Subrogation and Recovery

Subrogation – Third Party Recovery

The State Health Plan has the right of subrogation upon its injured members' right to recover from liable third parties. The Plan's objective is to recover medical expenditures incurred by the Plan where a third party is liable for the care.

Members should contact Health Management Systems Inc. (HMS), which has been contracted by the Plan to perform subrogation services, at 800-294-2757 to determine whether the Plan is claiming a right to recovery. Members or their duly authorized representatives can also email subrogation requests to ncshp@hms.com.

Settlement Calculation Guidelines

The North Carolina State Health Plan’s (Plan) lien is established in statute. Pursuant to N.C.G.S. § 135-48.37, the Plan’s lien calculation is made independent of the existence of other liens. Subsection (a) states that the Plan has the right to first recovery on any amounts recovered. Subsection (d) states that the Plan is entitled to at least fifty percent (50%) of the total damages recovered by the Plan member, exclusive only of the Plan Member’s reasonable costs of collection. Subsection (a) and (d) represent the lien calculation rules. After the Plan’s maximum recovery is calculated using the lien calculation rules, all liens are deducted from the gross settlement after deducting attorney’s fees and reasonable costs of collection. Any liens having priority over the Plan, such as a Medicare lien, are distributed first from the gross settlement. Liens are not deducted from the Plan’s portion of the settlement. The amount owed to the Plan should be calculated as follows:

  1. The total amount of damages recovered represents the gross settlement amount.
  2. From the gross settlement amount, subtract attorney’s fees and reasonable costs of collection to obtain the net settlement amount.
  3. Calculate 50% of the net settlement amount to obtain the cap on the Plan’s lien.
  4. If the actual amount of the Plan’s lien is less than the cap, then the Plan’s lien remains at the actual amount. If the actual amount of the Plan’s lien is more than the cap, then the Plan’s lien is reduced to the amount of the cap. Set this number aside.
  5. Return to the gross settlement amount.
  6. Subtract attorney’s fees and reasonable costs of collection.
  7. If there is a priority/superior lien (e.g. Medicare), subtract this lien from the gross settlement amount next. (*In no event shall priority/superior liens be deducted from the Plan’s share of the recovery, rather than the gross settlement amount.)
  8. Next, subtract the amount of the Plan’s lien as established in Step 4 above. If insufficient funds remain to satisfy the Plan’s lien, then distribute whatever amount is remaining, if any, after subtraction of priority/superior lien to the Plan. Then, any remaining amounts may be used to satisfy any inferior liens or proceeds for the Member.

The following are examples of a proper distribution:

Example 1: Actual Plan Lien Less than Cap

Gross Settlement Amount: $60,000

Attorney’s Fees: $20,000

Reasonable Costs: $2,000

Medicare Lien: $5,000

Actual Plan Lien: $3,000

  1. Gross Settlement = $60,000
  2. Net Settlement = $38,000 ($60,000 - $20,000 - $2,000)
  3. Cap on Plan’s Lien = $19,000 ($38,000 x 50%)
  4. Plan’s Lien = $3,000 (actual amount of Plan’s lien is less than the cap) – set aside
  5. Gross Settlement = $60,000
  6. Subtract Attorney’s Fees and Reasonable Costs: $60,000 - $20,000 - $2,000 = $38,000
  7. Subtract Medicare Lien: $38,000 - $5,000 = $33,000 / Distribute $5,000 to Medicare
  8. Subtract Plan’s Lien: $33,000 - $3,000 = $30,000 / Distribute $3,000 to the Plan
  9. $30,000 remaining for the Member and any inferior liens

Example 2: Actual Plan Lien Greater than Cap

Gross Settlement Amount: $60,000

Attorney’s Fees: $20,000

Reasonable Costs: $2,000

Medicare Lien: $5,000

Actual Plan Lien: $20,000

  1. Gross Settlement = $60,000
  2. Net Settlement = $38,000 ($60,000 - $20,000 - $2,000)
  3. Cap on Plan’s Lien = $19,000
  4. Plan’s Lien = $19,000 (actual amount of Plan’s lien is more than the cap) – set aside
  5. Gross Settlement = $60,000
  6. Subtract Attorney’s Fees and Reasonable Costs: $60,000 - $20,000 - $2,000 = $38,000
  7. Subtract Medicare Lien: $38,000 - $5,000 = $33,000 / Distribute $5,000 to Medicare
  8. Subtract Plan’s Lien: $33,000 - $19,000 = $14,000 / Distribute $19,000 to the Plan $14,000 remaining for the Member and any inferior liens

Reasonable Costs of Collection Guidelines

Only reasonable costs of collection supported by the following documentation will be considered by the Plan:

  1. Invoice or Proof of Charge with any specific expenses itemized
  2. Receipt or Proof Payment (e.g. check image, credit card statement)
  3. Explanation of the relevance of the expense to resolving the case if it is not obvious.

Costs not supported by adequate documentation or deemed unreasonable by the Plan will not be approved.

Retirement/Disability Offset

North Carolina law, as amended by Session Law 2017-135, provides that the monthly benefits to a member participating in a State-administered retirement system, the former Disability Salary Continuation Plan, or the Disability Income Plan of North Carolina may be offset to recoup an overpayment of State Health Plan funds, including benefits paid to, or State Health Plan premiums or claims paid on behalf of, any member or beneficiary. 

The amount of the offset from a member’s retirement or disability benefits will vary depending on the amount of the debt.  If the entire outstanding amount cannot be deducted from one month’s benefit, a smaller amount will be deducted each month until the entire outstanding amount is repaid.  If you have any questions about this process or the status of a debt or would like to repay any amounts owed, please contact Customer Service at 919-814-4400.

Department of Revenue Debt Setoff

Pursuant to N.C.G.S. §§ 105A-3 and 18C-134, the State Health Plan (Plan) is obligated to submit all outstanding member debts to the North Carolina Department of Revenue (NCDOR) for collection.  When a debtor files their tax return to claim their refund with NCDOR, the refund is captured and sent to the Plan.

Depending on the situation, NCDOR may be able to capture sufficient funds to satisfy the entire debt or only a portion – this depends on the total amount of debt owed to the Plan and other agencies and/or the amount of refund the debtor has with NCDOR.  In addition to tax refunds, NCDOR will also capture lottery prize payments to satisfy debts owed to the Plan.  NCDOR debt setoff will occur in addition to any other collection activities being pursued by the Plan.   

Wage Garnishment FAQs

What is the basis for the debt?

What is the basis for the debt?

This debt is for an overpayment of State Health Plan funds, which could include benefits paid to, or premiums or claims paid on behalf of, a Plan member or dependent.  Members may contact Blue Cross Blue Shield of North Carolina (Blue Cross NC) at 888-234-2410 to obtain more specific information regarding a debt owed to the Plan.

What gives the Plan authority to garnish a Plan member’s wages?

What gives the Plan authority to garnish a Plan member’s wages?

House Bill 1056 became law on June 25, 2018.  Pursuant to this legislation, any payment of benefits or other amount to, or premiums or claims paid on behalf of, any Plan member that is later determined to be an overpayment, an erroneous payment, or a benefit or amount for which the Plan member was ineligible, shall be repaid by the Plan member to the Plan.  This would include any debts owed to the Plan prior to the passage of this legislation.  If the Plan member is an employee of an employing unit, then any amounts to be recouped under this subsection shall be offset against the net wages of the Plan member.

Can a Plan member repay the Plan for the debt instead of having his or her wages garnished?

Can a Plan member repay the Plan for the debt instead of having his or her wages garnished?

Yes, when a Plan member owes a debt to the Plan, the Plan will notify the member of this debt in writing.  If the member does not enter into a payment plan acceptable to the Plan within 30 days after the written notice, the Plan will notify the member's employer of the debt.  After this initial 30 days, the Plan will only accept the total amount due as satisfying the debt.  Debts owed to the Plan may not be forgiven by the Board, the Plan, the Executive Director, the State Treasurer, or an employing unit. 

How much will be garnished per month from the Plan member’s wages?

How much will be garnished per month from the Plan member’s wages?

The amount of the garnishment from the Plan member’s wages will vary depending on the amount of the debt.  The Plan member’s employing unit is required to offset the amount owed against at least ten percent (10%) of the net wages of the member until the Plan notifies the employing unit that the debt has been paid in full.  The employing unit must set up the offset after providing notice to the member, and consent or an authorization is not required from the member.

How should the employing unit send amounts collected through wage garnishment to the Plan?

How should the employing unit send amounts collected through wage garnishment to the Plan?

The employing unit should send any amounts collected through wage garnishment to the Plan using a separate check from the one used for its premium payments.  The employing unit must include information with the check denoting the members to whom the payments apply.  The check should be mailed to: State Health Plan, P.O. Box 30048, Durham, NC 27702.  For further information on how to collect and send wage garnishments, please call 888-234-2410.

What happens if the employing unit does not offset the member’s wages?

What happens if the employing unit does not offset the member’s wages?

If an employing unit does not follow these requirements, the Plan will, after notice to the employing unit of its failure to cooperate, be entitled to seek recovery of any amounts due directly from the employing unit.