Will SEHP Lien Pro-Rate With Other Liens?

I’ve received some questions lately about the interaction of the NC Teachers’ and State Employees’ Health Plan Lien with other liens, such as medical providers liens (NCGS-44-49 through 50). Here is a great question that needs to be answered:

The Question:

If the legislation limits the plan to 50% of settlement, less reasonable costs ( and I understand that the plan will decide what the attorney’s reasonable fees/costs are) does that mean that the plan gets 50%, and the other unpaid providers (copays, deductibles) have to come out of the client’s net, or does the plan in fact pro rate with other providers? Also, how likely is the plan to say the attorney’s contractual fee is not reasonable, and up the net amount they get 50% of?

If you have client with four to five times settlement amount in meds and even more in lost wages, will the plan take ALL of the money?

The million dollar question (and the $5 answer)

I have addressed this same question on this Blog in a comment section, and the post and response can be found by clicking here. Make sure you read the question posed by David V. and my response.

SEHP may not have to pro-rate

I think SEHP has an argument that they do not have to pro-rate with unpaid providers. The revised statute does say they have the right to “first pay” from any settlement funds, which seems to suggest that they have the highest priority in repayment. On the other hand, I don’t think they can legislatively “one up” the Federal Government, so I doubt that this rule would apply in regard to Medicare (purely Federal) or Medicaid (state run but subrogation based upon Federal statute).

Medical providers may have to pro-rate behind the SEHP

On the other hand, the other lien statutes, such as the Medical provider lien, would probably be second in line behind SEHP. The medical provider statute (NCGS §§ 44-49 through 51) provides for proration, so you sort of get it on the back end. in the sense that the medical providers must account for SEHP’s lien. (EDIT: Added on 9.5.06: To explain further, I believe that if the SEHP lien is large enough, that medical providers will not get anything under their lien. In other words, if the SEHP lien exceeds 1/2 of the settlement after attorney fees are deducted, then SEHP will get the money, and the medical providers will have to seek reimbursement from the client, not from the settlement disbursement. Remember, the SEHP lien statute, when applied, pays the lien in full, but the medical provider lien only tells the lawyer what has to be paid to providers from the settlement. Once the SEHP FINAL lien is determined, SEHP doesn’t get anything more from the employee. On the other hand, the medical lien statute NCGS 44-50, does not ever”extinguish” the medical provider’s bill, it simply tell the lawyer what must be paid from the settlement.Also, keep in mind that SEHP doe not get paid from UM/UIM but that medical providers do.)

Ahlborn may help

I also think you could make the argument from the recent US Supreme Court case of Ahlborn to say that SEHP’s lien should be considered against the “whole” of the settlement, though that is a bit of a stretch considering that the Ahlborn case is working on Medicaid/Medicare lien language that is very different from the SEHP language. On the other hand, Ahlborn is such a landmark case in the world of subrogation and liens, that we will probably see courts around the Nation interpreting the implications for many years. I expect that at least a few NC cases will be coming up soon the the NC Court of Appeals on this issue, or we may see them in Federal District Court.

Hindsight is 20/20

I guess (in retrospect) that we should have tried to put some sort of pro-ration in the amended legislation, but we were already trying to convince SEHP (the State) to give away money they did not have to “give up.

Don’t let the medical providers pull a fast one

Also, in regard to unpaid medical bills (outside of co-pays and deductibles), the providers should have to accept SEHP as the total payment, which means they should not be able to “balance” bill what SEHP insurance did not pay. I thought that language was contained in the enacting language and Plan language for SEHP., but I don’t see it anywhere. The State Health Plan Language begins at NCGS §§ 135‑32 . Click here and page down to where the Plan begins.

I don’t see any provisions about the providers having to accept the Plan as payment in full (minus deductibles and co-pays) but I’m sure that must be in a contract somewhere. Probably it is in the contract that BC/BS has with the providers since BC/BS is the administrator of payments under the Plan. 

Another good question

The other question is “are medical providers required to submit their bill to BC/BS/SEHP if the covered individual presents their insurance card at the time of services?”

This will need to be determined by the contract that the medical providers have with BC/BS and SEHP. Does anyone out there have a copy of that contract? I’d love to see it. I had one years ago, but it was not an SEHP contract.

I would hope that medical providers are required to accept the SEHP plan, I just don’t have the law. It’s probably in the provider contract that the medical provider signs to be in the PPO for the SEHP. That would be the key provision to work away the medical provider liens.

So what will SEHP think is a “reasonable attorney fee”?

On the issue of the likelihood of whether SEHP will accept the standard 1/3 as a “reasonable” fee, I wouldn’t venture to guess. I’m hoping they do, but they might wind up acting like ERISA plans and saying 25%. We’ll have to cross this bridge when we come to it. to me, it seems a no brainer that 33% is fair and reasonable under the circumstances. The language of the SEHP lien says that if SEHP is forced to collect a lien on their own (Plaintiff does not have a lawyer) then SEHP will deduct their attorney fees from the settlement amount they get for the Plaintiff. What’s fair for the goose is fair for the gander.

Unfortunately, what SEHP decides is fair is unappealable, or at least that’s what the statute says. I have a strong suspicion there are ways around that determination if SEHP acts unfairly.

Chris Nichols
www.NicholsTrialLaw.com