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Article: Health Care Insurance in Personal Injury Cases, Health Care Insurance

Health Care Insurance in Personal Injury Cases

Medical bills are known as usual damages in personal injury cases. The universal view is that a person or an entity that injures someone should pay all medical bills from the injury.

But if a health insurer pays the medical bills — can the claimant still sue the liable party for that cost? Must the party at fault pay for medical bills already paid by a health insurer?

As an example, suppose a claimant injured by an earth mover goes to a hospital. His right shoulder requires surgery. Over the course of several months, having the surgery, along with physical therapy sessions restore, repair, and strengthen the injured shoulder. After deductibles, health insurance pays for all treatment costs, $50,000.

The claimant hires an attorney and sues the construction company liable for the injury. The health insurer files a lien against any proceeds of the lawsuit, essentially arguing that it paid for the medical treatment and should receive any reimbursement provided for it.

In most states, the lien would be effective. So, if the claimant recovers $100,000 in damages for medical costs, lost income, and specials for pain and suffering, $50,000 would go to the health insurer to discharge the lien and the remainder to the claimant.

Health care insurance premiums basically pay for health care costs in advance. The insurer covers the medical cost, but only after collecting premiums over several years. When health insurers set premiums for the plans they offer, they consider whether they can be reimbursed for outlays on claims. If not, they may need to charge higher premiums.

So health care liens in personal injury cases can discourage claimants from filing lawsuits, and, if health insurers benefit most when lawsuits succeed, perhaps they should have the obligation to hire attorneys to pursue personal injury claims for their policyholders.

Insurers and Hospitals

Health insurers contract with hospitals to pay certain portions of normal charges. If a hospital normally charges $150 for a chest x-ray, the insurer may cap the total payment at $100, and the insurer’s contract with its policyholders may oblige it to pay 70 percent of the cost of x-rays. So the insurer pays $70 (70 percent of the $100 agreed maximum cost), and the patient pays the remaining $30. Who pays the additional $50 of the hospital’s normal charge? Nobody. The hospital’s contract with the insurer effectively resets the x-ray charge.

When severe car crashes require expensive medical services, whatever remains after an insurer pays its portion can be considerable. The patient as responsible party owes this amount, and the hospital can collect it from the proceeds of the accident settlement or award. Sometimes hospitals bill patients for not only what they contractually owe, but also the difference between the charge set by the contract with the insurer and what the hospital sees as its normal charge. In the chest x-ray example, the hospital would claim $30 plus $50 from the patient’s injury settlement. This “balance billing” is actually illegal in some states.

Hospital Claims on Settlements

Hospitals need no permission from patients to file liens on accident insurance settlements within certain periods after providing care. But the liens can be for amounts based on normal, not contractual charges patients expect.

What Courts Have Said about Balance Billing

In a Texas federal case, [1] the court ruled held that a hospital had been paid in full by the patient’s insurer and was not entitled to recover anything further. In a Wisconsin state case, [2] the court found evidence that the hospital lien intentionally had disregarded patient rights.

The Maryland attorney general and Florida and Arkansas insurance commissioners have warned health care providers against balance billing. If the practice persists and continues, more adverse court rulings are likely, and more states should take positions accordingly.

The Lamber Goodnow legal team and the co-counsel firms we work with in Chicago are ready to answer any of the health insurance questions you may have. Our Chicago personal injury lawyers never charge a fee, unless we win your case. Get a risk free consultation today.

 

[1] “The statutory hospital lien asserted by Hermann as the basis for intervention in this case is unenforceable because the hospital has been paid in full for the services it provided . . . and there is consequently no debt to secure by the existence of the lien,” Satsky v United States, 993 FSupp. 1027, 1030 (SDTX 1998).

[2] “[F]iling the lien was purely a ploy to try to get as much money as possible,” Dorr v Sacred Heart Hospital, 228 WI 425, 455, 597 NW2d 462 (1999).

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