Personal Injury Question: If Bills Are Covered By Health Insurance, Can You Claim That Money In Suit?

This is another post inspired by a Google search that someone used to find our website.

And the short answer is “Yes.”  A person filing a personal injury lawsuit may seek to recover medical expenses even if  those medical expenses were paid through health insurance or some type of other insurance plan.  However, there are two very important issues that arise when insurance pays for medical expensese.

The first issue is subrogation.  Most health insurance policies have subrogation clauses.  In general, these clauses say that the health insurance company will pay for any medical care that its customers incur as a result of an accident.  However, if the customer makes a recovery against a third-party (in a settlement or lawsuit) then the customer has to use the proceeds to reimburse the  insurance company back  the amount the insurance company paid.  So a victim can try to recover the medical expenses, but then the victim may have to use the proceeds to pay the health insurance company back. 

Subrogation is complicated because there is often a dispute about how much the victim has to pay back, if any.  There are a number of different legal issues that govern this question depending on the specific facts of the case.  The fight over the amount to be paid back often takes months to resolve.

If you would like more information on subrogation, I’ve written extensively on it, and you can read some of those posts:

• Personal Injury Subrogation Explained
• Personal Injury Subrogation In The News
• Personal Injury Subrogation Continued

The second issue is known as the “paid or incurred” rule.  Generally, health insurance companies have contracts with doctors, hospitals and other medical providers that allow the insurance companies to pay the providers discounted rates.  For example, a procedure might cost a person without health insurance $1,000.00, but a health insurance company is able to negotiate a price of $750.00 for the same procedure.  As a result, when a person with health insurance gets the procedure done, the bill will be for $1,000.00, but there will be a contractual adjustment of $250.00, and the insurance company will only have to pay $750.00 to pay for the procedure in full.

In the past, the rule in Texas was that defendants shouldn’t receive a benefit from a victim’s purchase of health insurance.  When the case went to the jury, the jury would be asked to award the full $1,000.00 and the jury was never told that health insurance was involved or that the bill was reduced.

But times have maybe changed.  Writing with an amazing lack of clarity, the legislature adopted a new rule in 2003 that says:

In addition to any other limitation under law, recovery of medical or health care expenses incurred is limited to the amount actually paid or incurred by or on behalf of the claimant.

Texas case law is clear that the word “incurred” means the full amount of the bill.  At the same time, it’s apparent that the amount actually paid is the discounted amount.  So what are courts supposed to do?   The bill doesn’t say the plaintiff can recover the lesser of the amount paid or incurred.  Likewise, it doesn’t say the plaintiff can recover the greater of the two amounts. It just says that a plaintiff’s recovery is limited to one of these two measures of the bills, but it doesn’t provide any mechanism to decide which of the measures should be used when. 

This is a fight that is argued in every personal injury case, and there still isn’t a clear decision from any appellate courts about how this issue is supposed to be addressed.  Thankfully, the Texas Supreme Court recently agreed to hear a case on this provision so we might get some clarity in the next couple of years.

In the meantime, courts across the state are all treating this provision differently.  Generally, here in Travis County, the judges are allowing plaintiffs to present evidence on the full amount of the bills (the $1,000), but after the jury returns a verdict, the amount ultimately awarded is reduced to reflect the contractual adjustments.