Illinois has separate rules for liens. Doctors, chiropractors, and physical therapists will submit their lien using the rights afforded them in the Health Care Service Lien Act.
Under the rules of the Health Care Service Lien Act, all healthcare liens may not exceed 40% of the injured person’s settlement and no single lienholder may receive more than 1/3 of the total settlement. See 770 ILCS 23/10(c). If the total amount of all liens meets or exceeds 40 percent of the settlement, then all healthcare liens cannot exceed 20% of the settlement.
A. Subrogation Liens
Unlike Missouri, Illinois allows for subrogation liens. This means that any entity that makes a payment to a healthcare provider for treatment you received after an accident on your behalf has a right of full reimbursement. The logic behind this law is to prevent an individual from receiving twice the benefit (i.e. receiving payment from third party setttlment and from health insurance provider for same bill).
The legal theory that healthcare insurance companies are able to use to recover on is based in contract law. Contained within the fine print of health insurance policies in Illinois is language granting health insurance policies to be repaid in full for all payments made to healthcare providers for accident related medical bills. Healthcare insurance companies will send a questionnaire asking what injuries were caused by a third party. They will then send a subrogation notice to you or your attorney giving notice of the amount of their lien that must be paid back from the third party settlement.
These subrogation liens can cause a lot of problems. Often a health insurance plan will have a lien that is greater than the amount recovered in the settlement. This happens when the at fault party causes damages greater than the amount that they were insured for (i.e. at fault party carries Illinois state minimum liability coverage of $20,000 but causes plaintiff to have $50,000 in medical bills, all of which are paid by health insurance).
Until recently, Illinois law allowed a health insurance company to use this subrogation interest to eat up the entirety of a victim’s settlement. This changed, however, with the passage of the Healthcare Services Lien Act (770 ILCS 23). This act provided for two situations where health insurance must reduce their lien.
The first is when the insured (you) are partially responsible for causing the accident. If this happens, your recovery will be diminished by the percentage you were found to be at fault. This will occur using Illinois’ comparative negligence law. This would shift a hypothetical recovery otherwise worth $100,000 to $50,000. Now let’s say to get that $100,000 settlement you had $30,000 of medical bills paid by your health insurance. The Healthcare Services Lien Act would limit your health insurance’s recovery to 50% of the paid bills or $15,000 pursuant to the percentage you were found to have contributed to the collision.
The second situation is when the auto insurance policy is insufficient to adequately compensate the victim. Using the same hypothetical above, the Heathcare Services Lien Act would reduce the subrogation interest pursuant to the amount you were inadequately compensated.
If either of these two situations apply, your health insurance company must pay a pro rate share of the attorney’s fees. Your attorney will likly have recovered money that the health insurance company would not have otherwise collected, therefore they should pay their fair share for this benefit. This is called the Common Fund Doctrine. Subrogation lienholders must pay a pro rate share of the costs of the personal injury claim. When an attorney who performs services that lead to the creation of the fund (i.e. obtain a personal injury settlement), that attorney is allowed compensation out of the whole of the fund from those for whom the settlement benefited (i.e. the subrogation lienholders).
Resolving liens in Illinois is much trickier than in Missouri. Decisions as to case value and assessment of fault reached with an auto insurance company are not necessarily binding on the health insurance company. The health insurance company could technically take you to court in the event they disagree with their insured’s percentage of fault or the amount of compensation that should be considered adequate. The good news is that most health insurance companies would rather reach a negotiated compromise. It is in everyone’s best interest to come to an agreement that avoids the expense of litigation. This is one of many areas where selecting a personal injury attorney who knows the law, and not merely dabbles in it, can pay off substantially for a client.
B. MedPay Liens
Unlike Missouri, Illinois grants auto insurance companies that pay out MedPay claims to have a lien on the third-party accident settlement. This means that any amounts that MedPay pays they can get paid back from the third-party settlement whenever it resolves. This process is called a right of subrogation.
Due to the right of subrogation, one must discuss with their attorney the pros and cons of using their MedPay coverage. A recent informal poll at a CLE I attended showed that half of the lawyers in the room always use MedPay benefits for their clients on Illinois claims and half do not. It is nice to have your client’s medical bills paid off earlier in the case. The MedPay units at most insurance companies also work on reducing the overall bills which saves the client money.
I believe it is best to not use MedPay benefits that must be paid back unless funding is needed during the case. Insurance companies evaluate claims in part by the amount of medical bills that are owed on a case. They will discount your client’s claim by basing their evaluation on the amount currently owed, not the amount originally billed. This causes your client to be in a worse overall position than if you just submitted the bills as they were charged. On top of that, you also run the risk of having to pay back the insurance company the MedPay at a reduced case value.
If you need funding to obtain more medical treatment or get an MRI, I suggest using the MedPay benefits. Then it becomes cheaper to utilize this source of money than to obtain a third-party loan which may bear interest.
If you find yourself not knowing whether to utilize your benefits or not, I suggest talking to a personal injury lawyer. You may find that some disagree with my assessment, but so long as you know the pros and cons you will be at least informed when making your decision.