthy SF is required to reduce its claims under CC 3040: www.sfhp.org/files/providers/claims_ops_provider_manual.pdf
13) Lien reduction
Medi-Cal: 25% reduction or 50% of client’s net after fees (also reduction for comparative fault of others – Ahlborn case, as codified in W & I Code §14124.76)
Medicare: common fund reduction for fees and costs
Workers comp: common fund reduction for fees and costs. Plus, the lien can be wiped out completely if there was significant employer fault in causing the accident.
Health plans: read the plan, + CC sec. 3040
Medpay reimbursement–made whole applies. Progressive West Insurance Co. v. Yolo County Sup. Ct. (2005) 135 Cal.App.4th 263