An issue that commonly arises in a personal injury case is whether or not you should use your health insurance. That decision depends on many circumstances. But before answering this question, we should discuss how the typical health insurance policy works.
When you have health insurance, you become part of a vast network of hospitals and doctors who participate in your health insurance program. These are called “network providers.” In order for a health care provider to become part of the network, the provider must agree to be bound by certain allowable charges that are set by the insurance company. For instance, let’s say your family doctor is a part of your health network. You go see the doctor for a medical condition. After the visit, the doctor generates a bill for the services rendered. This may include an office visit, x-rays, etc. With each procedure, there is a separate charge. As a network provider, your doctor has agreed to accept a lesser amount for the services. So, if your doctor charges $100 for an office visit, the insurance company may only pay the doctor $40 and you might make a co-pay of $20, for a total of $60. However, under the doctor’s network agreement with your health insurance company, your doctor is required to write-off the remaining $40. This is called a “contractual adjustment.”
Now, let’s assume you are injured in a car accident. You have medical bills of $10,000. Prior to Texas tort reform (and the passage of Tex. Civ. Prac. & Rem. Code, Section 41.0105), you could use your health insurance and still claim the entire amount of your medical charges as damages in your injury lawsuit. This would be true even if your health insurance only paid $4,000 and the doctor adjusted the rest of your bill. So, in this example, you would be entitled to submit your entire $10,000 medical bill rather than just the $4,000 actually paid. This might result in a settlement of $20,000, even though you only incurred $4,000 in paid medical expenses. The theory was that the at-fault driver should not benefit from your health insurance. Likewise, the person who caused your injury is responsible for the “reasonable and necessary” charges for your medical treatment regardless of whether or not you have health insurance.
However, after Section 41.0105 took effect in Texas, this all changed. Now, if you use your health insurance, you are only allowed to claim the amount actually “paid or incurred” for treatment of your injuries. The amount that your doctor writes off as a contractual adjustment may not be claimed as part of your damages. Taking our prior example, if your recoverable medical expenses are only $4,000, then your settlement might be around $8,000. As you can see, this is a drastically different result.
At first glance, you might think this is fair. And maybe in some ways it is. But now the negligent party who injured you in the car accident is liable to pay you much less for the very same injury only because you used health insurance for which you paid the premiums. In other words, the negligent party has benefited from your health insurance even though that person never paid a dime for it. Nevertheless, this is the law in Texas. And whether you like it or not, we all have to live with it unless Section 41.0105 is repealed.
Whether or not to use your health insurance in a personal injury case depends on may circumstances and should be decided on a case by case basis. The major factor I consider is the seriousness of the injury. In cases where the injuries are very serious, I encourage the client to use their health insurance. This is because the health costs can get very expensive. Even if the recoverable medical bills are reduced by health insurance, the value of the case comes from the seriousness of the injury rather than the amount of the medical bills.
However, in those case where the client has relatively minor injuries (such as a soft-tissue injury), I might encourage them not to use their health insurance. Usually the client’s medical treatment can be handled on a “letter of protection” from the attorney rather than using health insurance. For example, if no insurance is used, the total recoverable medical bills might be in the range of $7,000 to $10,000. Then the client can claim the entire medical bill as damages. As such, the amount of the settlement would likely be more. After your lawyer and doctor negotiate the outstanding medical bills, the client is able to enjoy a greater net recovery. However, if insurance was used, the recoverable medical bills might only be $2,000 to $3,000 resulting in a lower settlement and a lesser net recovery to the client.
But every case is different. And whether to use your health insurance should be decided after consulting with your personal injury attorney.