Attorneys and their clients need to be aware of a change that might impact the amount of money clients receive from insurance settlements.
Last month, two additional state agencies joined the payment intercept program that requires insurance companies to check if the claimant owes money to the specific agencies before they can issue non-recurring payments of $500 or more.
Since 1998, insurance companies have been required to check with the Child Support Enforcement Division of the Department of Revenue to see if a claimant owes past due child support. The insurance company has to either provide information to the DOR or check the payment intercept program database to see if the claimant has a pending lien.
As of April, two additional agencies - DOR Taxpayer Services Division and MassHealth/the Department of Transitional Assistance - joined the intercept program following legislation passed in 2003 that required insurance companies to check with the agencies before cutting a settlement check.
In addition to child support, liens can be placed on the settlement check for taxes owed, as well as for health or financial benefits paid to an individual or his family for services as a result of an incident or accident from which he or she is receiving an insurance settlement.
This requirement that medical and financial benefits be repaid has been in place for a long time, as set forth in General Laws chapter 118E, section 22 and General Laws chapter 18, section 5G.
MassHealth and the Department of Transitional Assistance expect that any additional insurance claim information received from this program will help ensure that any individual receiving public assistance benefits will first repay MassHealth and the Department of Transitional Assistance for medical and financial assistance provided as a result of the incident.
Because this will impact a number of clients and attorneys, MBA President Kathleen M. O'Donnell recently held a meeting with representatives of MassHealth to discuss the change.
"I think it is crucial that those who represent injured people who are getting checks from insurance companies know this program is going to be in existence," O'Donnell said after the meeting.
"We have known about the intercept from the Department of Revenue for a couple of years now, but now it is more widespread, with not only child support but tax issues and now with MassHealth. Lawyers need to talk with their clients about these issues sooner rather than later."
The program has allowed the DOR's Child Support Enforcement Division to collect $30 million since the program went into effect in 1998, according to MassHealth representatives.
Insurance carriers are able to determine if individuals owe child support, back taxes or health expenses by accessing a database that contains information based on the individual's name and Social Security number.
The payment intercept program does not apply to a portion of a claim relating to payments to a third party, such as an attorney or medical service provider, such as MassHealth. After those payments are made, the DOR is next in line for priority payment.
Still, attorneys need to discuss the program with clients who may expect to receive a certain amount of money from a settlement but could potentially net no money if the amount they owe to the state and to third parties equals or is greater to the settlement.
"It's very upsetting for a client to go in and sign a release and believe that they'll receive a certain amount of money only to find out that it is going to the commonwealth," O'Donnell said.
"While the bar association applauds the commonwealth for trying to collect money, lawyers need to talk to their clients early on about the program so clients understand that what they are going to net out of the settlement."
MassHealth representatives said they will work cooperatively with attorneys and they are open to negotiating payment for the services as attorneys negotiate settlements with their clients and the insurers.
Michael Willette, MassHealth program manager for the Casualty Recovery Unit said, "We hope to make the transition as seamless as possible, taking into account the needs of our customers."
O'Donnell and other attorneys at the meeting said they have had good experiences working with MassHealth and hope that continues. Still, O'Donnell said the intercept program does raise concern because of how it will impact clients.
O'Donnell said she would not be surprised if other agencies attempt to devise similar programs and have them approved by the legislature - a possibility that should concern lawyers and the public.
"The legislature needs to consider whether it is appropriate for attorneys to be paid to collect funds for the commonwealth because right now clients are going to bear that burden," O'Donnell said. "Certainly that is something the MBA will be looking into."