The Colorado plaintiffs' bar is holding its collective breath that a game-changing bill making its way through the state legislature will end up on the governor's desk before the end of the 2019 legislative session. If the bill becomes law in its current form, it should settle a question that has split trial courts across Colorado: whether evidence of a medical lien, or the involvement of a medical lien financing company, is admissible at trial. For plaintiffs, this issue is huge. It comes up in almost every personal injury trial involving a medical lien financing company. The battle over admissibility is bitterly fought and when a judge allows the evidence into trial, it can be devastating for the plaintiff.
Senate Bill 19-217 is sponsored by Senators Mike Foote and Jack Tate, and Representative Marc Snyder. On its face, the bill appears to protect consumers who enter into medical lien financing arrangements. The measure requires various disclosures to better inform consumers of what they are getting into. The proposal also provides some restrictions on the amount of money a lienholder can collect in certain situations.
The real protection in this bill, however, is the armor it provides to plaintiffs and medical lien financing companies against a particular insurance defense tactic that attempts to vilify medical liens as collusive and fraudulent.
The good stuff is buried on page 7 of the latest version of SB 19-217.
38-27.5-104 Assignment – not admissible as evidence. (1) A HEALTHCARE PROVIDER CLAIMING A HEALTHCARE PROVIDER LIEN UNDER THIS ARTICLE 27.5 MAY ASSIGN, IN WRITING, A HEALTHCARE PROVIDER LIEN TO ANY OTHER PERSON OR ENTITY. AN ASSIGNEE OF A HEALTHCARE PROVIDER LIEN HAS ALL THE RIGHTS AND REMEDIES OF THE ASSIGNOR AND IS SUBJECT TO THE RESTRICTIONS AND OBLIGATIONS OF THE ASSIGNOR UNDER THIS ARTICLE 27.5.
(2) EXCEPT IN AN ACTION UNDER THE “UNIFORM CONSUMER CREDIT CODE, ARTICLE 1 OF TITLE 5, THE AMOUNT PAID BY AN ASIGNEE OF A HEALTH CARE PROVIDER LIEN FOR THE ASSIGNMENT, THE FACT OF THE ASSIGNMENT, AND THE TERMS OF THE ASSIGNMENT ARE NOT SUBJECT TO DISCOVERY OR ADMISSIBLE AS EVIDENCE IN ANY THIRD-PARTY OR FIRST-PARTY ACTION FOR ANY PURPOSE, INCLUDING AS EVIDENCE OF THE REASONABLE VALUE OF A HEALTHCARE PROVIDER'S SERVICES.
If the bill becomes law in its current form, it will give judges more direction and plaintiffs more certainty.
Currently, some judges will allow insurance defense attorneys to introduce evidence of a medical lien financing arrangement to support an argument that the plaintiff's medical care was unreasonable, unnecessary and overly expensive. Typically, the defense will either imply or overtly suggest that the medical care was directed by the plaintiff's attorney in collusion with the medical lien financing company with the intent of inflating the cost of the care to achieve a larger settlement or verdict. The other way defense attorneys will use this information is to argue that the true value of the medical services rendered is reflected in the discounted amount that the medical financing company paid the medical provider for the care, and not in the higher amount charged to the patient.
Plaintiffs' lawyers have staunchly resisted the introduction of this evidence with arguments that any information about a plaintiff's medical insurance or other source of payment for medical services is expressly barred by Colorado's collateral source rule. For example, plaintiffs often argue that medical lien-holders are collateral sources that share important similarities with health insurance. Evidence of a plaintiff's health insurance is clearly barred from introduction at trial by the collateral source rule. Plaintiffs' lawyers argue that medical lien information should be treated in the same manner. Some trial courts agree, others do not.
Where do health care liens come from?
Healthcare liens often arise in car crash cases where an injured person has a claim for damages against a negligent driver. The injured party seeks treatment from a health care provider through a contract in which the patient is not required to make an up-front payment for medical services. Instead, the health care provider asserts a lien against the proceeds of any future insurance settlement. The benefit for the patient is immediate access to high quality medical care including specialists without having to pay out-of-pocket for treatment. The downside is that when the settlement is finally reached, and the medical bills are finally paid, the injured party will have to pay full-price for the medical services rendered. They will not receive the deep discounts that health insurance companies are typically able to negotiate with the same medical providers. The lack of discount, of course, reflects the risk that health care providers take in extending medical services at no initial charge in the hope that they will be repaid later at a premium rate. Most of the time this gamble pays off, sometimes it doesn't. If an injury case fails to make a recovery large enough to cover the medical bills, the health care lien-holder may be stuck with an uncollectible debt. Though the patient is personally liable for the medical debt, in practice, such debts are often written-off by the lienholders when the insurance recovery is either non-existent or inadequate.
Enter the middleman
There is a prominent middleman known as the medical lien financing company that is part of the financial picture in many personal injury cases. The injured parties will usually be referred to a medical lien financing company by their attorney. The financing company will then refer the patient to a physician who has already agreed to treat the patient on a lien. The physicians then sell their receivables and assign their liens to the medical financing companies for a discounted rate. The lien financing company makes its money by purchasing medical debt at a reduced rate and then collecting the full value of the debt when the liability case settles. The medical lien companies have a network of doctors who have agreed to participate in this relationship. To a patient unfamiliar with the technical and legal aspects of the arrangement, it can look like health insurance. It's not.
Benefits of a medical lien
There are numerous reasons why an attorney might refer an injured client to a medical lien financing company. Typically, it happens when the client either has no health insurance or has poor quality health insurance. Sometimes the injured parties cannot afford to pay the deductible for their high-deductible insurance, which can be thousands of dollars out of pocket. Sometimes patients may have access to public assistance programs such as Medicaid only to find their access to specialists and follow-up care severely limited. Sometimes a person has access to decent quality health insurance but believes the doctors in-network did not provide appropriate care for the diagnosed injuries. Sometimes patients want a second opinion or access to a specialist who is not covered by their current insurance. Medical liens can provide a viable avenue for patients who need care they cannot otherwise access.
Despite the benefits, medical lien financing companies have their critics. The insurance defense bar has long-suspected collusive conduct between plaintiffs, their attorneys and medical lien financing companies. While Senate Bill 19-217 will provide a statutory basis for excluding medical lien evidence from trial, the question that remains open is what happens in cases where there is credible evidence that an attorney has colluded with a lien provider or finance company to inflate the cost of medical care? Whatever the final statute looks like, if it is signed into law, the appellate courts will almost certainly be presented with opportunities to modify the statute on a case by case basis.