The astronomic rise in health care costs is forcing many hospitals to scrape for every penny. As a result, some hospitals are laying claim to portions of consumers' auto insurance liability settlements in order to recoup payment for services rendered.
There's nothing wrong with collecting what's owed. When hospitals bill the health insurer or HMO and the consumer, that’s known as “balance billing.” Several courts have ruled the practice illegal.
Hospitals have every right to receive payment for services rendered and can come after you if you or your health insurer haven't paid your bills. In fact, some Medicare+Choice plans allow doctors and hospitals to bill you over and above what Medicare normally pays.
If your health insurer and the health care providers agree on a payment schedule, even if those fees are at a discount, the health care providers can't seek reimbursement from you, once they've been paid by your health plan.
Some hospitals are ignoring the law, when auto insurance liability settlements are involved. Here's how a hospital might try to claim part of your liability settlement.
Say you were injured in an auto accident that was not your fault and were admitted to the hospital because you sustained moderate injuries. You tell the admissions personnel your injuries are the result of an auto accident and you have health insurance. You belong to an HMO, which has an agreement with that hospital to provide you with medical care at a discount. Your HMO picks up the tab for you and the hospital is supposed to consider payment from the HMO as full reimbursement.
The hospital, knowing you were injured in an auto accident, files a lien against any car insurance liability settlement you collect — meaning the hospital gets to collect the difference between what your HMO paid and what the medical care actually cost. For instance, your hospital bill is $10,000 and your HMO's preset agreement with the hospital allows it a discount of 40 percent. Your HMO pays $6,000 and, if you collect an insurance settlement, the hospital will come after you for the remaining $4,000.
| There have
been court cases that ruled "balanced billing" is an illegal practice. |
Courts have ruled "balanced billing" is an illegal practice. In a Texas case (Satsky vs. United States of America), U.S. District Judge Samuel Kent ruled a hospital's attempt to recover payment from former patient Linda Satsky was prohibited because Satsky's health insurance company and the hospital had an agreement on the charges for her care.
Satsky had received a liability settlement as a result of an auto accident. The hospital to which she was admitted filed a lien against any liability settlement she received. Judge Kent ruled; however, that "a lien can only legally attach if there is an underlying debt secured by the lien. . . . The facts prove that Satsky's insurer has paid all of the sums owed to the hospital. . . . As there is no debt, there can be no lien."
In Dorr vs. Sacred Heart Hospital, a case decided by the Wisconsin Court of Appeals, the court ruled a hospital acted in bad faith by trying to collect payment from Beverly Dorr for services rendered. The hospital had filed a lien against any liability settlement Dorr received as a result of an auto accident.
The court ruled Sacred Heart Hospital filed the lien "purely as a ploy to try to get as much money as possible," and stated that there was "ample evidence" to show the hospital intentionally disregarded Dorr's rights to her full liability settlement by trying to collect on the lien.
In addition to the case law, Maryland's attorney general and the insurance commissioners in Arkansas and Florida have specifically warned hospitals and other health care providers about the illegality of "balance billing." The Maryland attorney general claims "no [health care provider], whether under contract with the HMO or not, could charge an HMO subscriber for any treatment which was a covered service."
In Massachusetts, the state insurance department banned “balance billing.” “This program has certainly proven to be successful. Saving tens of millions of dollars not only helps the state, but also keeps our members’ premiums down,” says Shawn Duhamel, legislative liaison for the Retired State, County and Municipal Employees Association of Massachusetts. “Hospitals and doctors had long viewed [balance billing] as a blank check. That practice had to end.”
When you receive a liability settlement after an auto accident, you don't have to give your health care providers a dime if your health insurance company and the hospital or doctor have an agreement on how services will be paid. You might have to hand over a portion of it to your HMO or health insurer, if it paid for your medical treatment. Your health insurance contract might say your health insurer has the right to subrogate — meaning seek payment — if you receive a settlement.
“It’s important for HMO members to know both their rights and their responsibilities with respect to balance billing. Not knowing could cost you hundreds, even thousands, of dollars or endanger your credit rating,” warns Jose Montemayor, the insurance commissioner of Texas.
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