Health insurance denying payment for car accident related treatment?

Has your health insurer denied paying for treatment related to an auto accident?

I’ve had a number of clients tell me that payment for the treatment they are seeking for injuries sustained due to a car accident has been denied by their health insurer. Invariably these clients have told me that they are told by their respective health insurers that the policy won’t pay because the claims are related to a car accident. Before giving up or otherwise accepting that your health insurance is not liable to pay for such treatment, consider the information below.

Whose and what insurance pays for medical expenses?

If you’ve been in a car accident there are likely several different types of insurance policies that may be available to pay for your injuries. Here are some of the most common types of policies that come in to play during an auto accident:

Medical Payments (“Med Pay”) Coverage in an Auto Policy

Med pay is a type of coverage offered in an auto policy. You’ve likely heard the term “liability only” or “comprehensive” coverage when purchasing an auto policy. Nebraska law requires drivers to purchase liability coverage, which is coverage that will pay for damages the insured causes to other parties, but other types of coverage are not required by law. These other types of coverage are purchased voluntarily and they cover different types of payments than liability coverage. One of these supplemental types of coverage is Med Pay, which is coverage to pay for medical expenses incurred by a covered person. The exact language of the policy will determine who can recover under the Med Pay portion of the policy, but it is typically available for the insured (the person buying the policy) and it will pay for expenses regardless of fault.

Health Insurance

A health insurance policy is available to pay for any necessary medical expenses incurred by a covered person. While it is usually obvious who is covered under the policy, there is often confusion over what is covered by the policy. Undoubtedly, there are exceptions and exclusions. That is, most health insurance policies exclude things like experimental procedures or physicians that are “out of network.” I am unaware of policy language that excludes claims simply because they arise from an auto accident and, in fact, I doubt whether such an exclusion would be enforceable under Nebraska law. If your health insurer has denied paying a claim because it is related to a car accident ask for a copy of the Explanation of Benefits (“EOB”) showing the denial and send it to your attorney.

The at-fault driver’s insurance

My clients commonly say something like “why should my insurance pay when it was the other person’s fault?” The short answer is that the other party and their insurance policy aren’t legally obligated to pay for your injuries unless and until you get a judgment against them in court. In other words, if they do pay anything right after an accident it is completely voluntary on their part. Some insurers will pay for expenses submitted to them by an injured party, some will not. Regardless of whether the at-fault party’s insurer pays any of your medical expenses, your medical expenses are not the only form of damages you are entitled to recover under Nebraska law.

Should you submit medical expenses to your health insurer or to an auto insurer, if available?

I always tell my clients to submit claims to their health insurer if the accident was caused by someone else. Even though Med Pay may be available, having a health insurer pay for claims will help in maximizing your recovery against an at-fault driver. Here is why:

The “Collateral Source” Rule

When we present a demand to an at-fault party’s insurer, we present them with documentation such as medical records and bills. If you’ve ever looked at a medical bill you may have noticed that there is often a large write-off for your health insurer. That is, your health insurer likely receives a contractual discount from your medical providers. This discount is a benefit you receive for purchasing health insurance. Under Nebraska law, someone who causes you injury is not entitled to reduce its liability simply because you get this contractual discount from your health insurer. In other words, we get to present the full billed amount of the medical expenses even though the amount actually paid is much less. However, if payments are made through Med Pay, we typically only see the amount actually paid and thus we can only recover the smaller amount from the at-fault party.

The “Made Whole” Doctrine

Sometimes the amount recovered in a settlement or even at trial does not fully compensate an injured party for all its damages. Normally, an injured party’s insurer is allowed to seek reimbursement under equitable and contractual subrogation when the injured party obtains recovery from another. That is, if your health insurance paid for your injuries they get paid back if you later get a judgment against the at-fault driver. However, because of the “made whole” doctrine, if you don’t recover all that you are entitled to, your health insurer cannot seek reimbursement. Blue Cross and Blue Shield v. Dailey, 268 Neb. 733 (2004). Med Pay coverage from an auto policy is statutorily excluded from the made whole doctrine and they would be allowed to seek reimbursement regardless of the amount recovered from the at-fault party.

The “Common Fund” Doctrine and Other Equitable Reductions

Much like the made whole doctrine, there are other equitable theories which allow for the reduction of the amount an insurer can seek through subrogation. For instance, it is common that an insurer may reduce its right of subrogation or a medical provider may reduce its lien by one-third. The theory behind the common fund doctrine, as well as other equitable theories, is that the injured party bears the burden of paying attorneys’ fees (which is typically a third of the total recovery) and others, such as insurers with rights of subrogation, benefit from the attorney obtaining payment from the at-fault party. See United Services Auto. Ass’n v. Hills, 172 Neb. 128 (1961). Accordingly, it is argued that all those benefiting from the “common fund” should accept a reduction in the amount they are paid. In other words, everyone seeking payment should each bear a pro rata share of the attorneys’ fees. However, Med Pay policies from auto insurers are statutorily excluded from these theories and they get paid back dollar for dollar. Neb. Rev. Stat. § 44-3,128.01.