Personal Injury:

Dealing with Health Insurance Providers

The basics of medical insurance payments are quite simple. A health insurance company will contract with a hospital to pay a certain percentage or certain fixed amount for each type of charge.

Balance Billing

When a patient has sustained personal injury in an accident, he or she may require extensive medical services. The copay, deductible, or co-insurance amount that is left over after an insurer pays its portion can be very high. The patient legitimately owes this money, and the hospital legitimately can collect it from the proceeds of the personal injury accident settlement. However, sometimes hospitals will try to get a second slice of the pie by billing the patient not only for the portion he owes according to his insurance policy, but also for the difference between the charge contracted with the insurer and its regular charge. This practice, known as "balance billing," is illegal in some states. However, some hospitals are apparently ignoring the law where auto insurance liability settlements are involved.

More and more patients are suing hospitals, some individually and some in class actions. Key cases in Texas and Wisconsin have resulted in strong language from the courts, and big judgments against the offending hospitals. According the Texas court in Satsky vs. United States, the judge held that the hospital, which had been paid in full by the patient's health insurance company, was prohibited from recovering any further funds. A lien could only attach if there was a debt secured by the lien, and because the bill had been paid in full per the health insurer's contract with the hospital, there was no debt remaining for the hospital to collect. The Wisconsin judge in Dorr vs. Sacred Heart Hospital didn't mince words, stating that the hospital had filed its lien "purely as a ploy to try to get as much money as possible," and that it had intentionally disregarded the patient's rights in doing so.

In addition, the attorney general of Maryland and Florida's and Arkansas' insurance commissioners have specifically warned health care providers that "balance billing" is illegal. Michigan's public health regulations specifically state that the practice is forbidden. As the practice continues, it is expected that courts in more states will rule that the practice is illegal, and that more states will take an official stance.

Your health insurance company often has a right to take part of your personal injury settlement, depending on what you agreed to in your health insurance policy. Often, your health insurance company is entitled to recover everything it paid for your medical care, which is called subrogation. The theory behind subrogation is that a person should not have his medical bills paid twice-once by his health insurer, and a second time in the form of a settlement or judgment for damages in an personal injury liability case. So, rather than having your medical bills paid by the insurance company and getting the equivalent sum to keep from the personal injury settlement, you would have to pay the amount you received for your medical expenses in the settlement to your health insurance company.