How to avoid having your credit ruined by unpaid accident-related medical bills
Summary: Getting your accident-related medical bills paid can be tricky. The "other guy's" insurance is unlikely to pay until there is a settlement. There are specific rules to follow to get your bills paid and avoid collections. Here they are:
How to avoid having your credit ruined by unpaid accident-related medical bills**
By Duncan B. Koler, Esq., Law Offices of Duncan B. Koler, APC
**Please note this article does not address how to handle medical bills related to workers compensation cases.
In 35 years of practice working on personal injury cases I have seen consistent misunderstanding and mishandling related to payment of an injured person’s medical bills after an accident. Not knowing how to deal with the bills often leads medical providers to send them to collections.
It’s common sense that medical bills related to an injury that was clearly caused by someone else should be paid by the at-fault party or their insurance. Unfortunately, common sense doesn’t always prevail in the law. If you don’t know what the rules are, there is a good chance your medical bills will not get paid on a timely basis and could get sent to collections.
Med-Pay and PIP Coverage
The first thing to understand is that in most states the at-fault person’s insurance doesn’t legally owe you anything – unless and until you either: (1) reach an agreement with them to settle your claim; or (2) file a lawsuit, take your case to trial and win a judgment. This situation gives the at-fault insurance leverage against you. They can wait and bide their time, while your bills accumulate and pressure builds for you to pay them to avoid collections. This can motivate you to settle prematurely (and cheaply) just to get your bills paid.
To address this unfair situation, many states have enacted regulations requiring insurance companies to offer what is called “medical payments coverage” (“med-pay”) or “personal injury protection coverage” (“PIP”) in their motor vehicle and premises insurance policies. If you purchase this coverage from your insurance company, they are obligated to step up and pay your reasonable injury-related medical bills. Subsequently, if you settle your claim with the at-fault party, your insurance company is entitled to reimbursement for the bills they paid. In other words, what this means is that if you purchase this coverage, your insurance will pay the bills up front (avoiding collections) and then get reimbursed at the end of the case. Your insurance company’s right to reimbursement is called “subrogation.”
Insurance policies with med-pay/PIP coverage typically require: (1) the medical bills be caused by a covered accident; and (2) the medical bills must be reasonable and necessary. Insurance companies also vary widely in how well they handle payment of medical bills for their injured insureds. Some are reasonable, but others can be very aggressive and limiting as to what they consider to be caused by an accident (for example, if you have a similar pre-existing injury or condition), or reasonable and necessary. I would say three things here. First, be careful about alternative healthcare. Chiropractic and acupuncture are generally accepted these days, but there are other forms of cutting-edge testing and therapy that are not generally accepted by the medical community, and may not be covered under med-pay/PIP. Second, med-pay/PIP coverage can be very cost-effective (i.e., fairly cheap), and it’s not subject to a huge deductible like many health insurance policies are these days. In my opinion, it is a good idea to buy this kind of coverage. In a modest auto accident/injury case you can easily rack up $5,000 - $10,000 in medical bills based on an ER visit and physical therapy or chiropractic to help recover from neck or back strains. Consider purchasing enough med-pay/PIP coverage to cover bills in this range or even higher, in case you have more severe injuries. Third, do some internet research regarding which insurance companies are fair in paying their insureds’ bills, and which ones try too hard to find reasons not to pay.
As noted above, the at-fault person’s insurance will almost always refuse to pay the medical bills before there is a settlement or judgment against their insured, because they don’t have to legally. Because of this, it does no good to give the hospital or your healthcare provider instructions to bill the other guy’s insurance. The bills won’t get paid and will eventually go to collections.
This is what you should do:
(1) Before an accident: Talk to your insurance broker or an attorney about options available to you for med-pay/PIP coverage in your state.
(2) After an accident: If you have purchased med-pay/PIP coverage, you should report the accident to your insurance company and have them assign a claim number. Instruct the hospital and any healthcare providers who provide injury-related services to you to bill your insurance company, using the claim number given to you by your insurance company.
(3) If you have med-pay/PIP, follow up with your insurance company to make sure they are doing there job, paying the bills. Periodically ask them for a list of the bills they have paid and not paid. If you receive notices or bills from your healthcare providers showing the bills are not paid, call and ask your insurance adjuster why. Do not assume that everything is being handled properly and simply put your bills aside unopened. If you hire an attorney, ask if they will be handling these tasks.
If you have health insurance, it may cover your medical bills from an accident. I routinely hear from clients that they have been told that health insurance will not cover bills related to an auto accident, but this is a misleading half-truth. It is true that coverage for accident-related bills will depend on the specific language of the health insurance policy. A health insurance policy is a contract and the words of the contract define the obligations of the insurance company. However, in practice, what I have seen is that health insurance will process and pay bills for injuries caused by someone else, subject to certain rules:
(1) If you also have med-pay or PIP, that coverage must be used up (“exhausted”) before health insurance will pay. You (or your attorney) must usually obtain written proof from your auto or premises insurance company that the med-pay or PIP policy limits have been spent, including a list of the bills that have been paid, and provide that proof to your health insurer. Additionally, many health insurers require that you submit a signed accidental injury report or questionnaire before they will start paying your bills. Bottom line: You need to be proactive to make sure your health insurance starts processing and paying for accident-related bills.
(2) Like your med-pay/PIP insurer, your health insurer will be entitled to subrogation reimbursement for the bills they paid, out of any settlement or judgment you receive from the at-fault party. Do not settle your claim without taking into account the subrogation rights of your own insurance company.
(3) Again, like the situation with med-pay/PIP, you should not simply assume that your health insurance company is doing everything correctly. If you receive bills showing lack of payment, that is a sign that something may be wrong. Sometimes there is mishandling by the insurance company, but just as often, the hold up may be due to your health provider’s billing. Open your bills and keep track of what is being paid/not paid and contact your insurance company and your provider if there is a problem. Also take the time to review correspondence from your insurance company showing what they are paying and not paying (called Explanation of Benefits or “EOB’s). Again, in my opinion this is something a good attorney should assist with as part their representation of you in your injury claim, but you should ask the attorney if this is included to make sure.
(4) Medicare and Medicaid behave similar to regular health insurance for the most part. They will want proof that your med-pay/PIP coverage is exhausted before they will begin to pay your accident-related bills. Additionally, they need to be notified in writing that you have been involved in an accident, have injuries and are receiving care and incurring bills. They also have a right of subrogation for reimbursement from any settlement or judgment you receive for your injuries.
(5) Even if you have a high deductible on your health insurance, it makes sense to run your accident-related bills through health insurance after any med-pay/PIP is exhausted, so that your deductible is diminished for when you may need coverage for another medical condition or injury.
What to do if you have no insurance coverage of your own:
(1) Are you eligible for Medicaid or Medicare? Depending on your age, income and/or disability, you may become eligible after an accident occurs and gain coverage for your accident-related bills, even after an accident has occurred.
(2) Are you able to purchase health insurance? If so, you may be able to get coverage for your accident injuries, even after-the-fact if there is no pre-existing condition waiting period. This also depends on your deductible, of course.
(3) You may be able to make arrangements with your health care providers so that they will hold your account and not refer it to collections. This usually requires that you make modest monthly payments to the provider. If you have an attorney, your attorney may be able to arrange for your providers to hold the account, in exchange for your granting your health provider a lien or partial assignment of your claim proceeds, and promising to pay them once the claim settles. This is often done with chiropractors and physical therapists, who may be familiar with and trust your attorney. An attorney’s reputation with local health care providers is important. If a provider is willing to hold your account pending settlement, they would likely require both you and your attorney to sign an agreement for the lien or assignment.
(4) If you cannot do any of the above, it is still best to take the bull by the horns and contact each of your health care providers to explain your situation, promise to pay when you can and request forbearance. If you don’t ask for forbearance and make no payments, you will likely be sent to collections.
The above is not an exhaustive list of the problems that can arise when trying to get your bills paid after an accident to avoid collections. Proper handling of these issues requires diligence and can be time-consuming and stressful for an injured person. It can be an important part of the service that an attorney provides to his or her injury clients, so that they can focus on recovering from their injuries.
Finally, the advice I provide in this article is general advice that may or may not be applicable to your specific situation. These are complicated legal issues best answered by an attorney licensed to practice law in your state, based on the specific facts of your case and the insurance you may or may not have. My providing the advice in this article does not create an attorney-client relationship between you, as a reader of the article, and myself. I require a written attorney fee agreement for all of my clients.
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