Protecting a Settlement from your Health Insurance Provider

The huge discounts of Health Maintenance Organization or HMO have been imposed on the hospitals and clinics, and the lack of enthusiasm in paying claims, the medical care providers are rubbing each penny. Several hospitals are laying claims as part of the liability settlements of the patients to collect what the patients owe them. But, there are others that go beyond that.

How do health care providers overreach?

The basics of medical insurance payments are easy and simple. A health insurance company will have a contract with a hospital to pay certain percentage or some fixed amount for every type of charge. For instance, the normal charge of a hospital for a chest x-ray may be $150 and the insurance provider contract to cap the total payment due for the chest x-ray at $100. In return, the insurance provider’s contract with the customers may require the insurer to pay 70% of the cost of the x-rays. Hence, when the patient receives an x-ray, the insurer will pay $70 or 70% of the $100 as agreed cost. Then the patient will have the remaining $30. The contract of the hospital with the insurance company has effectively resets the price of x-ray for the insurance provider and its policy holders.

When the patient is involved in an accident, he/she may require extensive medical services. The amount that is left after the insurance provider pays its part may be high. The patient lawfully owes this money and the hospital lawfully can collect it from the proceeds of the accident settlement. But there are times when the hospitals will attempt to get another portion by charging the patient not only the portion he/she owes but also the difference from the charge contracted with the insurance provider and its regular charge. With the chest x-ray example that we have, it means that the hospital tries to claim $30 and the discounted $50 from the injury settlement of the patient. This is called “balance billing” and in some states, this is not accepted and treated as unlawful. But there are some hospitals that ignore the law where the auto insurance liability settlements are involved.

How does a hospital make a claim on settlement?

The simplest method to describe how the hospital claims part of the settlement is through example. Driver A is admitted to the hospital after sustaining some substantial injuries. She has health insurance through HMO, and provides that information to the hospital, but also informs the hospital that she was injured by a defective product. The hospitals, without the patent’s consent, may file a lien on the accident insurance settlement within a certain period which is usually from ten to thirty days after they have given the care to the patient. The hospital files a lien against any settlement that Driver A receives.

The insurance provider settled with Driver A for $10,000 and her hospital bills has amounted to $5,000, hence the 70% or $3,500 was paid by the health insurance of Driver A. The amount she owed personally is %2,500 but instead of collecting $2,500 through the lien, the hospital collects $5,000, where $2,500 Driver A owed plus the $2,500 that it would have billed if not for the discount contracted between and Driver A’s insurance provider. For many places, this hospital breaks the law.

What do the courts say about “balance billing”?

Many patients and are still increasing in number, are filing charges against the hospitals, whether individually or class actions. There are cases in Texas and Wisconsin that resulted in strong language from the courts, and huge judgments against the offending hospitals. The Texas court in Satsky against United States, the judge explains that the hospital, which was fully paid by the health insurance of the patient, was barred from recovering any more funds. A lien can only be attached when there was a debt secured by the lien and the bill is fully paid as per the contract of the health insurance provider with the hospital, and there was no remaining balance for the hospital to collect.

The Wisconsin judge in Dorr vs. Sacred Heart Hospital stated that the hospital filed its lien “purely as a ploy to try to get as much money as possible,” and he further said that it intentionally ignored the rights of the patient in doing such act.

Furthermore, the attorney-general of Maryland and Florida and Arkansas’ insurance commissioners particularly warned the health care providers that “balance billing” is unlawful, and that more states will take an official stance.

Can my health insurance provider take part of my settlement?

Your health insurance provider has the right to participate in your auto accident settlement which depends on what you have agreed to in your policy. Oftentimes, your health insurance provider is entitled to recover everything it paid for your medical care, a process known as subrogation. The principle behind subrogation is that the individual should not have his/her medical bills paid twice, once by his health insurance provider and second time in the form of settlement of judgment for damages in an accident liability case. Instead of having your medical bills paid by your insurance provider, and acquiring the equivalent amount to keep from settlement, you need to pay the amount you received for your medical expenses in the settlement to your health insurance provider.

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