Protecting a Settlement from Your Health Insurance Provider
How does a hospital make a claim on a settlement?
The easiest way to explain how a hospital can claim part of a settlement is by giving an example. Jane Driver was admitted to a hospital after receiving some substantial injuries. She has health insurance through an HMO, and gives that information to the hospital, but also tells the hospital that she was injured by a defective product. Hospitals, without a patient's permission, may file a lien on an accident insurance settlement within a certain period (often between ten and thirty days) after they have provided care. The hospital files a lien against any settlement Jane receives.
The insurer settled with Jane for $10,000. Her hospital bills amounted to $5,000, 70 percent of which ($3,500) was paid by her health insurance. The amount she owed personally was $2,500. However, rather than collecting $2,500 through the lien, the hospital collected $5,000-the $2,500 Jane owed plus $2,500 that it would have charged if not for the discount contracted between it and Jane's insurer. In many places, the hospital broke the law.
What are the courts saying about "balance billing?"
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.
Can my health insurance company take part of my settlement?
Your health insurance company often has a right to take part of your auto accident 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 accident liability case. So, rather than having your medical bills paid by the insurance company and getting the equivalent sum to keep from the settlement, you would have to pay the amount you received for your medical expenses in the settlement to your health insurance company.
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