State Employee Health Plan (SEHP) Liens



If you are a North Carolina state employee and are injured in a car accident, the State Employee Health Plan (SEHP) will likely help pay for your medical care. All state employees and their dependents covered by the health insurance program are subject to potential SEHP liens on their personal injury recovery. In other words, if you are covered by the insurance program, you may be obligated to reimburse the health plan for any medical expenses paid by the provider through your settlement or award. This article will address SEHP liens and their potential effect on your personal injury recovery. With that being said, this article should be used as a general overview, and it is always recommended that you seek professional legal advice whenever you have a personal injury claim.

How are SEHP Liens Established?

The SEHP coverage is unique in that it automatically receives a reimbursement right (lien) in the proceeds of your settlement or award as soon as the program pays for your medical treatment; therefore, SEHP is not required to notify you or your attorney of their lien. Essentially, SEHP programs do not need to take any affirmative actions in order to have an interest in your recovery proceeds.

SEHP plans, however, may only seek an interest in proceeds that are recovered from “liable third parties.” Examples of third-party coverage are liability proceeds of all types (example: auto, homeowners’ and professional liability). If your recovery proceeds come from what is known as first-party coverage, SEHP plans will not be able to receive an interest in the proceeds. Examples of first-party coverage include workers’ compensation, medical payments coverage (MedPay), and uninsured and underinsured motorists’ coverage. Again, this is important because the SEHP plan will not be able to claim reimbursement from any money you receive from these types of coverages.

How Will SEHP Liens Affect Disbursement of Your Recovery?

Once you have reached a settlement or receive an award, you will need to reimburse SEHP for their lien. SEHP liens are capped, meaning there is a limit to how much of your recovery can be taken. SEHP may only be reimbursed up to 50% percent of your net recovery. A net recovery is the amount of money available after “reasonable” attorney’s fees and costs are deducted. North Carolina courts have established that one-third of the final recovery amount is reasonable for attorney’s fees. Furthermore, you will not likely be obligated to pay any remaining balance on the SEHP lien that exceeds the 50% net amount; thus, the amount received by SEHP will likely be considered final payment. The following example will help to better illustrate how SEHP affects your disbursement.

Let’s assume that Jack, who is a state employee and covered by a SEHP insurance plan, was injured in a car accident. Jack received $20,000 worth of medical treatment, which SEHP covered in full. Jack hired an attorney and eventually received a $30,000 settlement. Here, SEHP would have a $20,000 lien, the amount paid toward the medical expenses. Jack’s lawyer would first receive his portion of the settlement in the amount of $10,000 (1/3 of $30,000). Due to the 50% net cap, SEHP would not be reimbursed entirely for their $20,000 lien. SEHP would only receive $10,000, which is 50% of the net proceeds ($30,000 total settlement – $10,000 for attorney fees = $20,000 net recovery ÷ 2 = $10,000 amount available to pay SEHP lien). Jack would then receive the remaining $10,000. The calculations and disbursement amounts are as follows:

Settlement Amount: $30,000
Attorney Fees: -$10,000
Remaining Balance: $20,000 (net proceeds)
÷2 for 50% of net proceeds amount
Amount to SEHP: $10,000
Amount to Jack: $10,000 (remaining balance after attorney’s fees and SEHP lien)

Disbursement Calculations with Both SEHP and Federal Liens (Medicare or TRICARE)

In the case of personal injury liens, federal law always trumps state law. When you have a recovery with both SEHP and Medicare liens, Medicare will receive payment first. It is completely plausible for a Medicare lien to prevent the SEHP program from receiving any reimbursement from your recovery. For instance, SEHP will not likely receive any reimbursement when the Medicare lien is greater than 50% of the net proceeds. Let’s look at the following example for a better understanding.

Let’s assume that Jack, who is a retired state employee and covered by a SEHP plan and Medicare, was injured in a car accident. Jack received $20,000 worth of medical treatment, of which SEHP paid $10,000 and Medicare covered $10,000. Jack hired an attorney and eventually received a $30,000 settlement. Here, both Medicare and SEHP would have a $10,000 lien, the amount each paid toward the medical expenses. Jack’s lawyer would receive $10,000 (1/3 of $30,000). Due to the 50% net cap, there would only be $10,000 to pay the SEHP lien ($30,000 total settlement – $10,000 for attorney fees = $20,000 net recovery ÷ 2 = $10,000 amount available to pay SEHP lien). However, in this example, the SEHP lien would not receive any reimbursement from Jack’s settlement. Medicare would receive the entire $10,000 amount and Jack would receive the remaining $10,000. The calculations and disbursement amounts are as follows:

Settlement Amount: $30,000
Attorney Fees: -$10,000
Remaining Balance: $20,000 (net proceeds)
÷2 for 50% of net proceeds
Amount to Medicare: $10,000 (full amount)
Amount to Jack: $10,000 (remaining balance after attorney’s fees and SEHP lien)
Amount to SEHP: $0.00 (full amount of 50% net recovery went to Medicare)

Disbursement Calculations with Both SEHP and Medicaid Liens

Dealing with a disbursement of proceeds when both SEHP and Medicaid liens exist can be difficult and confusing. The two statutory liens seem to be in conflict as to which provider should be paid first. Medicaid allows for pro-rata distribution between other liens attached to the same recovery proceeds, while SEHP claims it receives first priority. The general practice is to distribute the funds according to the Medicaid statute, via pro-rata share. Before reimbursing either lien, you should seek approval of the repayment amounts from both programs. For further information and examples on how to pro-rate for reimbursement purposes, please visit the following link to our North Carolina Personal Injury Medicaid Guide.

Disbursement Calculations with Both Medicaid and Physicians Liens

Disbursement of physicians liens can also be in conflict with SEHP Liens. Both physicians liens and SEHP liens have to abide by the 50% of the net recovery cap as previously discussed. The SEHP lien’s claim to have first right of recovery, however, muddles the water. Due to the SEHP first right of recovery, SEHP should receive reimbursement before physicians liens. With this being said, if a SEHP lien amount is greater than the 50% net recovery, a physician lien would not likely receive any reimbursement from those same proceeds. The best course of action is to notify all parties that hold a lien and try to negotiate a pro-rated disbursement.

Negotiating and Reducing a SEHP Lien

The best way to reduce a SEHP lien is to request a final itemization and dispute any claims that you feel are not related to your personal injury case. Disputing unrelated treatments or procedures can often result in SEHP reducing its lien. You will need to fill out a lien request form and mail it to:

Health Management Systems, Inc.
N.C. State Health Plan Group
5510 Six Forks Road, Suite 310
Raleigh, N.C. 27609

****The request form can be found on our website under the forms section or at the following link: SEHP Lien Request Form.

Once you have sent the request form, SEHP will generally respond with an itemized lien amount within 5 days. You will want go over SEHP’s itemized response and dispute any of the charges provided that are not related to your case. SEHP may not agree, but you have nothing to lose when disputing a charge that you feel is unrelated.

While not required to do so, SEHP plans have indicated a willingness to negotiate liens when it would be unfair to enforce the full lien amount. When negotiating, you will want to argue all the factors affecting your personal injury claim. Utilizing fairness arguments will be vital in achieving a suitable compromise. Also, remember that a little kindness goes a long way in negotiating your lien. Some tried and true arguments are:

1. You could need future treatment, and you will need some of the settlement to pay for these treatments.

2. You need the settlement or award money to pay your bills because the injuries you sustained prevent you from working.

3. Your continuing treatment costs still have to come out of the settlement.

4. Some of the settlement or award is for your continuing pain and suffering.

As you can see, handling SEHP liens can be strenuous and confusing, especially when other liens are involved. It is important to understand that speaking with a lawyer about your personal injury claim is always a good idea. Please feel free to call our office at (919) 313-2729 or use our Lawyer Locator tool to find an attorney near you.



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