Paid or Incurred & Subrogation: A Match Made In Hell?
Imagine, heaven forbid, you've been injured in a car wreck in Texas.
The driver who hit you was drunk. Fortunately, he carried the required minimum amount of liability insurance, $30,000.00.
Let's assume you're a responsible employee of a company that provides medical insurance benefits through a plan you're a participant in. Each pay period a small dent in your paycheck ensures you've got great medical coverage. You have a co-pay, but it's low.
Unfortunately, the car wreck necessitates a night in hospital. You suffered a minor concussion and they want to keep you under observation, perhaps run a CAT scan. You also suffered some significant bruising and maybe a muscle strain. X-rays and an MRI are recommended to be sure there's nothing more significant going on, like a herniated vertebral disc, or a fractured vertebra.
All in all, your hospital bills total $35,000.00. You're discharged, with instructions to follow up with a physical therapist. You then discover you're going to have to miss some work to keep all your physical therapy appointments. You'll have to cash in some sick time. All told, you'll be in therapy for about 12 weeks, and it's going to cost about $7,500.00.
Finally, some $42,500.00, plus a week's worth of sick days later, you've reached "maximum medical improvement"; in other words, after all the therapy, you're as close to the way you were before the wreck as the therapist believes you're going to get.
Let's assume you submitted an authorization to the drunk driver's insurance company that allowed that insurer to obtain your medical bills and a record of the amount your employer's health plan paid directly to the hospital and the physical therapist.
Let's also assume the medical insurer your employee health plan is underwritten by has negotiated deeply discounted contract rates with both of those providers.
Those contract rates mean the providers were paid a little more than Medicare rates for their services, say 35 cents on the dollar. So that $42,500.00 bill actually only cost your medical insurer $14,875.00.
How much is your claim against the drunk driver worth?
$42,500.00 right? After all, that's the value of the treatment you received, at least according to the hospital and the physical therapist, and that's what they billed, isn't it.
You write to the drunk driver's insurer demanding they compensate you for the value of the treatment you received. You're pretty sure they're going to go ahead and cut you a check for the entire $30,000.00 available under their insured's policy aren't they?
The law in Texas today says the value of your medical treatment isn't what the hospital and the therapist billed your medical insurer. Rather, it's what your insurer valued it at; in our example $14,875.00.That's all the other driver's insurance company is prepared to pay to compensate you.
After a lot of back and forth with an unsympathetic bodily injury adjuster, whose job is to deny claims entirely if possible, and at least delay claims payments, you capitulate and accept the adjuster's offer. Well, you think, that sucks. But hey, almost $15,000.00 will help assuage the misery somewhat, right?
Think again, again.
A while back, not long after you finished your medical treatment, you got a letter from a company acting on behalf of your employee health plan's insurance company, the big medical insurer.
The letter said the medical insurer has a right of "subrogation." In other words, a right to get back the amount it paid in benefits to your medical providers from any recovery you get from the drunk's auto insurer.
That $14,875.00 you thought was yours? Turns out it goes straight back to your medical insurance company. What's even worse is the drunk's auto insurer knows all about it, and they cut their settlement check to the medical insurance company directly. You don't see a dime.
This is reality in Texas personal injury claims right now.
After the creation of the "paid or incurred" rule by the Texas legislature in 2002, and a 2011 Texas supreme court decision (http://caselaw.findlaw.com/tx-supreme-court/1573065.html) that imposed a reading of the rule clearly favoring insurance companies over injured individuals, the amount a responsible, insured victim of another's negligence is entitled to recover has been reduced to the payment made by that victim's medical insurer to their medical provider for their treatment. Think about the implications to the value of a claim if the victim is covered not by private health insurance but by Medicare, with it's low reimbursement rates.
This is all a Texas jury is permitted to hear about concerning the value of the victim's medical treatment. Not the amount billed or charged, the amount that doctors and hospitals actually value their services at, but rather the amount paid by a medical insurance company.
Combine this harsh result with a medical insurance company's subrogation or reimbursement right, imposed through the threat of withdrawing continued benefits to the insured, or a lawsuit in federal or state court to recover un-recovered benefit payments (depending on whether the employee benefit plan is subject to federal ERISA (http://www.dol.gov/dol/topic/health-plans/erisa.htm) jurisprudence, or the state common law of contract) and the concept of insurance as a mechanism by which we pass the risk of loss to our medical insurers is eviscerated.
In fact, the loss remains entirely the insured's; in premium dollars, in lost sick time, and in the intangible damages liability claims adjusters believe Texas juries won't award; pain, suffering, and mental anguish. Indeed, juries in Texas are reluctant to award these "non-economic" categories of damages.
Can A Lawyer Really Help?
Suppose in our example you had called a personal injury attorney. Would it make a difference?
A good personal injury attorney will get between his client and the insurance companies involved in his client's claims.
He can prevent direct negotiation between the negligent actor's liability insurer and his client's medical insurer. In some cases he can file a declaratory judgment action either in state or federal court to clarify the terms of subrogation or reimbursement clauses in employee health benefit plan documents.
He can argue application of principles of equity in asserted reimbursement claims; in other words, arguing that strict adherence to the law will result in a patently unfair result.
He can also hold the threat of his client's recovering non-economic damages at trial over the liability insurer, often persuading that insurer to pay something towards those damages over and above just the amount paid to the treatment providers by a medical insurer.
He can negotiate a reduction in the amount the subrogating medical insurance company will accept in satisfaction of its reimbursement claim.
In short, a good personal injury lawyer can bring knowledge and expertise to the situation that a victim simply doesn't have, so as to maximize the likelihood of that victim being able to realize some tangible monetary compensation for their loss.
If you've been injured in a car wreck in Texas, don't let the insurance companies get the better of you. Retain a good car wreck lawyer to fight for your rights and get you the compensation the law entitles you to.