State Law and Plan Language: What to Look for in Lien Resolution

Lien resolution starts with either a series of laws (like Medicare liens and Medicaid liens) or relies on plan language (like Private liens, ERISA liens, and more). For private liens, there are tens of thousands of different plans based on different state laws and different contracts – or plan language.


If you know how to read the plan language, you can learn how to resolve the lien. But first, your location matters. Eight anti-subrogation states do not allow private liens except where the lien may have federal preemption, like ERISA. Those states are: Arizona, Connecticut, Kansas, Missouri, New Jersey, New York, North Carolina, and Virginia. Then, Georgia has codified the Made Whole Doctrine to the point where it is nearly an anti-subrogation state too. Again, these eight or nine states do not allow health insurance liens unless federal law preempts their state law (think of Medicare, ERISA, FEHBA, and Medicaid, among others).


Similarly, there are eight states where the law does not assume subrogation rights exist. These are the non-equity states that require specific plan language. Those non-equity states are Illinois, Louisiana, Maine, Michigan, New Hampshire, Ohio, South Carolina, and in certain situations, Massachusetts.


A lien holder may reach out to you with its subrogation rights and tell you to pay it back. Do you have to pay? You can determine those rights when you look for and review plan language – even in anti-subrogation states. Remember that federal laws can preempt, or overrule, state laws. So, you need to know how to determine which laws apply. Then, finally, you can get to the point of reading the plan language.


First, look for two terms: subrogation and reimbursement. These mean different things. And the term “lien” generally isn’t used. Usually, both subrogation and reimbursement clauses will start by discussing when they apply. For example, “if a judgment or settlement is received by the injured person…” Then, the clause will continue with how much must be repaid, and what exceptions exist. Those excepts could be the Common Fund Doctrine, stating that the repayment will be reduced by your attorneys’ fees and expenses. Or, that the Made Whole Doctrine applies and limits the payment back to the insurer if the plaintiff is not made whole (returned to pre-negligence level of health, finances) by the settlement.


If you want to know the laws in any state, take a look at MASSIVE’s Interactive 50 States Guide.