Is the SEHP Entitled to Payment From Medical Payments Coverage?

As the State Employee Health Plan gets makes more and more subrogation claims, we will find situations that have not been contemplated by the statute.

One such situation would be where a client has not had legal representation, and a medical payments insurer makes payment directly to the SEHP before an attorney becomes involved. Here is how I think this should be addressed.

SEHP not entitled to med pay coverage

One argument to make is that SEHP should not have ever received the med pay.

The statute talks about liens against settlement from “liable third parties” and we know that SEHP does not expect reimbursement from worker’s comp (not a liable third party) nor from the client’s UM/UIM (not a liable third party).

So if the med pay is from your clients own insurance, it is not from a “liable third party”. 

Because of that, the client should clearly get a credit for the med pay paid to SEHP, AND it should not count as part of the overall settlement (i.e: if the settlement was 30k, plus $1800 in med pay, then SEHP should figure the reduction amount (10k cap here) on the 30k, NOT $31,800)

AN EXAMPLE OF FIRST PARTY MED PAY

Thus:

30,000 TOTAL SETTLEMENT

Assume:

10,000 Attorney fees (1/3 of settlement you obtained)

100,000 SEHP lien claimed

30,000 TOTAL SETTLEMENT

-10,000 Attorney fees

20,000 NET

SEHP should get no more than 50% of the net after reasonable procurement costs (1/3) and so they are entitled to 50% of $20,000, or $10,000 as full and final satisfaction of the lien.

From the $10,000, subtract $1,800 previously paid, so a final payment of $8,200.

Reasoning behind “liable third party”

One of the reasons they collect only from “liable third parties” is that the patient/client/plan member is the one paying premiums for the medpay/UM/UIM, not SEHP. Thus, the SEHP should not get the benefit of the client’s insurance.

Their argument is contrary to the plain language of the statute, and also to the past administration of the lien.

Now, if the medpay came from the liable third party (maybe a passenger as client), then that argument may not work as well. In that case, they should still deduct the previous payments from the lien, BUT, I think they would count the medpay as part of the total settlement. Using the example above, it would look like this:

THIRD PARTY MED PAY

30,000 Settlement

1,800 med pay from liable third party

31,800 TOTAL SETTLEMENT

Assume:

10,000 Attorney fees (1/3 of settlement you obtained)

100,000 SEHP lien claimed

31,800 TOTAL SETTLEMENT

-10,000 Attorney fees

21,800 NET

SEHP should get no more than 50% of the net after reasonable procurement costs (1/3) and so they are entitled to 50% of 21,800, or $10,900 as full and final satisfaction of the lien.

From the $10,900, subtract $1,800 previously paid, so a final payment of $9,100.

-Chris Nichols
www.NicholsTrialLaw.com