Protecting a Settlement From Your Health Insurance Provider

"Why should I have to protect my settlement from my hospital and health insurance company?" It's a fair question. Health maintenance organizations (HMOs) have forced deep discounts on hospitals and clinics. They are also reluctant to pay many accident-related claims. So, medical care providers try to scrape for every penny. Some hospitals claim part of their patients' liability settlements to collect what patients owe them. But some reach further than that.

Your health insurance company is also interested in reimbursement for what it paid for your health care from your settlement. That keeps you from benefitting by having your medical bills paid twice — once from insurance and once from your settlement.

The following summarizes best practices for protecting a settlement from your medical and health insurance provider. Speak with an accident attorney if you have specific questions about your car accident claim.

How Do Health Care Providers Overreach?

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

For example:

• A hospital emergency room's standard charge for a chest X-ray is $150.
• The insurer may contract to cap the total payment for a chest X-ray at $100.
• In turn, the insurer's contract with its customers may require the insurer to pay 70% of the cost of X-rays. So, if you get a chest X-ray, the insurer will pay $70 (70% of the $100 agreed cost).
• You must pick up the remaining $30 (the co-pay).

Who's on the hook for the extra $50 of the hospital's regular charge? Nobody. The hospital's contract with the insurer resets the X-ray price for the insurer and its policyholders.

When you're in a car accident, you may need extensive medical services. The amount left over after your insurer pays its part of the contracted rate can be very high. You owe this money as your co-pay obligation. So, the hospital can collect the repayment from the proceeds of your accident settlement.

Going back to the above example, the hospital charges $150 for the X-rays after a car accident injury. But your insurance company contracts with the hospital to set the cost of an X-ray at $100. When the insurance company pays its part, $70 in this case, you, as the injured person, still owe a $30 co-pay. If you don't pay your $30 part of the medical costs, the hospital can recover that amount from your settlement.

But sometimes hospitals try to get a second slice of the pie. They do so by billing the accident victim their regular rate instead of the rate they contracted with the insurer. In our chest X-ray example, that means that not only would the hospital try to claim the $30 you owe, but it would also try to claim the $50 difference between its regular and insurance company rates.

The at-fault driver's auto insurance may be responsible for your medical treatment. However, in some situations where you use your personal injury protection (PIP coverage) or MedPay from your car insurance policy, it becomes crucial to understand how billing works.

When a hospital bills you more than what they have agreed with your insurance claims department, it's known as balance billing. This practice can make the medical payments, including out-of-pocket expenses, add up quickly.

How Does a Hospital Make a Claim on a Settlement?

The easiest way to explain how a hospital can claim part of a personal injury lawsuit settlement is by giving an example. A hospital admitted Jane Driver after she received substantial injuries due to another driver, the at-fault party. She tells the hospital that she has health insurance through an HMO. She also tells the hospital that her injury is from a defective product, and she has filed a personal injury claim to recover her damages and attorney's fees.

Hospitals may file a lien on an accident liability insurance settlement amount without a patient's permission. They must do so within a certain period (often between 10 and 30 days) after providing care. So, the hospital files a lien against any settlement Jane receives.

Jane received a personal injury settlement for $10,000. Jane's hospital bills are $7,500 at the hospital's regular rate. But, because Jane's insurance company contracted lower rates with the hospital, her bill is $5,000. So, there's a $2,500 difference between the hospital's regular rate and its contracted rate with Jane's insurer.

Jane's insurance company pays 70% of its contracted rate. So, its part of the bill is $3,500 ($5,000 x 70%). Jane's responsibility (co-pay) is the remaining 30% of the contracted rate, or $1,500 ($5,000 x 30%).

However, the hospital billed Jane the full $7,500 instead of the $5,000 contracted rate. So, instead of recovering just the $1,500 that Jane owes from her settlement, it recovers $4,000 from Jane's settlement. That's the $1,500 Jane owed plus the $2,500 difference between its regular rate and its contracted rate with Jane's insurance company. In many states, the hospital broke the law.

What Are the Courts Saying About 'Balance Billing?'

More and more patients are suing hospitals. Some are suing individually, while others are pursuing class-action lawsuits. Key cases in Texas and Wisconsin have resulted in strong language from the courts. These have concerned patients who, after their auto accident, were faced with hefty bills. They also resulted in significant judgments against the offending hospitals.

In the Texas case of Satsky vs. United States, the patient was involved in a car accident. The patient's insurance company paid the hospital in full. The court ruled the hospital could not recover any further funds. A lien could only attach if it secured a debt. But the insurance company paid the bill in full per the health insurer's contract with the hospital. So, 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 had intentionally disregarded the patient's rights.

Other states followed suit. The attorney general of Maryland warned health care providers that balance billing is illegal. Florida's and Arkansas' insurance commissioners have done the same. Michigan's public health regulations expressly forbid the practice. The California Supreme Court unanimously upheld a state law barring balance billing. 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.

How Can I Protect Myself Against Balance Billing?

In a nonemergency situation, ask many questions about how the hospital bills. You can also insist that all the services you receive are in-network. But situations that give rise to an injury settlement are often emergencies. You likely don't think about or even ask questions in these cases.

In the case of an emergency, review your hospital bill thoroughly when you get it. If you think you're the victim of balance billing, check whether the practice is illegal in your state. You may be able to file a complaint with the appropriate state agency. You can also contact an attorney experienced in personal injury for legal advice.

Can My Health Insurance Company Take Part of My Settlement?

Your health insurance company often has a right to take part of your injury settlement to recover some of what it paid for your medical care. It depends on the terms of your health insurance policy. This practice is called subrogation.

The theory behind subrogation is that you should not have your medical bills paid twice, once by your health insurer and once by a settlement or judgment in an accident liability case. So, you would have to reimburse your insurer for part of their medical expenses.

Speak to a Car Accident Lawyer Today

Understanding who's entitled to what in a car crash or any other personal injury case can be complex. An issue involving an insurance carrier, hospital, or medical provider can get even murkier. It's vital to understand who is responsible for what after your car accident.

Luckily, you can contact an experienced personal injury attorney. A personal injury lawyer will know the relevant insurance coverage laws in your state and help protect you from unintended outcomes. They might even be able to give you a free case evaluation.