 |
| Courtney Delaney |
The scope and impact of sexual violence is difficult to measure, and there is no single source of data that provides a complete picture of the crime and its effect on all victims. One reason for this is an underreporting of the crime; the Rape, Abuse, and Incest National Network estimates that as few as 230 of every 1,000 sexual assaults are reported to law enforcement.[1] In its Crime in the United States report for 2017, however, the FBI showed a 20% increase in reported incidents involving allegations of rape compared to 2013.[2]
From Victim to Plaintiff
With this increase in reporting, it appears that sexual assault victims may be seeking civil damages in greater numbers than ever — and not just from their abusers. Civil plaintiffs are also pursuing claims against institutions such as schools, churches and businesses on the grounds that the organizations are allegedly failing to provide protection from assault and/or respond properly once an assault is reported.
Where parties can settle these cases, the settlement terms are often complex and interdependent on certain contingencies, including the possibility of future claims, as well as considerations for income tax consequences. However, one aspect of such settlements that may get overlooked is the potential impact of health care insurance repayment obligations (liens) that arise in connection with the settlement.
Medical bills are often paid on a temporary basis to treat for both physical and emotional injuries, with the idea that should a responsible party later show up, those medical bills will be repaid to the health insurer. Failure to identify and address these third-party repayment obligations early in the settlement process can create unexpected hardships for plaintiffs, including a partial or total loss of award and reduced medical insurance benefits. It can also open defendants up to additional liabilities from actions taken by or on behalf of government or other potential health care entities.
Health Care Lien Obligations and Potential Penalties
In the litigation context, medical bills may be a component of alleged damages. If a plaintiff's medical bills were paid by the plaintiff's health insurer and are a part of the overall resolution of the case, then statutory or contractual rules kick in to trigger health care liens. The insurer can claim a lien against any settlement, judgment or other payment, requiring repayment of some or all of the costs it paid for the plaintiff's medical bills. In the case of sexual assault cases, those costs can range from doctor's visits and hospitalizations, to prescription drugs and medical equipment.
As shocking as this news may be to a settling plaintiff, health care liens are nothing new and are actually a matter of law. Governmental health care payers (Medicare,[3] Medicaid,[4] the U.S. Department of Veterans Affairs and TRICARE for active service members,[5] and others) have the right to recover costs in this manner, and those rights are established by federal and state statutes.
Additionally, most private health insurance plans claim a similar right of recovery in their plan language. Private health care liens can be daunting to address in a settlement context where (1) the health insurer is employer-sponsored, triggering equitable lien rights under the Employee Retirement Income Security Act,[6] and (2) beneficiaries agree to this when they sign their contract for coverage.
Generally speaking, an insurer can take one of two avenues to recover its expenses: subrogation or reimbursement. A right of subrogation gives an insurer the right to step into the plaintiff's shoes and bring suit on the plaintiff's behalf against the party responsible for the injury. A right of reimbursement gives the insurer an interest in (that is, a "lien" against) the proceeds of the insured's recovery from the responsible party. The laws regulating subrogation and reimbursement vary by type and jurisdiction.
The most common types of health care liens are:
Medicare Parts A and B
Medicare is a federal health insurance program for people age 65 and older, people younger than 65 with certain disabilities and people of all ages with end-stage renal disease. Different Medicare programs, called "parts," offer different types of coverage. Part A is hospitalization insurance; Part B covers medical services and supplies that are necessary to treat the beneficiary's health condition. Medicare Parts A and B are sometimes called "original" or "traditional" Medicare. If Medicare has paid for any treatment for the settlement-related injury, federal law gives Medicare the first right to recover some or all of its payments. Other insurers, if any, may not recover until Medicare's interests are satisfied.
Medicare Part C
Medicare Part C is a replacement for Medicare Parts A and B. Enacted into law in 1997,[7] Part C plans (often called "Medicare Advantage" plans) are typically provided by a private insurer using federal dollars to help manage medical care. Beneficiaries must have Medicare Parts A and B coverage to join a Medicare Part C plan. Although the specific recovery rights of Part C payers is a matter of some debate, with such questions as double damages and assignments being raised in the federal courts, many settlement agreements now require Part C interests to be identified and resolved.
Medicare Part D[8]
Medicare Part D provides prescription drug coverage. These plans, sometimes called prescription drug plans, add drug coverage to beneficiaries' existing Medicare plans. Part C plans can also offer prescription drug coverage, but beneficiaries have options for such coverage based on costs, coverage terms and other offerings. Medicare Part D plans have recovery rights similar to those of Medicare Part C plans.
Medicaid
Every American state and territory has its own Medicaid agency, and each has its own set of regulations. Regardless, Medicaid has a right of recovery that is similar (but secondary) to Medicare's.
Military or Other Governmental Lienholders
This includes plans offered by the U.S. Department of Veterans Affairs, TRICARE, Indian Health Service and other government agencies. Like Medicare, these programs' rights to recovery are a matter of law, but secondary to Medicare's.
Private Insurers
These are premium-based plans offered by private companies, typically through the beneficiary's employer. A private insurer may be entitled to recovery but, as mentioned previously, that right depends on the plan's contract language and the laws of the state in which it operates, or in some cases federal law.
Addressing Health Care Liens in Sexual Assault Cases
Because insurers' rights to recovery are protected by law or contractual language, it is best to resolve any such lien placed on settlement awards. Failing to address a lien proactively may cause a payer to insert itself into the settlement process to assert its right of recovery. If the victim receives government benefits, such benefits may be withheld until a governmental lien is paid (sometimes with penalties and interest added).
Insurers can reduce or deny future coverage altogether if an outstanding lien is not addressed. And federal law mandates that the responsible paying parties, such as insurers or self-insureds, can face stiff penalties for not ensuring compliance as part of federal medical repayment rights, whether double damages or daily penalties for failing to report.[9]
To overcome these hurdles, plan to start addressing prospective health care liens early in the settlement process. Resolution can take weeks or months depending on the lienholder's processes, the experience level in working with lienholders and the amount of information and communication required.
The following tips can help ensure compliance and efficiently resolve health care lien obligations in these cases:
- Be aware that, depending on circumstances (employment, income, health status, military service, etc.), the client may be covered by multiple health care plans, both governmental and private.
- Get the client's complete insurance history, going back to the date of injury. This is especially important if there are multiple prospective lienholders. Insurance cards and plan documents will make lien resolution easier.
- Remember that, in these types of cases, injuries are not limited to the individual who directly suffered harm. Derivative claims and other associated claims often arise and can complicate lien resolution and reporting obligations.
- Pay close attention to the settlement terms and provisions, and understand how the description of injuries and release of claims can trigger federal or state recovery rights for injury-related medical expenses.
- Coordinate health care liens. At the time the parties are ready to resolve their differences, third-party obligations such as statutory or contractual repayment rights should be handled as a matter of collaboration, not conflict. In many instances, those obligations extend to all of the settling parties, especially in the case of Medicare or military health care. Using a neutral third party to serve as lien resolution administrator can ensure that benefits are preserved for plaintiffs and defendants alike.
- Find out what kinds of documents the lienholder will require and gather them early in the process. At the very least, a lienholder will need a HIPAA authorization and a letter of representation signed by the plan member (plaintiff). Some health care payers require more documentation than others do, but lienholders generally will not start working the case in earnest until they have received everything that they need.
- Start early! In many cases, properly resolving health care liens can take 120 days or more, depending on lien type, strength of recovery rights and the responsiveness of lienholders. Best practices dictate not to wait until the end to start figuring out health care liens.
When the parties can agree on a way to resolve these terrible circumstances, whether alleged, proven, or otherwise, it is critical not to lose sight of potential hurdles to overcome. Besides dealing with the complexities of income taxation,[10] another great hurdle is health care liens. As a settlement checklist develops for these heavily nuanced cases, best practice suggests to thoroughly investigate how the plaintiff's medical bills were paid, which entity paid them, and what potential recovery rights exist.
If a firm does not have an established process for addressing health care liens, they should create one. If the firm does a lot of personal injury work, it is a good idea to have someone in the firm with experience resolving repayment obligations with both governmental and private health care plans. If this is a bridge too far, consider outsourcing lien resolution work to a partner; the cost can be considered a reasonable case expense.
Sexual assault cases attack the senses and sensibilities of everyone involved. As practices work these cases, the emotional toll on all parties involved (including the attorneys who represent the parties) demands that each step be made with focus, compassion and determination. The parties deserve nothing less, so do not let medical liens be a surprise.
Courtney Delaney is the director for Medicare secondary payor policy at Epiq.
The opinions expressed are those of the author and do not necessarily reflect the views of the organization, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] See https://www.rainn.org/statistics/criminal-justice-system (reviewing Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, National Crime Victimization Survey, 2010-2016 (2017); Federal Bureau of Investigation, National Incident-Based Reporting System, 2012-2016 (2017); Federal Bureau of Investigation, National Incident-Based Reporting System, 2012-2016 (2017); Department of Justice, Office of Justice Programs, Bureau of Justice Statistics, Felony Defendants in Large Urban Counties, 2009 (2013), to approximate its estimate as a result of a combination of studies and scientific methodologies) (last visited June 6, 2019).
[2] See https://ucr.fbi.gov/crime-in-the-u.s/2017/crime-in-the-u.s.-2017/tables/table-1 (using a revised definition that expanded the scope of reporting) (last visited June 6, 2019)
[3] 42 U.S.C. Sec. 1395y(b).
[4] 42 U.S.C. Sec. 1396p (noting that Medicaid is a joint federal-state health care system, in which each state has its own Medicaid lien laws that are based on federal laws as part of the state's medical assistance programs).
[5] 42 U.S.C Sec. 2651; 10 U.S.C. Sec. 1095.
[6] The Employee Retirement Income Security Act of 1974, 29 U.S.C. §§1001-1461 (2000), governs many employee health and welfare plans in addition to retirement plans.
[7] 42 U.S.C. 1395w-a(21).
[8] Medicare Modernization Act of 2003, Pub. L. No. 108-173, 117 Stat. 2066 (Dec. 8, 2003). This Act produced the largest overhaul of the Medicare program in its then-38 year history, creating as its key feature benefits for prescription drug coverage through tax breaks and subsidies.
[9] See 42 U.S.C. Sec. 1395y(b)(2)(b)(iii), and Sec. (3)(A); 42 U.S.C. Sec. 1395y(b)(8)(E).
[10] Complex tax questions arise in administering settlements with both physical and emotional distress damages, including whether to issue tax reporting forms (e.g., Forms 1099) to claimants, and how to identify and properly account for the incidents of taxation, if any. For that reason, it is critical to appoint an administrator knowledgeable in tax laws as well as lien laws.