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How to keep your health insurance from taking your money

Friday, February 13, 2015
The general rule is your health insurance is not entitled to reimbursement

If you were injured in a car wreck and you are seeking treatment for your injuries, we always tell folks to use your health insurance to pay for your medical treatment.  Frequently, though, when your health insurance gets wind that your medical expenses were caused by the negligence of another, your health insurance company will send you a questionnaire asking you for information about your accident, injuries, and whether you are represented by an attorney.

Sthethoscope and medical documents

Your health insurance company does this so that they will know if they are entitled to be reimbursed for the medical expenses they pay on your behalf for accident related treatment. However, not all health insurance policies are entitled to reimbursement in Virginia. In fact, the general rule is exactly the opposite in Virginia for health insurance, with a few exceptions.

If your health insurance is provided through Medicare or Medicaid, both are entitled to reimbursement to some degree from your recovery from the third party tortfeasor. Medicare is considered a “secondary payor” but it will make conditional payments subject to reimbursement. Medicaid is entitled to a statutory lien against any settlement or judgment “to the extent of such legal liability” of the third party tortfeasor. A tortfeasor is the person who committed the tort. A tort is a civil wrong, other than a breach of contract, that gives rise to a lawsuit for damages against another person, like a car wreck. A third party tortfeasor is any individual or entity that is or may be liable to pay for all or part of the expenditures for medical expenses.

This is not as simple as it appears, though, and there has been much litigation on “the extent of legal liability” in Medicaid cases. According to the Supreme Court, only the amount you recover from the third party tortfeasor that represents medical expenses is subject to the lien of the state government. This scenario may seem odd and you may ask why wouldn’t the tortfeasor be liable for all of my medical expenses?

In some states, the law permit partial recovery based on allocation of fault. In Virginia, the law eliminates any recovery if the plaintiff is at fault at all. Additionally, we frequently see clients who have to settle for much less than the case is worth because the insurance policy limits are well below the amount of harms and losses suffered by the plaintiff.

For example, imagine you had $75,000 in medical expenses but only $100,000 in insurance coverage. The driver of the other vehicle is the typical citizen who owes more money on his house, car, and credit cards than he has. We would call that person insolvent and ultimately judgment proof. He is judgment proof because even if you went to court can obtained a judgment for $300,000, you would likely never see more than the $100,000 that he had in insurance coverage. This would essentially force you to settle the claim for the policy limits of $100,000.

Would Medicaid have a lien for the full $75,000 in medical expenses it paid?  The answer is no, because the third party tortfeasor only ended up paying for about 1/3 of the value of your case and thus, only 1/3 of the value of your medical expenses.  So the third party tortfeasor paid $25,000 of your medical expenses and Medicaid’s lien should be limited to that amount.

If your health insurance is an individual plan that you signed up for and you pay for, then you will not have to reimburse your health insurance company for any medical expenses. So even if your health insurance company ask you for information, you will not have to reimburse your medical expense when you settle your claim.

If you policy is provided through your work, that answer might change even though you contribute some to the policy.  If your policy is provided through your employment, the Employee Retirement Income Security Act, a federal statute that preempts state law, allows your health policy to recover the full amount of medical expenses paid as a result of a third party tortfeasor if ,and only if, your policy is self-funded. Self-funded means that the general assets of your employer pays your medical expenses, not an insurance company. If your employer is only responsible for the premium and the insurance company is responsible to pay the medical expenses, then your plan is not self-funded, it is insured.

This is much more complicated a question than it appears on its face because policy documents can be hundreds of pages and you might have to dig deeper to find out if t he plan is truly self-funded. Many plans claim to be self-funded, but, in reality, it is not. If it is, the plan is entitled to reimbursement that is called an equitable lien.  If not, Virginia law prohibits reimbursement.

If you don’t know what type of plan you have, you need to contact a Virginia personal injury lawyer to investigate.  Even if your plan is self-funded, there are some things that a qualified Virginia personal injury lawyer can do now to put you in a better position to negotiate a reduction  later.

If you have questions, email or call us for a free personal injury consultation.