Subrogation and Healthcare Liens in Georgia Settlements

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Money from an injury settlement does not always go straight to the injured person. Up to four kinds of claims can attach to a recovery, each under its own statute: a provider’s lien, a health insurer’s reimbursement claim, a Medicaid lien, and an employer’s workers’ compensation lien. Two decisions of the United States Supreme Court, US Airways, Inc. v. McCutchen and Gallardo v. Marstiller, show how federal law can change the result for a federal plan or for Medicaid.

Reimbursement Is Allowed, Subrogation Is Not

Georgia’s statute on health insurance recoveries draws a line between two ways a payer can look to a settlement. “Subrogation for medical expenses and disability payments by a benefit provider against a person at fault for injury is prohibited” (OCGA 33-24-56.1(e)). What the statute allows instead is a claim for reimbursement from the injured party’s recovery, on conditions.

The Provider’s Lien

A person, firm, hospital authority, or corporation operating a hospital, nursing home, physician practice, or chiropractic practice, or providing traumatic burn care, “shall have a lien for the reasonable charges” for the care of an injured person, “upon any and all causes of action accruing to the person to whom the care was furnished,” “subject, however, to any attorney’s lien.” The lien “is only a lien against such causes of action and shall not be a lien against such injured person, such legal representative, or any other property or assets of such persons and shall not be evidence of such person’s failure to pay a debt” (OCGA 44-14-470(b)).

To perfect the lien, the provider must give written notice to the patient and to the persons and insurers claimed to be liable, not less than 15 days before filing, and must file a verified statement with the clerk of the superior court in the county where the provider is located and, if the patient is a resident of this state, the county where the patient resides. A hospital, nursing home, or burn care provider must file within 75 days after the patient’s discharge, and a physician or chiropractic practice within 90 days after the patient first sought treatment (OCGA 44-14-471(a)). A failure to perfect the lien by timely notice and filing “shall invalidate such lien,” except as to a person liable for the damages who received actual notice of the notice and filed statement before any release, covenant not to bring an action, or settlement (OCGA 44-14-471(b)).

A release is not “valid or effectual against the lien” unless the holder joins in it or releases the lien, and the lien holder may enforce the lien by an action against the person liable for the damages or that person’s insurer (OCGA 44-14-473(a)).

The Health Insurer’s Reimbursement Claim

A “benefit provider” is any insurer, health maintenance organization, health benefit plan, preferred provider organization, employee benefit plan, or other entity that pays for health care expenses or disability, lost wage, or other benefits under a policy or contract (OCGA 33-24-56.1(a)(1)). When an injured person recovers from a third party, the benefit provider can claim reimbursement out of that recovery for the benefits it paid because of the injury, capped at the amount the settlement documents or judgment allocate to those categories of damages. Both of two conditions must hold. The recovery has to exceed all of the injured party’s economic and noneconomic losses, leaving out the losses the provider’s claim covers, and the claim has to be cut by a pro rata share of the attorney’s fees and litigation expenses the injured party incurred in bringing the claim (OCGA 33-24-56.1(b)).

Where it is claimed that the recovery does not exceed those losses, the benefit provider may seek a declaratory judgment on how far it may share in the settlement, and if the court determines that the settlement “does not fully and completely compensate the injured party, the benefit provider has no right of reimbursement” (OCGA 33-24-56.1(c)). A benefit provider may not reduce what it owes under the injured party’s liability, uninsured motorist, disability, medical payments, or other coverage as a setoff against its reimbursement claim, and may not withhold benefits to enforce the claim (OCGA 33-24-56.1(f)).

The person asserting the claim against the third party must give the benefit provider notice of the claim, by certified mail or statutory overnight delivery, “no later than ten days prior to the consummation of any settlement or commencement of any trial,” with a request for an itemization of the payments for which reimbursement is sought (OCGA 33-24-56.1(g)). If that notice is given, a reimbursement claim is enforceable against the injured party only to the extent the injured party had actual notice, before settlement or trial, of a specific itemization of the payments claimed (OCGA 33-24-56.1(h)); if it is not given, subsection (h) does not apply (OCGA 33-24-56.1(i)). The statute does not apply to the Department of Community Health’s rights under Article 7 of Chapter 4 of Title 49, and it does not affect the rights and obligations in OCGA 34-9-11.1 (OCGA 33-24-56.1(l)).

For example, imagine a case in which a benefit provider paid $24,000 of medical expenses, the case settles for $120,000, the injured party’s other economic and noneconomic losses total $90,000, and attorney’s fees and expenses come to $42,000, which is 35 percent of the recovery. The recovery of $120,000 exceeds the $90,000 in losses, so the first condition is met. The reimbursement claim is reduced by 35 percent of $24,000, which is $8,400, to $15,600. If the same settlement were only $85,000, the recovery would not exceed the losses, the benefit provider could seek a declaratory judgment, and if the court found that the settlement does not fully and completely compensate the injured party, the provider would have no right of reimbursement.

Where a Federal Plan Changes the Result

For a health plan governed by ERISA, the plan’s clear terms control reimbursement over equitable limits, but where the plan is silent on the costs of recovery, the common-fund doctrine supplies the default. In US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013), an employer’s self-funded health plan under the Employee Retirement Income Security Act paid $66,866 in medical expenses for an employee hurt in a collision. The employee’s lawyers, on a 40 percent contingency fee, recovered $10,000 from the at-fault driver, whose coverage was limited, and $100,000 from the employee’s own automobile insurer. The recoveries came to $110,000, or $66,000 after the fee, and the plan demanded reimbursement of the full $66,866. The employee raised two equitable rules: a limit on reimbursement to the participant’s double recovery, and the common-fund doctrine, which shares attorney’s fees with a party that benefits from a recovery. The Supreme Court held that “neither of those equitable rules can override the clear terms of a plan.” It also held that the common-fund doctrine has a role in interpreting a plan that is silent on how the costs of recovery are allocated, because in that situation “the common-fund doctrine provides the appropriate default.” The decision concerns a plan governed by federal law.

The Medicaid Lien

The Department of Community Health “shall have a lien for the charges for medical care and treatment provided a medical assistance recipient upon any moneys or other property accruing to the recipient” as a result of sickness, injury, or death due to a third party’s liability (OCGA 49-4-149(a)). It may enforce the lien by the hospital-lien procedures, but has one year from the date the last item of care was furnished to file its verified statement, in the county where the recipient resides and in Fulton County, and the statute does not affect the priority of an attorney’s lien (OCGA 49-4-149(b)). The department is subrogated to the recipient’s rights under private health insurance contracts “only to the extent of the reasonable value of the medical assistance paid” (OCGA 49-4-149(c)).

In Gallardo v. Marstiller, No. 20-1263 (U.S. June 6, 2022), a child struck by a truck while stepping off a school bus received Florida Medicaid payments of $862,688.77, and the tort case settled for $800,000, of which $35,367.52 was designated for past medical expenses. Florida’s statute presumptively treated 37.5 percent of the settlement, $300,000, as representing medical expenses. The Supreme Court framed the question as “whether §1396k(a)(1)(A) permits a State to seek reimbursement from settlement payments allocated for future medical care” and answered: “We conclude that it does.” The decision construes the federal Medicaid Act and Florida’s statute.

The Workers’ Compensation Lien

When an employer or its insurer has paid compensation and the employee has a right of action against a third party, the employer or insurer has a subrogation lien against the recovery, capped at the compensation actually paid, which it may intervene to protect; its recovery is limited to the disability benefits, death benefits, and medical expenses it paid, and only if the injured employee has been fully and completely compensated for all economic and noneconomic losses, counting both the compensation benefits and the third-party recovery (OCGA 34-9-11.1(b)). The employee’s attorney is entitled to a reasonable fee, apportioned with any attorney engaged by the employer or insurer (OCGA 34-9-11.1(d)).

Frequently Asked Questions

Must a provider bill the patient’s health insurance before filing a lien?
Yes. A lien filing is not enforceable unless the provider “first submitted a claim to each health insurer of the injured person, if such injured person has health insurance coverage, and had such claim rejected” (OCGA 44-14-471(c)).

How long does a lien holder have to sue on the lien?
The action against the person liable for the damages, or that person’s insurer, must begin “within one year after the date the liability is finally determined by a settlement, by a release, by a covenant not to bring an action, or by the judgment of a court of competent jurisdiction,” and the court may allow reasonable attorney’s fees if the claimant prevails (OCGA 44-14-473(a)).

Can a health plan’s contract override the Georgia statute?
Not for a plan the statute governs. A benefit provider cannot enforce a policy or contract term on subrogation or reimbursement that conflicts with the statute (OCGA 33-24-56.1(j)).

Can a confidentiality clause keep settlement terms from a reimbursement proceeding?
No. A confidentiality provision covering terms “necessary to a proceeding under this Code section shall be unenforceable as to the disclosure of such required information” (OCGA 33-24-56.1(k)).

What if an injured worker does not sue the third party?
If the employee has not brought the action within one year after the date of injury, the employer or its insurer “may but is not required to assert the employee’s cause of action in tort,” must immediately notify the employee, who may intervene, and must pay over to the employee any amount it recovers beyond its lien (OCGA 34-9-11.1(c)).

  • OCGA 33-24-56.1
  • OCGA 44-14-470; OCGA 44-14-471; OCGA 44-14-473
  • OCGA 49-4-149
  • OCGA 34-9-11.1
  • US Airways, Inc. v. McCutchen, 569 U.S. 88 (2013)
  • Gallardo v. Marstiller, No. 20-1263 (U.S. June 6, 2022) (slip opinion)

Disclaimer

This article provides general information about liens and reimbursement claims under Georgia and federal law. It is not legal advice, is not medical advice, and does not create an attorney-client relationship. Which claims attach to a settlement depends on who paid for care, the terms of any plan, and the specific facts. A person with an injury claim should consult a licensed Georgia attorney promptly about the particular situation.

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