Insurance For Everyone?

You paid for health Insurance and auto Insurance. You’re prepared, right? Then, that fateful day comes when you’re driving down I-75 and a drunk driver merges into your lane. Suddenly, you find yourself waking up in the emergency room. While the emergency team examines your injuries, you’re glad you’re prepared.

Flash forward 30 days. What’s this? Your health insurance carrier is requesting to be repaid for bills that they’ve paid for your medical treatment. Your auto insurance is also demanding to be repaid. How can this be? You paid for the coverage; why should you have to pay them back?

It’s called subrogation, and virtually every auto- and health-insurance carrier in Ohio writes provisions such as these into policies. This provision requires that you, as their policy holder, repay them for the monies they have expended on your behalf when you decide to assert a claim against another person.

Here’s a summary of how it works: Your health insurer, as a condition to providing payment to a doctor, required the doctor to accept a schedule of “usual and customary” charges that the doctor has agreed, in advance, to accept for the medical services he would render. It makes no difference that the procedure normally billed by the doctor is, say, $200 per session. The insurance carrier will pay only $75 for the procedure, and the doctor has agreed with this payment schedule, agreeing further to write the balance off as a “cost of doing business.”

Why do doctors do this? If the doctor doesn’t cooperate with the health insurance company, those people that are insured with that particular insurance carrier will be required to seek medical services elsewhere. So, in the interest of preserving business, the doctor accepts a pay-cut. Your doctor now needs to see more people in an average working day, with shorter scheduled appointments, in order to receive enough money to pay overhead, meet payroll, and, hopefully, make a reasonable profit.  And remember, when the Health Insurer pays your doctor, they expect to be paid back by you in the event you get compensated by the Drunk Driver’s insurance carrier. So, exactly what did the Health Insurer pay? Interesting question!

What about your auto insurance coverage? You believe you have coverage that provides for payment of your medical bills. Did you wonder why your doctor wanted to submit his bill for medical services to your auto insurance company rather than your health insurance carrier? Your auto insurance carrier will pay 100% of the doctor’s bill without requiring the doctor to write-down his balance. Unfortunately, auto medical payment coverage is usually limited in amount. Typical coverage of $1,000, $2,000, or $5,000 is not uncommon. And, once the auto insurer has paid out the medical payment coverage, it’s gone. But, remember, you still need to pay them back if you make a recovery!  So, exactly what did the Auto Insurer pay? Interesting question! 

What about uninsured motorist coverage? If the other driver has a $25,000 policy, and assuming you collect this sum, your own uninsured motorist carrier would be entitled to reduce the amounts they have to pay you to compensate you for your injury. It works like this: The other driver has $25,000 in coverage. Your own policy provides for uninsured motorist coverage of $50,000. Therefore, your own insurance company will only have to pay you $25,000, not the $50,000 you obtained in coverage. And, from the original $25,000 you obtained from the other driver’s insurance company, you have to pay back your own subrogated carrier. Potentially, that first $25,000 of coverage could be substantially reduced, to even $0, for the monies you had to pay back.  And again, exactly what did the Auto Insurer pay? Another interesting question.

As you can see, your insurance premiums continue to go up, while artifice in the insurance industry has contrived mechanisms to pay you less.  Here’s another twist. As you worry about how your compensation is being nibbled away, you have to consider the difficulties you may encounter in establishing that the other party is solely negligent for the injuries you have sustained. Say, for instance, that the drunk driver tells his insurance company that he believes you were exceeding the speed limit. His insurance company will, in all likelihood, advise you that they are reducing the amount they feel obliged to pay by your own comparative negligence. Instead of paying 100% of your damages, they now propose to reduce this amount to, say, 75% based upon their own determination that your negligence should be assigned a 25% negligence factor.

We live in a complicated world, with complicated issues. Most of us trust others to give us fair insight into the decisions we need to make. It is unfortunate that something so simple should be the subject of such utter complication. 

Daryl K. Rubin is a General Partner in the Law Firm of Rubin-Zyndorf and Associates.