One of the most common questions clients ask is why an insurance company, doctor or hospital has placed a lien on the proceeds from their claim settlement or lawsuit verdict? A lien is a type of claim seeking to recover money spent by a healthcare provider to treat a plaintiff’s injuries. The lien allows the provider to be reimbursed for these expenses from the proceeds of any settlement or judgment in connection to the event that caused these injuries. Under Illinois law, a lien is a valid way for medical providers to be reimbursed for outstanding expenses made on a plaintiff’s behalf. See 770 ILCS 23/10. Most health care providers also assert lien recovery rights as a condition of coverage in a health insurance policy.
Example of a lien: The most common example of a medical lien occurs when a health insurance company pays for a plaintiff’s medical care after the plaintiff was injured due to the fault of a third party. These situations commonly occur after auto accidents. For example, when a person is taken to the emergency room following an accident, his or her own individual health insurance policy general pays for the emergency services. When another person is at fault for the accident that caused this emergency treatment (referred to in the insurance industry as the “third party liable”), the injured person (the “plaintiff”) can generally recover the cost of their medical care from the insurance company of the responsible party. At the same time, his or her health insurance company will file a lien seeking reimbursement for the cost of his or her care. The plaintiff then satisfies the lien by refunding his or her own health insurance company for any amounts that were paid for their care. Such an arrangement is fair public policy as without a lien and subsequent refund, a plaintiff would recover their expenses twice: first, through the payment by their health insurance company and a second time when the insurance company for the responsible party reimburses the plaintiff for his or her medical expenses.
There are two important rules that affect how medical bills and liens are determined and compensated: Continue reading