NC State Employees Health Plan Lien

Is the SEHP entitled to payment from Medical Payments Coverage?

As the State Employee Health Plan gets makes more and more subrogation claims, we will find situations that have not been contemplated by the statute.
One such situation would be where a client has not had legal representation, and a medical payments insurer makes payment directly to the SEHP before an attorney becomes involved.  Here is how I think this should be addressed.
SEHP not entitled to med pay coverage
One argument to make is that SEHP should not have ever received the med pay.
The statute talks about liens against settlement from "liable third parties" and we know that SEHP does not expect reimbursement from worker's comp (not a liable third party) nor from the client's UM/UIM (not a liable third party).
So if the med pay is from your clients own insurance, it is not from a "liable third party". 
Because of that, the client should clearly get a credit for the med pay paid to SEHP, AND it should not count as part of the overall settlement (i.e: if the settlement was 30k, plus $1800 in med pay, then SEHP should figure the reduction amount (10k cap here) on the 30k, NOT $31,800)
10,000 Attorney fees  (1/3 of settlement you obtained)
100,000 SEHP lien claimed
-10,000 Attorney fees
20,000 NET
SEHP should get no more than 50% of the net after reasonable procurement costs (1/3) and so they are entitled to 50% of $20,000, or $10,000 as full and final satisfaction of the lien.
From the $10,000, subtract $1,800 previously paid, so a final payment of $8,200.
Reasoning behind "liable third party"
One of the reasons they collect only from "liable third parties" is that the patient/client/plan member is the one paying premiums for the medpay/UM/UIM, not SEHP.  Thus, the SEHP should not get the benefit of the client's insurance.
Their argument is contrary to the plain language of the statute, and also to the past administration of the lien.
Now, if the medpay came from the liable third party (maybe a passenger as client), then that argument may not work as well.  In that case, they should still deduct the previous payments from the lien, BUT, I think they would count the medpay as part of the total settlement.  Using the example above, it would look like this:
30,000 Settlement
1,800  med pay from liable third party
10,000 Attorney fees  (1/3 of settlement you obtained)
100,000 SEHP lien claimed
-10,000 Attorney fees
21,800 NET
SEHP should get no more than 50% of the net after reasonable procurement costs (1/3) and so they are entitled to 50% of 21,800, or $10,900 as full and final satisfaction of the lien.
From the $10,900, subtract $1,800 previously paid, so a final payment of $9,100.
-Chris Nichols 1.800.906.5984

State Employee Health Lien: no cap under Wrongful Death Statute

When the changes to the State Employee Health Plan lien were enacted on October 1, 2006, the Legislature specifically exempted the SEHP from the $4,500 cap that is normally placed on medical providers collecting from wrongful death settlements.

Specifically, the Wrongful death Act (N.C.G.S. § 28A-18-2(a) ) was amended to say:

The limitations on recovery for hospital and medical expenses under this subsection do not apply to subrogation rights exercised pursuant to G.S. 135-40.13A.

This subsection becomes effective for deaths occuring on or after October 1, 2006.  The Plan is still limted to recovering no more than 50% of the net settlement after "reasonable collection costs" are subtracted from the total settlement.  "Reasonable" is presumed to be 33.3% by SEHP.

Chris Nichols 1.800.906.5984

Medicaid v. State Employees v. Medical Provider Liens: An Epic Battle

I recently received a great question from an attorney regarding the interplay of Medicaid, State Employee Helath Plan, and Medical Provider Liens.  With the recent developments in Medicaid subrogation law (The SCOTUS decision in Ahlborn and North Carolina Supreme Court ruling in Ezell) and the "new" amended statute for the State employee Health Lien, lawyers are left scratching their heads on hoow to address the competing liens of these entities.

The Question:

We recently settled a case on behalf of a minor.  There is a Medicaid, a SEHP and a hospital lien.  Medicaid lien is much greater than the other two, but payment in full of all three would be less than 1/3 of the total net proceeds to the minor. 

By way of example (not actual numbers): Assume a $100,000 settlement and attorney fees and costs of $30,000.  Liens total $30,000.  $15,000 Medicaid, $10,000 SEHP and $5,000 Medical providers.  Here's the catch: parent's claim had run prior to suit being brought, thus the entire settlement was for minor's pain and suffering, future lost wages, and future medical expenses.  Under Ahlborn it would seem that Medicaid has no right of recovery (a percentage of nothing is nothing) but that the SEHP and Medical Providers would get paid in full.

Have you seen an NC case like this go through the system post-Ahlborn or has the scenario been discussed at any of the meetings you have attended?

MY Answer:
You win the award for "best law school exam question on liens"!

No case like yours has come forward yet, but I was expecting one.  The folks at SEHP were sort of surprised when I told them this would happen, they seemed to think that if you had SEHP ALL your bills would be paid.  They never thought about people losing jobs, losing insurance coverage, etc.

The analysis should start with Ahlborn.  Ahlborn tells us that Medicaid can not claim repayment from any portion of a settlement not apportioned to medical payments.  Clearly, the settlement in this case has no component of medical bills because the medical bill claim was that of the parents, and the statute of limitations for the parents claim (and therefore Medicaid's derivative claim) had run before the suit was filed.  The only possible argument that Medicaid could make would be to argue that the parents "assigned" the right of collection to Medicaid upon the child's receipt of Medicaid benefits under 108A-57.  As is noted in a recent publication by John Saxon at the UNC School of Government:

It is clear that both statutes involve the recovery of Medicaid payments from third parties who are liable to Medicaid beneficiaries. G.S. 108A-57, however, uses the term "subrogation" to define the state Medicaid agency's rights against third parties while G.S. 108A-59 defines the State's right as one arising by virtue of "assignment." Subrogation and assignment, though, are distinct legal concepts. So, it is not entirely clear whether the State's claim against a third party is a claim based on subrogation or a claim based on assignment, whether the State may assert a claim based on subrogation and assignment, whether the State must elect to pursue its claim based on subrogation or assignment, and whether the scope of the State's rights under G.S. 108A-59 is coextensive with, broader than, or narrower than the scope of its right of subrogation under G.S. 108A-57. Nor is it clear whether the "pro rata" and "one-third cap" provisions of G.S. 108A-57 apply if the State's claim is based on an assignment under G.S. 108A-59 rather than subrogation under G.S. 108A-57.

So at the outset, we have the argument that Medicaid has NO lien or right of subrogation pursuant to Ahlborn.  The Ezell case, of course, is directly contradictory to this, with Judge Steelman's dissent at the Court of Appeals (adopted per curiam by NCSC)saying:

Notwithstanding any other provisions of the law, to the extent of payments under this Part, the State, or the county providing medical assistance benefits, shall be subrogated to all rights of recovery, contractual or otherwise, of the beneficiary of this assistance, or of the beneficiary's personal representative, heirs, or the administrator or executor of the estate, against any person. . . .

N.C. Gen. Stat. § 108A-57(a) (2005) (emphasis added).

The above language contemplates a broad right of subrogation, which is indicated by the reference to "all rights of recovery." Subrogation is not limited to tort recovery, as the statute expressly covers contractual rights or "otherwise." See State v. Shade, 115 N.C. 757, 759, 20 S.E. 537, 537 (1894) (noting that when the words "or otherwise," follows an explicit example in a statute, the legislature intends to include every other manner of fulfilling the purpose of the statute, for example here, recovery, no matter what might be the attendant circumstances). The causation language discussed by the majority is from the portion of the statute dealing with the duty of a plaintiff's attorney to distribute settlement proceeds to DMA, not from the portion of the statute defining the scope of DMA's right of subrogation, which is set forth verbatim above.

The next matter to address is the lien of the State Employee's Health Plan.   Of course, the SEHP lien will attach to the proceeds regardless of whether they are for medical bills or not:

§ 135-40.13A. Liability of third person; right of subrogation; right of first recovery.

(a) Whenever the Plan pays benefits for hospital, surgical, medical, or prescription drug expenses, with respect to any Plan member, the Plan shall be subrogated, to the extent of any payments under the Plan, to all of the Plan member's rights of recovery against liable third parties, regardless of the entity or individual from whom recovery may be due.

Though, one might argue that the logic of Ahlborn would apply and SEHP would not have a lien on the minor's damages (though it seems the statute allows the lien to attach to any proceeds).

The Plan's lien language gives SEHP the "right of first recovery" which would seemingly place SEHP in a higher priority than Medicaid, though Medicaid could argue that because they are federally funded, the state law would be preempted.

The Plan has the right to first recovery on any amounts so recovered, whether by the Plan or the Plan member, and whether recovered by litigation, arbitration, mediation, settlement, or otherwise.

The Plan's subrogation right is limited to recovering no more than 50% of the net settlement after "reasonable" attorney fees and costs (presumed to be 1/3) have been paid.

There is currently no guidance on how SEHP would "compete" with Medicaid if both have valid liens.  SEHP told me during our meeting that they were "working with the AG's office and Medicaid" on a way to handle this type of situation.  My best guess is that if both liens are valid, Medicaid and SEHP would devise some sort of pro-rata sharing.

SEHP and Medical Liens
SEHP claims to have priority over all Medical Provider liens.  Thus, because SEHP's lien formula is almost exactly the same as the Medical Provider lien formula, if SEHP's lien is equal to 50% of the NET settlement (after reasonable collection costs) then the Medical providers would not be entitled to any payment under the statute (though their balances would still be owed by the client).

If SEHP's lien was LESS than 50% of the NET (after reasonable costs of collection) then the question would first be to determine if there is a valid Medicaid lien.  If there is a valid Medicaid lien, AND Medicaid does NOT have to share with SEHP, then the Medicaid and Medical provider liens would be prorated up to 1/3 of the settlement (for Medicaid) or 50% of the net after Attorney Fees (for Medical providers).

Finally, you have medical liens under NCGS 44-49 and 44-50. Medicaid must share "pro-rata" with any unpaid medical providers pursuant to the requirements of:

§ 108A-57. Subrogation rights: withholding of information a misdemeanor

(a)  . . . Any attorney retained by the beneficiary of the assistance shall, out of the proceeds obtained on behalf of the beneficiary by settlement with, judgment against, or otherwise from a third party by reason of injury or death, distribute to the Department the amount of assistance paid by the Department on behalf of or to the beneficiary, as prorated with the claims of all others having medical subrogation rights or medical liens against the amount received or recovered, but the amount paid to the Department shall not exceed one-third of the gross amount obtained or recovered. (emphasis added)

This was discussed in the previous section.  Further, SEHP claims that they do NOT pro-rate with medical providers within the 50% of Net after attorney fees limitation.

Thus, I see two scenarios that could result from your case:

1)  Medicaid Valid, SEHP Valid, Medical Liens Valid
In this scenario Medicaid and SEHP would first need to determine if one or the other had priority in payment or if they prorate within the 1/3 limitation set by medicaid.  If SEHP has first priority, then the question would be does Medicaid get 1/3 of what is left after SEHP is paid or are they limited to no more than 1/3 of the total settlement minus what SEHP has been paid.  Medical providers would receive the remainder, pro-rated with Medicaid up to the 1/3 limit of medicaid or the 50% after attorney fees of Medical Provider liens.
2.  Medicaid INVALID, SEHP Valid, Medical Liens Valid
If our courts apply Ahlborn as written, then Medicaid should have no lien on the minor child's pain and suffering or future medicals recovery.  Then SEHP would recover it's full lien, up to 50% of the net after "reasonable costs of collection" and then Medical providers would share among themselves, pro-rata, up to 50% of the net after attorney fees. (Which is essentially the same 1/3 that SEHP claims).  Medical providers could argue that their share should be 50% of the NEt AFTER SEHP is paid, but I don't see any real basis for that argument.
I think that you will probably need to litigate this matter.  In that regard, you need to give Medicaid notice of all hearings.  My guess is that you would make these arguments at the minor settlement hearing and that Medicaid (AG) would need to participate.

If you have not read my posts on these issue on my Blog, you might want to check it out: Ahlborn Resources
Chris Nichols 1.800.906.5984

NC Injury Liens: SEHP update

Here is an update on the NC Teachers and State Employees Health lien:

I met with the folks at the SEHP along with the top brass from the NC Academy of Trial Lawyers two weeks ago.  Our meeting was designed to discuss some of the wrinkles in interpretation of the "new" lien.


The SEHP agrees that the lien cutting formula is essentially the same as the medical providers lien formula.  You take the settlement, subtract out "reasonable" attorney fees and costs.  Of the net, the SEHP will never take more than 50% of that to fully satisfy their lien.


The SEHP is working with the assumption that reasonable attorney fees AND costs are 33.3%.  That means that if you want them to subtrect a 40% fee plus a lot of costs in the above formula, they won't do that without you making a special request and justifying why that should be done.  Remember, the statute leaves the definition of "reasonable" entirely in the hands of SEHP.


The SEHP takes thew position that the statute says, quite clearly, that their lien takes priority over medical provider liens under NCGS 44-49 and 50.  Thus, if you have a SEHP lien that exceeds 50% of the NET proceeds and you have medical provider liens, the SEHP will be paid their lien (and it will be satsified) but the medical providers will get nothing based upon their formula.  Of course, the medical providers can still attempt to collect from the client, because the medical provider lien is a distribution lien, not a "satisfaction" lien.

I told the SEHP folks that medical providers may disagree. 


SEHP is "working with" the AG's office to figure out some sort of sharing arrangement when there are Medicaid and SEHP liens.  We were told to "be on the lookout" for some sort of update about that agreement.  The same is true for Medicare.  I don't have any suggestions at the moment for how one would divide up money between the liens, other than to say that Federal Law trumps state law, so I think that Medicaid and Medicare will get there money.


SEHP agrees that their lien does not apply to UM/UIM coverage because those payments would not be from a "liable third party" as the lien statute requires.  That's good news.


SEHP agrees that the SEHP lien does not apply to workers compensation settlements.  More good news.

That's the sum and substance of our meeting.  The folks at SEHP were very nice, and understood our concersn and seemed genuinely concerned with the welfare and well being of their policy holders (our clients).  SEHP is balancing the Plan's interests in keeping the plan funded with the plan member's interests in being made whole after an accident.

Stay tuned for updates on Medicare and Medicaid.

Chris Nichols:  Nichols Law Firm 1.800.906.5984

Mea Culpa: The right way to apply the new SEHP legislation

A fellow pliantiff's lawyer, David Lewis of KELLY & WEST ATTORNEYS in Lillington, NC, has correctly pointed out that the new SEHP legislation uses the language from the NC Medical Lien Statute and that the analysis should probably follow that line of lien reduction.(i.e. I got it wrong)  He's aboslutely correct, I think.  The final result comes out almost the same as my analysis, but I'm embarrassed to say that I knew we included the language of NCGS 44 -50 in the SEHP legislation, but forgot to use that same analysis.  The good news is that SEHP is still WRONG.

David's email correctly points out:

The caluclation should be:
30,000 settlement
10,000 atty fees
250 costs
125,000 SEHP lien
FIRST:  Subtract out atty fees and costs to determine "total damages recovered by the Plan member"(not total amount paid by 3rd party)
SEHP not to exceed 50% of "total damages recovered by the Plan member"
THEREFORE:  SEHP lien is $125,000 > $19,750
LIEN IS REDUCED TO 50% of $19,750 =  $9,875.00
Final Disbursement:
30,000 Settlement
-10,000 Attorney Fees
-250 Costs
-9875.00 FINAL LIEN
$9,875.00 to CLIENT
I think you nailed this analysis, David.
Chris Nichols 1.800.906.5984

SEHP lien statute signed by Governor, but not helping

Governor Signs the Bill, but SEHP doesn't Get it

The governor signed the SEHP bill (Session Law 2006-264** SB 602) yesterday on the last possible day to sign the legislation.  Great news, right?  Well, maybe.  Looks like SEHP is interpreting the statute in a very odd manner.

SEHP is not reading the new statute correctly

It appears that the lawyers at the SEHP have consulted with the collection agency they use and have decided that their interrpretation of the statute is nothing like mine (or what the law says).  Basically, what SEHP is saying is that while they will reduce the lien for attorney fees, they won't reduce it beyond the 50% of gross cap.

Examples of the WRONG interpretation: 

I think SEHP is not interpreting this correctly because in their version, if the lien is $1 more than the 50% gross cap, then the atty fee deduction does not apply.  I think that SEHP has sort of made this into an "either or" approach, which it is clearly not designed to be.  It seems that the only place they would allow the attorney fee reduction would be if the lien does not exceed the 50% cap.

Example 1 of how they have it wrong

30,000 Settlement
10,000 Attorney fees
250      costs
16,000 SEHP lien
Is the 16,000 Lien > 15k ( 50% of the gross settlement):  YES
THEN:  Reduce lien to 15 k
Example 2 of how they have it Wrong
30,000 Settlement
IS the $3,000 Lien < 15k ( 50% of the gross settlement):  YES
THEN: Reduce lien by atty fees/costs:
Figure %ratio of atty fees plus costs to Settlemet: 10,250 / 30,000 = 34.15 %
THEN:  reduce lien by ratio    $3,000 (lien) x .3416 = $1,024.80  (REDUCTION AMOUNT)
FINAL LIEN AMOUNT:  3,000 - $1,024.80 =  $1,975.20 LIEN
10,000 Attorney fees
250      costs
3,000 SEHP lien
My Analysis of why they are Wrong
I think that this interpretation is completely contrary to what the statute is trying to get to.  I think the "purpose" of the statute was to make sure that the SEHP paid their fair share of the "collection" costs.  It is easy to understand if you think of the Plaintiff's attorney as a "collection agency" for the SEHP.  The Attorney should get "paid" our collection "percentage" which should only be taken off what SEHP actually "receives".  (Of course, the client gets the "collection costs")

This means that SEHP should pay their fair share on what is actually "collected," meaning that they even have to pay on the 50% of the gross.  I'm sure they don't pay their collection agents on the "total claimed lien" but only on the "collected" lien.  We all know that 33.3% of 0 is 0.

Had the statute intended SEHP's interpretation, it would have said that the attorney fees are to be deducted from the total lien amount and then if that reduced amount was greater than 50% of the gross settlement, the lien would be reduced to 50%, and no less.

Therefore, I don't think that SEHP is even following an "alternative" view or interrpretation of the lien statute.  They are making up their own statute where the "reasonable costs of collection" are sometimes paid, and sometimes not paid.  This means that the "reasonable costs of collection" are being paid in varying amounts.

Possible Constitutional Violoation by SEHP
Of course, we are somewhat at their mercy because the statute says that they decide on what is "reasonable" and I suppose they can say that if the lien amount is greater than 50% of the gross, "reasonable" collection fees are always Zero.

I think that we might be able to mount a constitutional challenge to that interpretation.  When the lien was first enacted, we approached SEHP and said, "hey look, can't we look at each case individually and then arrive at an agreement as to what is a 'fair' reimbursement?"  We gave examples of a family where the bread winner is killed, leaving three children and an unemployed widow, and the insurance policy only covers $30,000 of damages and the lien exceeds the coverage.  Under the old statute, SEHP got all the $30,000 and the widow and children got NOTHING.

SEHP said, "Sorry folks, we can't 'bargain' with individual SEHP members because that is unconstitutional.  We have to treat every citizen/member the same.  It's in the NC Conststitution.  We've been sued for that."  So when the new SEHP legislation was passed in one house, SEHP started to "accomodate" by voluntarily accepting the 50% cap, but not reducing for attorney fees.  So in the above example, the SEHP got 15,000, and the widow got $5,000.  And SEHP got their money because the widow paid an attorney to get it for them.  How generous of SEHP, right?  And when I say SEHP, what I really mean is OUR STATE.  SEHP is the State of North Carolina.

Well, sure.  Maybe you'll get sued again.  I think this is a ridiculous argument.  The Attorney General's office "settles" discretionary matters every day, from State Tort Claims to tax deficiencies.  I think this was classic beuracratic whimpiness on the part of SEHP.

Anyone up for a Constitutional Challenge?  I love the smell of "founders intent" in the morning.  Smells like victory.

Chris Nichols 1.800.906.5984

When Will the Governor Sign the Bill??

Waiting for the Governor
     We are all waiting on the new State Teacher's and Employees Health Plan Lien to be signed into law by the Governor.  A lot of us lawyers are impatient for this to happen because we have been waiting since 2004 for the "new" legislation to give a makeover to this "super lien".
Things Look Good
     The Governor has not signed off on the bill yet, which is part of a much bigger package that must be reviewed.  Holly at the NC Academy of Trial Lawyers says she has no indication that there is any sort of veto lurking, so it's just a matter of waiting.
The Situation is in Control
     I've driven past the Governor's mansion a few times in the last week or so, and I saw Holly camped out on the side walk in a small village of lobbyists that sleep in cardboard boxes and tents while legislation waits to be finally approved.  It looks like Krzyzewski-ville (K-Ville) over at Duke University. 
     Holly had a megaphone in one hand, and a cardboard sign in the other that said "Sign the Bill!"  She was chanting with the others, 'Hey, Hey, Ho, Ho, Super Lien has Got to Go!"  It was a truly moving sight that brought a tear to my eye.  That's dedication, and I just happened to have my handy Nikon Coolpix 5 digital camera there to capture the moment . 
     I've heard through the grapevine that she may be staging a hunger strike if this technique does not work. 
     All kidding aside, Holly is monitoring this closely and will let us all know ASAP when the bill becomes law.
-Chris Nichols
Click on Photo to see larger size. 1.800.906.5984

SEHP Lien Request Forms

So you have a client that is a member of the North Carolina Teachers and State Employee's Health Plan?  You need to get the information to determine the extent of the Plan's lien?

Here are some simple steps to follow to protect your client's rights:

Read the Background and In-Depth Analysis of the Lien

Get caught up with the basics of the law by reading the article I wrote for the North Carolina Academy of Trial Lawyers magazine, Trial Briefs

Read the Current Law

Now that you know the background of the law, you need to catch up on the latest developments (like the law being amended) so read the posts on this blog listed in the left column in the catagory "NC State Employees Health Plan".  Or click HERE for a chronological (most recent first) listing of all the posts from this Blog covering the lien.

Get your Client's Authorization

You need to have your client give the SEHP authorty to release information to you.  This is essantially a HIPPA form for SEHP.

Request the Lien

Download the SEHP Lien request form.

You are on your way to negotiating the lien.

Chris Nichols 1.800.906.5984

Example of How SEHP Lien Operates

When the Governor Signs[ed] the Bill, How will [does] it Work?

The Legislature has passed a revision to the State Employee and Teachers Health Plan lien and has sent that bill to the Governor for signature.  Refer to this post for the text of the bill.

Up until now, the SEHP limited itself to no more than 50% of a gross settlement.  Now the lien law limits SEHP to 50% of the settlement AFTER attorney fees have been paid.  The Amendment to the original legislation allows a reduction for "reasonable attorney fees" but leaves the decision regarding "reasonableness" in the sole discretion of the SEHP.

EXAMPLES of how the "old" lien and the "new" lien operate:

The current law which is not followed (Actual "old" SEHP lien law says this):

          Assume SEHP claims $20,000 lien
30,000 settlement
10,000 Attorney fees
20,000 SEHP lien  (paid $20,000)
$0        Client

NOW, before the "new" bill is in effect: (Note, new bill signed on August 31, 2006 and applies retroactively)

          Assume SEHP claims $20,000 lien
30,000 settlement
10,000 Attorney fees
15,000 SEHP paid in full  (50% of 30,000, reducing $20,000 lien by $5,000)
5,000 CLIENT

THE "NEW" Lien Law when signed by the Governor:

(NOTE:  This haexamples below were edited on 9.6.06 because the previous post was incorrect.  What is below is now correct.)

Example 1:  Lien exceed 50% of the settlement

30,000 settlement
-10,000 Attorney fees
$20,000 Subject to SEHP lien
SEHP can take no more than 50% AFTER attorney fees, so
$20,000 > $10,000 (1/2 after attorney fees), thus
-$10,000 SEHP Lien ($20,000 reduced to 50% of 20,000 after atty fees)
$10,000    To CLIENT

Example 2:  Lien does NOT exceed 50% of the settlement

          Assume SEHP claims Lien of $9,000
30,000 settlement
-10,000 Attorney fees
$20,000 Subject to SEHP lien
SEHP can take no more than 50% AFTER attorney fees, so
$ 9,000 < $10,000 (1/2 after attorney fees)
$11,000    To CLIENT

As you can see, the Amendment increases the client's recovery when the lien exceeds half of the recovery AFTER attorney fees. The old law was working with 50% of the GROSS recovery and now the formula works with (essentially) the NET recovery.  Also, this Amendment provides an excellent reason for the client to hire you because the "attorney fee" cut is not available to unrepresented SEHP members.

Below is a quick review of the application of the lien:

For payments made from January 22, 2003 to July 20, 2004, the SEHP claims a right of equitable subrogation.  The SEHP has not done much to enforce this, sending a few notice letters out on cases where they thought there was third party insurance, mostly car wrecks.

The SEHP, to my knowledge and by all reports, has not litigated the equitable subrogation right.  I do not think that a right of equitable subrogation is recognized by North Carolina law.

If payments were made for related health care after July 22, 2004, then I think you must request a statement of the lien, which may prompt the SEHP to claim the equitable subrogation for payments made before July 2004.

There is also a good argument that for equitable subro to even exist, there must be direct notice of the claim to the lawyer or client.  There does not need to be "notice" for the lien arising after July 2004.

If you do get caught up in the equitable subro claim because of post July 2004 payments, the SEHP has significantly negotiated on the equitable subro claims.

Also, the date that the SEHP uses to determine the lien is the date of their payment, not the date of service.  The lien does not apply to UM or UIM recoveries.

If you have questions, please email Chris Nichols.

Chris Nichols 1.800.906.5984

What if SEHP hasn't paid YET...

I received a very intriguing question about the State Employees Health Plan lien.  Here is the scenario:

Client is ready to settle a personal injury case.  Healthcare providers do not have lien and refuse to file on the client's State Employees Health Care insurance.  NC State BC/BS (the adminstrator of the State Health Plan) states in letter that they have not paid any money on this claim.  Client does not wish to pay the medical providers.  Is the lien retro-active if providers file AFTER settlement?  Can they hold my firm responsible?

This is an excellent question to use to analyize the language of the State Health Plan lien.

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