Should you use your health insurance to pay for accident-related treatment?

One question that I often get from clients is whether they should use their health insurance to pay for accident-related treatment. Whether you have a private or public health plan, the answer is always yes. But why?

  1. Using your health insurance means that you receive the benefit of contractual adjustments. A contractual adjustment is an amount of money that a healthcare provider must write-off pursuant to a provider agreement they have with your health insurance company. This adjustment is usually significant. The amount adjusted is eliminated from your patient account and the healthcare provider cannot balance bill you for these adjusted charges. For example, if the bill is $10,000, and the contractual adjustment is $6,000, the total amount of the bill for which you are responsible cannot exceed $4,000.
  2. Using your health insurance means that your health insurance pays some or all of the remaining portion of the medical bill. How much your health insurance pays toward your bill is largely a function of your remaining deductible and co-pay obligations. Assuming you have met your deductible, your health insurance company will pay the remaining balance of the bill subject to any co-pays. So continuing our example from above, your health insurance company will make a payment of up to $4,000 leaving you with no balance, or a small balance equal to your co-pay and/or remaining deductible. Under government plans (Medicare and Medicaid) there is generally no patient balance after adjustments and insurance payments.
  3. The defendant’s auto insurance company must compensate you for the full amount of the medical bill regardless of any contractual adjustments and health insurance payments. This is where the benefit of using health insurance is realized. Virginia has something called the collateral source rule which prevents the defense attorney from telling a judge or jury that you have health insurance and whether your health insurance company paid your medical bills. So long as you can prove that the charges are reasonable, customary, and related to the injuries you sustained, you are entitled to be paid on the total amount of the bill. Referring back to our hypothetical, even though $6,000 was contractually adjusted off the bill, and your health insurance company paid the remaining $4,000, you still get to recover the full $10,000 from the defendant’s auto insurance carrier. By using your health insurance, you realize a net benefit of $10,000. By not using your health insurance, you would owe your medical provider $10,000.

Some health plans are entitled to be reimbursed for the amount they pay for your accident-related treatment. This is referred to as a “right of subrogation” or a “right or reimbursement.” This right is held by only those private health plans which are wholly self-funded ERISA plans. A personal injury attorney can help you determine whether your health plan qualifies as a wholly self funded ERISA plan. In order to make this determination, your attorney will examine a copy of the health plan’s IRS Form 5500 and the Summary Plan Description.

In addition, state and federal health plans like Medicare, Medicaid, and TRICARE are entitled to be reimbursed from an injured victim’s recovery. These rights of reimbursement are governed by state and federal regulations.

The good news is, the amount paid by private health insurance to your healthcare provider is generally a small percentage of the total bill. The reimbursement rate is even lower if you have Medicare, Medicad, or TRICARE. So even if you have to reimburse your health plan from your recovery, you will still benefit by using your health insurance for accident-related treatment.

If you have been injured in a motor vehicle collision, make sure to always use your health insurance and call a personal injury attorney immediately to protect your rights.

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