This article has been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, September 2006 issue, @2006 by Steven J. Bruzonsky, Esq.
Healthcare Group of Arizona Lien Claims
Some AzTLA members have inquired whether Healthcare Group of Arizona (HCG) HSCOs (Health Care Services Organizations) have lien rights under Arizona law. There is no Arizona caselaw on point. For the reasons set forth below, my personal opinion is that HCG and its HCSOs do not have lien rights.
1. The Creation of HCG and its "Group Service Agreement":
ARS 36-2912, 36-2912.01 and 36-2912.02 establish HCG under the AHCCCS statutes.
HCG was created by the Arizona State Legislature in 1985 to provide affordable and accessible health care coverage (guaranteed issue and community rates which does not use health conditions or claims experience to determine premiums) to sole proprietors, small businesses with 50 or fewer employees and political subdivisions. While commercial health plans in Arizona are governed by the Department of Insurance, HCG reports to the Governor and the Joint Legislative Budget Committee and is governed under Title 36 Statute, Title 9 Rule. HCG offers HMO and PPO and Health Savings Account options. http://www.healthcaregroupaz.com/AboutUs.aspx.
The HCG "Group Service Agreement" does expressly provide for liens against personal injury claims:
A. Section V "Other Sources of Payment for Health Services" (page 18) states that "In the event a member receives payment from a third party, organization or government entity including, but not limited to, homeowners insurance, workers' compensation, automobile insurance or an insurance carrier for health services which have been rendered by the health plan or paid for by the health plan, then the health plan shall have a right of reimbursement from the member to the extent that the member has received payment" and goes on to say that reimbursement shall be for "payments" made and also "to the extent of the prevailing rates for the care and treatment rendered" where the health plan has "arranged for the rendering of services"
B. Section III "Termination of Coverage" (pages 13-14) arguably gives the plan authority to terminate a member with 30 days written notice for various reasons including "Violating a material provision of the member handbook".
C. It is further stated that "the healthplan shall coordinate all third party benefits. Services provided under this GSA are not intended to duplicate other benefits available to the member. The health plan shall not be the primary payer for claims involving workers' compensation, automobile insurance or homeowners insurance." (page 18) "The health plan will recover to the extent of the excess." (Page 20) Motor vehicle accident Medical Payments coverage "shall pay first" (page 21).
(Note that that the term "third party" used above may arguably not apply to first party uninsured and underinsured motorist coverage, but AHCCCS historically will attempt to apply it to these coverages, as ARS 12-962 also uses "third party" language and AHCCCS regulations attempt to apply the ARS 12-962 AHCCCS lien to first party uninsured and underinsured claims.)
2. The arguments that HCG and its HCSOs have lien rights under Arizona law :
Traditionally, HCG and its HCSOs had not actively been asserting liens in personal injury cases. However, recently, one AzTLA member has reported that University Family Care, a HCG HSCO, is claiming a lien, and that matter is presently ongoing.
While commercial health plans in Arizona are governed by the Department of Insurance, HCG reports to the Governor and the Joint Legislative Budget Committee and is governed under Title 36 Statute, Title 9 Rule. HCG is a state plan under Title 42 CFR 430 et seq. HCG and its HCSOs have lien rights under the broader AHCCCS lien statutes, ARS 36-2915 and ARS 12-962. The HCG "Group Service Agreement" promulgated under this authority provides for liens against personal injury settlements.
Note that if HCG is deemed a plan under the AHCCCS/Medicaid umbrella, then health care providers are prohibited from balance billing, per 42 CR 447.15. The Ninth Circuit has held that an air ambulance provider, which filed a timely A.R.S. § 33-931 statutory lien, can't balance bill against the patient's injury settlement, because the Arizona lien statute is preempted by Federal Medicaid law. Lizer v. Eagle Air Med Corporation, 308 F. Supp. 2d 1006 (Ariz. 2004). Lizer didn't specifically consider whether A.R.S. § 36-2915(G)(5), which expressly states that hospitals may AHCCCS balance bill, is preempted by Federal Medicaid law. The argument is that if Federal Medicaid law preempts A.R.S. § 33-931, then why wouldn't it also preempt A.R.S. § 36-2903.01(G)(5)?
3. The arguments that HCG and its HCSOs do not have lien rights under Arizona law: ARS 36-2912, 36-2912.01 and 36-2912.02, which establish HCG, do not expressly grant any subrogation rights to HCG or HCSO contractors; and they do not grant the AHCCCS Director any discretion to include subrogation rights in regulations or the HCG "Group Service Agreement".
However, ARS 36-2912(J) states that the "contractor - - - has the same lien or subrogation rights as those held by health care services organizations licensed pursuant to title 20, chapter 4, article 9." What does this mean? ARS title 20, chapter 4, article 9 is titled "Health Care Services Organizations" (HCSOs) and covers from ARS 20-1051 through ARS 20-1078. This article includes ARS 20-1072 whereby HCSOs may only charge enrollees copay/ co-insurance/deductible amounts. This article does not grant HCSOs any subrogation rights.
HCSOs, as AHCCCS (not HCG) contractors, perform AHCCCS lien collection on behalf of the AHCCCS Administration. AHCCCS v. Cochise County, 86 Ariz. 210, 920 P.2d 776 (App. 1996). But they do not have their own lien rights. So ARS 36-2912(J) does not grant HCG HCSOs any lien rights.
In consideration of ARS 36-2912(J) discussed above, there is no reason why HCG HCSOs would not be subject to Arizona's anti-subrogation caselaw regarding personal injury settlements. The common law rule long followed in Arizona is that, absent a statute, an assignment of a cause of action for personal injuries against a third party tortfeasor is void and unenforceable. Harleysville Mutual Ins. Co. v. Lea, 2 Ariz. App. 538, 410 P.2d 495 (App. Div. 1 1966) (auto medical payments); State Farm Fire and Casualty Co. v. Knapp, 107 Ariz. 184, 484 P.2d 180 (1971) (auto medical payments); Allstate Ins. Co. v. Druke, 118 Ariz. 301, 576 P.2d 49 (1978) (auto medical payments); Gallego v. Strickland, 121 Ariz. 160, 589 P.2d 34 (App. Div. 2 1978) (uninsured motorist) (prior to statutory amendment providing for uninsured motorist subrogation); Brockman v. Metropolitan Life Ins. Co., 125 Ariz. 246, 609 P. 2D 61 (1980) (group health insurance); Karp v. Speizer, 132 Ariz. 599, 647 P.2d 1197 (App. Div. 1 1982) (assignment to judgement creditor by judgement debtor of proceeds expected to be recovered from personal injury action) ; Piano v. Hunter, 173 Ariz. 172, 840 P.2d 1037 (App. Div. 1 1992) (same rule applies to local school district health trust fund); and Lingel v. Olbin, 198 Ariz. 249, 8 P.3d 1163 (App.2000) (prohibition against assignment of personal injury claims is based on public policy).
ARS 36-2912(AA)(3) defines "creditable coverage" to include various types of health coverage and insurances â€“ but these definitions do not mention third or first party liability type claims, further evidence that the legislature had no intent to give Healthcare Group of Arizona HCSO's any lien rights.
ARS 36-2913 establishes a third party liability fund to be used strictly for AHCCCS purposes and doesn't mention or set forth any allocation of part of that fund for HCG purposes.
HCG and its HCSOs cannot claim ERISA liens. 29 USC 1003(b) excludes from ERISA plans established or maintained "by the Government of the United States, by the government of any State or political subdivision thereof, or by agency or instrumentality of any of the forgoing". See LoPiano v. Hunter, 111 Az Adv Rep 37 (1992).
4. Termination of Benefits Concern:
The HCG "Group Service Agreement", Section III "Termination of Coverage" (pages 13-14) arguably gives the plan authority to terminate a member with 30 days written notice for various reasons including "Violating a material provision of the member handbook". So this remains a concern when contesting a HCG or its HCSO lien claim.