Family Law

Are Surrogacy Insurance Liens A Form Of Infertility Discrimination?

An insurance lien can be one of the most expensive parts of a surrogacy journey, which can leave the path out of financial reach for many.

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Children are expensive. And having a child when faced with infertility — whether as a result of a medical condition or having a partner without the complementary reproductive capability — can make just getting to the starting line of parenthood expensive. The costs are especially weighty when a parent-to-be needs to turn to surrogacy as the solution.

And now there is an additional growing obstacle that makes a difficult situation even worse.

Surrogacy insurance liens.

What Is A Surrogacy Insurance Lien?  

Explaining the American medical system is hard. Even most Americans don’t understand it, much less individuals from other countries. And the American medical insurance system is especially confusing on the issue of surrogacy. Now, adding the legal concept of “liens” into the equation makes things even harder to understand.

Essentially, if I were pregnant and delivered a child of my own, my own insurance policy (whether through my employer, spouse’s employer, or the open market) would help pay the medical expenses. That is, of course, not the total amount of my costs, because I still have to pay deductibles, co-pays, and co-insurance (not to mention the monthly premiums). I’m on my own for all of those. But it gets worse if I am not carrying a child the old-fashioned way. For instance, if I were unable to carry a pregnancy on my own because I, say, was born without a uterus (MRKH affects approximately 1 in 4,500 female newborns), my insurance policy will generally not provide coverage for someone else to be pregnant as a surrogate for me.

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However, the surrogate’s own medical insurance might provide coverage for her pregnancy. Or it might not. Or … it might have a lien structure attached to it. Indeed, some medical insurance policies expressly exclude surrogacy for others, and say something to the effect that yes, we will provide coverage for pregnancy-related expenses, except if you are acting a surrogate. Then the coverage won’t apply.

Other insurance policies, however, don’t exclude surrogacy insurance coverage, but instead write in a lien. The lien in essence says if the surrogate receives compensation, the insurance company can require the surrogate to pay that money, or some portion of that money, to the insurance company, in order to reimburse the medical costs paid on the surrogate’s behalf.

Of course, a compensated surrogate is not likely to be interested in giving up her compensation to the insurance company after going through a pregnancy and delivery for another person or couple. The surrogacy contract will, if the surrogate had decent legal counsel, have the intended parents also on the hook for the lien amount. So a 100% lien for a surrogate receiving $50,000 base compensation, could have the intended parents paying an additional $50,000 to the insurance company on top of the surrogate’s compensation and all other surrogacy costs (the fertility professionals, the lawyers, the matching program/agency, the escrow company, and so forth).

That’s a lot. The result is that an insurance lien can be one of the most expensive parts of a surrogacy journey, which can leave the path out of financial reach for many. And the insurance company for the intended parents reaps a windfall, as that entity never has to cover an old-fashioned pregnancy that would have otherwise been factored into the cost of the premiums.

Is This Common?

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While it isn’t that common, professionals in the area are seeing an increasing number of policies containing surrogacy lien language, especially in states such as California. Sarah Paige, surrogacy insurance expert with ART Risk Financial and Insurance Solutions, estimates that she sees about 400 to 500 surrogacy arrangements a year directly impacted — where the parties are unable to secure a better or more cost-effective policy — and forced to be subject to a surrogacy lien.

However, Paige notes that an even larger number of surrogacy arrangements are further impacted. She estimates that over 600 surrogates a year change insurance policies to get away from a surrogacy lien. The result in these cases is that surrogates are frequently forced to leave the medical providers with whom they have established relationships from their previous pregnancies, and are required to change to providers covered by the new nonlien policies.

Is This Use Consistent With The Original Purpose Of Liens?

Probably not. This week, on the podcast I Want To Put A Baby In You, we interviewed Ralph Tsong, a California-based assisted reproductive technology and adoption attorney, about surrogacy insurance liens. Tsong explained that most states have laws that permit liens by medical providers, but the legislative history behind these liens generally envisioned a situation like a car accident or some other injury with an uninsured victim. When the victim receives a settlement or judgment against the offender, the medical providers are then entitled to recover their costs of providing care to the victim from that payout. In that context, a lien might make more sense.

Tsong explains, most insurance companies, inspired by these statutory liens for medical providers to recover from uninsured persons, have written their policies so that they have a contractual right to a lien when their subscriber receives a monetary recovery for their injuries and the insurance company paid for the treatment. A few of these companies extend that to surrogacy compensation, further stretching the logic.

In California, some liens reference California Civil Code Section 3040, which limits insurance companies from recovering more than “one-third of the moneys due to the enrollee or insured under any final judgment, compromise, or settlement agreement.” That reliance, Tsong notes, is ironic given that Section 3040 was enacted not for the purpose of giving an insurance company a right to a lien, but to limit it. The law was passed in response to insurance companies liening subscribers in higher amounts than they actually paid to the medical providers!

Other insurance liens, in and outside of California, do not rely on such statutory grounds, relying instead on contract principles, writing the lien in as a simple term of the policy — a contractual agreement between the insurance company and insured. In those cases, a one-third limit starts looking like a luxury.

Can A Surrogate Just Not Mention The Whole Surrogacy Part To The Insurance Company? Good try. Probably not. Insurance policies with liens generally require that the covered person — the surrogate — when entering into a surrogacy agreement, is required to provide a copy of the signed surrogacy agreement to the insurance company within a specified time. Often that is within 30 days of signing. Also, it’s unlikely that a surrogate could avoid telling her obstetrician or medical providers that she is acting as a surrogate. A few years ago, the medical billing coding system, referred to as ICD-10, was updated to include an exact code not just for pregnancy but specifying a surrogacy pregnancy. Additionally, part of the surrogacy contract generally addresses transparency, and permitting open communication between the intended parents and the surrogate’s healthcare providers. So the net result is that … everyone is gonna know.

What Can Be Done?

The Silver State has the gold standard. One state, Nevada — through the passage of state-level legislation — specifically prohibits insurance plans subject to state law from excluding coverage for surrogacy pregnancies, or applying liens to surrogacy-related compensation.

So lobbying state legislators may be one viable option. Additionally, Tsong has been looking into the discriminatory treatment arguments, as well as the disparate impact that lien policies have on those facing infertility. He believes another path forward may be through a class-action lawsuit, through state civil rights agencies, or other legal action against the insurance companies.

Those affected by a surrogacy lien may want to consider reaching out to Tsong or an attorney of similar expertise to explore options. And for those hopeful parents just looking into surrogacy, especially if the surrogate is in California, where surrogacy liens are most common: don’t forget to look into all the insurance details. You may be in this unfortunate, and expensive, boat.

Ellen TrachmanEllen Trachman is the Managing Attorney of Trachman Law Center, LLC, a Denver-based law firm specializing in assisted reproductive technology law, and co-host of the podcast I Want To Put A Baby In You. You can reach her at babies@abovethelaw.com.

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