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Understanding Lien Resolution

Posted by Wagstaff Law Firm | Feb 03, 2025 | 0 Comments

This article was written by Krissi Gore, Senior Counsel and Lauren Kampling, Litigation Manager and Liaison.

Your case has finally settled, and as your attorneys, there is nothing we want more than for you to get your settlement funds quickly. However, there is a significant obstacle that stands in the way between you and a large portion of your money: medical liens.

Since the word “lien” generally makes people think of an outstanding financial obligation, like an unpaid bill or overdue debt, clients often balk when told we must resolve their medical liens, particularly when they've paid all their premiums, co-pays, deductibles, and doctor's bills. It would be more accurate—and conversely, less confusing—to refer to a medical lien as a claim for reimbursement against a personal injury settlement. However, the reality is no matter what you call medical liens, they are certain to generate frustration for clients and attorneys alike, fueled both by the extended delays in getting settlement funds, as well as the potential for a reduction in the settlement amount that the client ultimately nets. 

Medical insurers have a statutory right to assert liens against personal injury settlements, and as your attorneys, we have a fiduciary duty to ensure your medical liens are resolved properly. When your case has settled and been funded by the defendants, we typically will issue an initial disbursement to you, after paying the fees and expenses on your case and reserving a “holdback amount” to cover any potential lien exposure.  We work with court-approved lien resolution administrators who not only identify your liens, but negotiate them on your behalf, ideally resulting in lower overall lien exposure.  If we were to ignore those obligations and release all available funds to the client without holding back a percentage for liens, clients could be pursued for payment directly by lienholders without the benefit of the lien resolution administrator's expertise, and if the liens are not fulfilled, the client could become ineligible for future healthcare benefits and subject to financial penalties. Once liens are finalized, we send the final disbursement with the remaining balance of the “holdback amount” after liens have been paid. Although it can be disappointing not to receive the entire net settlement amount at once, our goal is to provide our clients with whatever funds are available from the settlement as soon as we can, while fulfilling the lien resolution obligations.

Lien resolution typically takes 6 to 12 months from start to finish, though this timeline can vary depending on the lien. There are two primary types of medical liens: private and governmental, which are outlined below.

Private health insurance liens arise from ERISA plans, federal employee insurance plans, state employee insurance plans, and individual plans, such as Health Insurance Marketplace policies or Medicare Supplement plans. Payment obligations and timelines for private health insurance vary depending on the type of plan and may also depend on where you live, as some states prohibit health insurers from seeking reimbursement in third party recovery actions. Additionally, some mass tort settlements involving a large number of claimants may have a Private Lien Resolution Program, or PLRP, in place. The PLRP is designed to create efficiencies in the lien resolution process for private health insurance liens that can lessen lien-related aggravation. 

Governmental insurance liens include Medicare, Medicaid, military insurance, and tribal insurance. Government liens require the lien resolution group to work with the agencies at issue to resolve your liens. Like private health insurance liens, payment obligations and timelines for governmental insurance liens may depend on the state you live in, especially when Medicaid is involved. While Medicare is a federal program, each state has its own Medicaid program, and the liens must be negotiated individually with the state agency at issue. Medicare liens can be resolved traditionally, but for mass tort settlements involving a large number of claims, they may also be a part of a global program to simplify lien determinations and employ caps, similar to the PLRP. Additionally, if you receive military health benefits, you may also have liens with the VA or with Tricare, which have historically been not only especially difficult to negotiate, but also more time consuming. Military liens sometimes necessitate that the entire settlement amount be “held back” for lien exposure, meaning you would be unable to receive an initial disbursement of your settlement proceeds as discussed above, and instead must wait until the liens are finalized to receive settlement funds.

As your attorneys, our goal is to make the lien resolution process as quick and as painless as possible. To this end, we may ask you to fill out a questionnaire regarding your health insurance and request a special HIPAA form, which will enable the lien resolution administrator to obtain the medical records necessary to effectively negotiate with the health insurance companies or agencies.  We will work closely with the lien resolution administrator to ensure your liens are progressing, and we will also keep you informed about your liens

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