State Employees Lose Benefits

In 2004, the North Carolina Legislature created a "super lien" on proceeds received from third-party funds for state employees and retirees from the state. The lien was inserted in the state budget and passed without notice.

The lien overturned the North Carolina insurance commission regulation that prevented payment to the state when the third-party is liable for medical costs. If you were a state employee (or retiree) and you were injured by the negligence of another (such as a car wreck, medical malpractice or products liability), your health care was paid by the State Health Plan. If you received a recovery from the negligent third-party, you did not have to pay the health insurance company for the benefits you have paid for over the years. Quite simply, you worked for your health care benefits. The benefits were part of your compensation. There was no need to repay those when injured by someone else. It is the sort of benefit that you do not normally understand or appreciate until you are injured.

The effect of this "super lien" is that any amount paid by the health plan must be repaid first. For example, if you were in a motor vehicle collision that results in medical bills of $50,000 and the person who hit you only has minimum limits of $30,000, you may be able to recover the $30,000 in minimum limits bue every dollar will have to go to the health plan because it paid $50,000 in insurance benefits on your behalf.

There is no provision for attorney's fees or costs in recovering the insurance benefits. As a result, no attorney can represent you on a contingency fee because there will be no payment to you. You certainly do not want to pay an attorney on an hourly basis to recover money for the health plan.

In the most serious situations where there are large medical expenses and limited insurance, the new "super lien" benefits the negligent party and his/her insurance company. The stated purpose of the "super lien" - repay the state so it will keep costs down - does not work. There is no reason to seek recovery since you will receive nothing, so there is no payment to anyone.

Contrast the North Carolina "super lien" with Medicare and Medicaid. If Medicare paid for your health care, it is entitled to full reimbursement less one-third attorney's fees and expenses. There is also a hardship provision in Medicare to allow you to petition Medicare to receive some of the benefits. Although the situation arises where you may not receive any recovery and the attorney would be paid for their fee, at least you have the opportunity of recovery under the hardship provision and Medicare does receive some return on its payment for your healthcare.

With Medicaid, the lien is limited to one-half of the recover after payment of attorney's fees. In this instance, much like a workers' compensation lien, you are always entitled to some benefits.

Medicare, Medicaid, and workers' compensation encourages you to pursue your legal rights against the negligent party. By doing so, you ensure that the person responsible pays for at least a portion of your medical bills. Such a plan benefits all North Carolina taxpayers.

The North Carolina health plan super lien does nothing but protect private insurance companies and the negligent parties.