Liens and your personal injury settlement
One of the most important and trickiest issues personal injury attorneys deal with is how to handle liens in your personal injury settlement.
In short, if you were injured in a personal injury accident, whether it be an automobile, motorcycle, bicycle or slip and fall accident, it is likely that your health insurance company will file a “lien” against your recovery, which requires that they be reimbursed for medical bills paid on your behalf.
Many accident victims are confounded by this. They argue, and rightly so, that they’ve paid insurance premiums for years. As such, why should they be penalized for being injured through no fault of their own?
It’s a matter of contract law. While you may not have noticed, it is likely that your health insurance company included subrogation (i.e., reimbursement) language in your health insurance contract which gives them the right to be reimbursed if you are injured by a third party (i.e., the person who caused the accident).
So, if you are injured by someone else’s negligence and your health insurance pays your bills, you will have to pay them back.
How it works
Let’s say you are injured in an automobile accident and you recover $100,000.00 from the defendant’s insurance company for your injuries. The $100,000.00 is then reduced by, among other things, the amount of the health insurance lien you must pay your health insurance company.
Some people have asked, if I must pay my health insurance back, perhaps I should not use my health insurance to pay the bills. That is an option. Many medical providers would be fine delaying payment of the bills pending settlement or other resolution of your case. Why? Because the doctors or hospitals have contracted rates with the health insurance companies. This means, they get paid significantly less than what their retail (for lack of a better word) rates are.
Normally, if a healthcare provider agrees to postpone collection of their bill, they will file a “lien” against the recovery that you and your attorney must sign. However, many providers will not accept a lien or “letter of protection.” For those providers, you may have to make monthly payments to keep your bills from going to collections.
Collections? Yes, when you get in an accident, if you or your health insurance doesn’t pay for the bills, those bills can and often do go to collections companies for recovery. This can negatively affect your credit.
As such, it’s extremely important to manage your bills after an accident. This is also an example of why in the end, it is usually beneficial to have your health insurance company pay your medical bills.
Note that while most of your bills may be paid, you will still be responsible for paying your co-pays and deductible before your health insurance kicks in.
Often your medical bills and/or liens, amount to more than your potential settlement. If this happens, your attorney will rely on the Illinois Healthcare Services Lien Act to resolve your bills. Generally, the lien act states that health care providers are limited in how much they can recover against your settlement.
If you are unsure how to handle liens in your personal injury settlement, contact my office today for a free consultation. Call 312-848-9783 and ask for attorney Barry Zlotowicz.
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