How Much Do I Keep From My Settlement?
Article co-written by Nicholas Beck, Paralegal Tara Barnett, and Paralegal Jan Dillon
When your personal injury case (motor vehicle crash, medical malpractice, products liability, etc.) settles, you will receive a settlement statement that references the total settlement amount with line-item required payments: Attorney’s fees (a percentage of a recovered amount, agreed upon at the beginning of representation); costs associated with your case (filing fees, medical record fees, expert retainer fees, copying, mailing, etc.); and possible reimbursement to lien holders associated with your treatment. After fees, costs, and other payments are accounted for, the remainder becomes your net amount, which is generally not subject to federal income tax.
Why Do I Have Liens?
When you or a loved one is injured in an accident and receives medical treatment, depending on how that medical treatment was paid for, there could be a lien against any settlement proceeds received. Liens can come from a variety of sources. The following are entities that potentially could have a lien related to your treatment:
- Medicare;
- Medicaid;
- Private Health Insurance Companies with ERISA self-funded plans;
- TRICARE, and/or CHAMPVA; and
- Health care medical providers for unpaid bills.
A medical lien is a legal device used by healthcare providers to secure payment for services rendered. In Virginia, a health care provider has the right to assert a lien in a personal injury case for any unpaid bills up to a certain amount for the service rendered. [1] All claims associated with a lien are evaluated by your legal team for relevancy to determine relatedness. If a claim is determined to be unrelated, your legal team will communicate with the lienholder to clarify what should be included in the lien. However, just because a charge is determined unrelated to your case, it does not negate your responsibility for paying unrelated charges.
Many insurance companies will seek reimbursement for the claims they have paid on your behalf. Insurance companies do not pay treating providers dollar for dollar because they have payment contracts with medical providers. Any lien your insurance company asserts is based off the amount the insurance company paid to the provider and not what the provider actually billed. With any federal or state-funded insurance company (Medicare, Tricare, Medicaid, etc.), the law gives priority to reimbursing any payments made on your behalf. This is also true if your health insurance is an ERISA plan.
Why Do I Have to Pay Back My Insurance When I Pay the Premiums?
The types of insurance that seek reimbursement are either protected by subrogation/reimbursement laws or through an agreement with your health insurance company (in the case of an ERISA plan). In federal and state-funded health insurance, all parties involved in your case – you, your legal team, even the defendants – have an obligation to pay back Medicare (or any federally-funded health insurance company) and Medicaid. This is true even if you settle without having an attorney represent you. If you have an ERISA plan through your employer, you entered into an agreement with the insurer that, if you settle a case, you will pay back the money your insurance company paid on your behalf. Although reimbursements to insurance companies are based on the contracted amount, they paid to treating providers, your legal team may be able to negotiate a lesser reimbursement amount; however, this is not a guarantee.
Although your health insurance company paid your treating providers based on a contractual amount, treating providers may still bill you for a balance, which is why a medical provider may assert a lien or balance owed.
At Gentry Locke, our personal injury attorneys in Virginia will always be able to process and to explain your settlement. Liens are complex and our attorneys and paralegals have the ability to work and negotiate the liens to an agreement that provides a good outcome for all parties. It is always better to be aware and pay now rather than down the line with a tax audit. Contact us if you have questions or need assistance. We are happy to help!
[1] Va. Code §8.01-66.2.
