Medical Payment Reimbursement – Contractual Obligations You Need to Know

If you obtain medical treatment through your health insurance (e.g., Cigna, Blue Cross, Aetna, etc.) and the “med-pay” provisions of your car insurance policy (see Med Pay Coverage for additional information) for personal injuries which were the responsibility of another individual, you will likely be obligated to pay your health insurance and car insurance back for the payments it made for your treatment, should you be successful in obtaining a settlement or judgment from the at-fault party. This requirement for reimbursement will be found in the language of your health insurance policy and car insurance contract. Typically, at the time of treatment for your personal injuries, your doctor will hand you a form that asks whether your injuries were the result of someone else’s act. Additionally, you will likely receive a letter in the mail from your health insurance carrier asking whether particular treatments you recently received were the result of someone else injuring you (such as in a car accident, slip and fall, dog bite, etc.). You have to truthfully and fully answer this questionnaire, or risk being in violation of your health insurance contract. Depending on the nature of the contract you have, you may be obligated to pay back up to 100% of the amount your health insurance paid on your behalf (see ERISA Liens and 100% Reimbursement for additional information), or as little as 0%, should certain legal protections come into the equation. On this latter note, because of two very important California laws, your personal injury attorney will likely be able to negotiate down the amount you owe to your health insurance provider. The first rule, known as the Common Fund Doctrine, states that if you retain a personal injury attorney who successfully obtains a settlement or judgment on your behalf (while your health insurance company did nothing to assist in obtaining the settlement/judgment), the amount of reimbursement sought by the health insurance must be reduced by the percentage the attorney retained out of the settlement. For example, if your health insurance provider spent $6,000 on medical bills, and your attorney’s fee was 1/3 or 33% of the settlement, the amount the health insurance provider has to reduce their reimbursement by is 1/3 of $6,000 (i.e., $2,000), making the final amount of reimbursement $4,000. Off the top, because you hired a personal injury attorney, you will be able to put an additional $2,000 in your pocket, and not the insurance company’s. The second rule, known as the Made Whole Doctrine, states that if you are not “made whole” by way of the settlement you obtain, the health insurance company must waive the entire amount of the reimbursement they seek. This is a powerful argument your personal injury lawyer will make to the health insurance provider if the value of your claim exceeds the amount you obtain. For example, you were severely injured in a car accident by someone who only has a $25,000 policy and no other assets to pursue. Your medical bills are $15,000 and you required surgery to address a broken foot. Clearly, the value of your case exceeds $25,000. As such, because you have not been “made whole” by way of the low settlement amount, your insurance company will waive their right to reimbursement and you will owe them nothing. Your personal injury lawyer will be able to guide you through this process to ensure that the most amount of money is put in your pocket when your case concludes.