House Bill 21-1300 recently became Colorado law.
This law contains some good news for people who have racked up liens for medical care due to injuries caused by another’s negligence. It goes into effect September 7, 2021.
What is a Medical Lien?
In Colorado, hospitals and other providers have the right to ask accident victims to sign a lien stating that the provider will be reimbursed from any eventual personal injury settlement. Medical liens can be a good way to pay for care when health insurance or cash payments are not an option. They allow the injured person to receive necessary treatment without having to pay anything up front. However, the injured person’s net recovery from their personal injury settlement will be smaller due to paying off the lien.
Problems with Medical Liens
Medical liens have caused problems. For example, providers have encouraged victims to sign liens when other payment options might be better, and these liens have accrued interest. Providers are motivated to assign liens when they believe the lien will be better for their balance sheet (even if it is worse for yours).
Medical liens have caused problems during settlement negotiations, too. Insurance companies have used medical liens to argue for reduced settlements in several ways. One is to submit as evidence any payments made by third party payers, who may have paid the lien at a reduced rate. The insurer will then say the reduced rate is the fair value of the bills and refuse to pay a victim any more than that. This is similar to another insurance tactic: reclassifying bills at a “usual and customary” rate. This happens when an insurer says your $20,000 hospital bill should have only cost $2000, so that is what they will pay. Insurers like to argue that lienholders should simply reduce their bill, not that the insurer should pay more. Settlements that do not cover the cost of the lien then cause more suffering as medical lien companies hire collection agencies to collect the debt.
Hope for Colorado’s New Law
Colorado’s new law attempts to correct these injustices and bring the world of medical liens back in line with the overall premise of Colorado personal injury law: the responsible party (i.e., their insurer) pays for the injuries. Among other provisions, the law states:
- Before a health care provider lien is created, the patient must be informed of alternate methods of payment, including health insurance and worker’s compensation.
- If the injured person does not receive a settlement, the injured person is not liable for any amount of the medical lien.
- If the injured person receives a settlement that is less than the amount of the lien, the injured person is not liable for any amount higher than the amount of the settlement.
- Lien assignments to third party payers are not admissible as evidence in trial.
- A medical lien cannot be assigned to a collection agency.
- The term “usual and customary billing” refers to the amount providers typically charge uninsured patients in the same geographic area.
The need for medical liens arises when injured victims do not have the means to pay their medical bills while waiting for their cases to settle. If you have health insurance, worker’s compensation insurance, or government insurance like Medicare and Medicaid, you should not need a medical lien in most cases.
Hire an Experienced Attorney
Personal injury cases can be challenging, especially when there are liens involved. Time and again, research has shown that a lawyer’s presence increases the overall recovery to victims. If you have been injured due to another’s negligence, we want to help you.
Article by Molly Fuscher, Paralegal