Insurance liens are causing stress to many intended parents and surrogates
What are liens?
A lien is defined as a claim of an interest on a property right. Some insurance companies in certain states (among them, Colorado, California, Washington, Oregon, Hawaii, and Idaho), have written “the right to lien” into their insurance policies when it comes to surrogacy arrangements. Insurance liens are normally an insurer’s claim to recover from an injured victim’s award or settlement with the person or company that caused the injury. Because compensated surrogacy contracts involve a payment from intended parents to the gestational surrogate and perhaps because surrogacy is becoming more common and will require medical treatment, insurers have expanded their right to lien to cover a surrogate’s compensation. In California, some insurers limit their lien amount to 1/3 the compensation based on California Civil Code 3040 because the surrogate retained an attorney. However, other insurers will state they have a right to lien the full compensation.
What is the procedure for a lien?
An insurance policy which has a lien will require the surrogacy contract be mailed to them after signing. The lien comes in the form of a demand from the insurance company (usually a third party on behalf of the insurer) after the birth of the child by the surrogate. The insurance company will send a list of fees which they have paid to the hospital for the delivery. Sometimes they include the fee for maternity care. The surrogate will be responsible under the policy, for paying the lien, however, under a properly drafted surrogacy agreement, the intended parents should be responsible for covering the lien. The lien could be capped at the total compensation of the surrogate, or 1/3 in the case of some liens in California. If the lien is from Kaiser, the amount that the insurance paid for the treatment as Kaiser is the health care provider as well as the insurer may be in dispute.
How on earth is this legal?
It very well might not be legal. Liens are based on contract principles rather than state law. While 42 states have laws on the books that allow hospitals and physicians to recover from a tort damages award, few states (California being one) have laws that recognize an insurer’s lien. The law that some insurers rely on to lien in California (Civil Code 3040), is meant to be limited to tort claims as under the medical lien statute (Civil Code 3045.1). If it is based only on the insurance policy, the lien would seem questionable as it might discriminate against women (by charging only women more as only women can be surrogates), or for disparately impacting only people who have infertility or are not able to reproduce without a surrogate. In some states like California, arbitrary discrimination is not allowed. In addition, maternity care is considered essential and must be covered under the Affordable Care Act.
So why are liens still around?
Good question. So far no one to our knowledge has challenged the legality of surrogacy liens. It very well could make a good class action or a complaint to be referred the state civil rights department. Complaints to the insurance commissioner have been less successful. For now, most cases we see, most parties avoid liens by choosing an insurance option that does not have liens. Some people may be ok with a lien if it is through the surrogate’s insurance plan and is still cheaper than buying a new policy and paying the deductible. Others have their lien negotiated down to nuisance levels. However, it seems unfortunate that surrogacy liens continue without a challenge. If you are hit by a surprise or unreasonable lien, we may be able to refer you to someone who can consider your complaint.
It’s important to hire an attorney who is familiar and can explain insurance liens and what your liability may be as a surrogate or intended parent in the contract. Tsong Law Group has extensive understanding of the world of insurance liens.
This article is for informational purposes only and should not be relied upon without additional research or consulting an attorney. This article is not legal advice and does not create an attorney-client relationship with the reader.