October 5, 2017
In personal injury cases, the aggregate amount of medical bills is the determining factor in their valuation. Though it is common practice for the injured party to ask for three times their total costs from the injury, insurance adjusters base their maximum settlements from actual amount of the medical bills themselves. Though this seems pretty straightforward, determining the aggregate amount the adjusters must consider provides some challenges. The North Carolina Rule of Evidence 414 only allows evidence of the amount actually paid, or that the patient and the patient’s health insurer actually have to pay to satisfy the claim.
Again, this rule seems simple: the injured party can only offer evidence of and thus only recover the amount that they were billed by the provider. Additionally, the injured party can recover the amount the insurance company was responsible for. Unfortunately, the relationship between medical providers and major insurance companies complicates this issue, hence the reason for a rule of evidence addressing it. Medical providers initially bill an entire amount to the patient’s insurance company, reflecting the costs of the services to the patient. However, providers usually have deals set up with those major insurance companies, where the providers agree to accept less than the billed amount from the insurer to satisfy the bill. The portion that the medical provider is willing to accept from the insurance company plus the amount billed directly to the patient is called the “adjusted amount”. The medical providers agree to do this because each insurance company values certain procedures differently, and this practice allows the medical provider to accept insurance for a bigger number of patients. While this system works well for medical insurers and medical providers, it puts a wrinkle in working with claims adjusters for personal injury cases as the adjuster will only consider the adjusted amount for medical bills when determining how much to settle a case for.
Say for example Lucky Larry is in a car accident with Dangerous Dale, and Dale is at fault. He is seen at the emergency room at General Hospital one time and the hospital sends one bill for all of the services he received for his injuries. The cost of his visit was $2,000. Larry has Acme Medical insurance and only has a co-pay of $100 for an ER visit. General Hospital submits a claim to them. Fortunately for Acme, they have a series of contractual adjustments with General Hospital and even though they are billed $1,900, they only have to pay $1,100 to satisfy the bill because of the contract they made with the hospital and the procedure done to treat Larry. When time comes for Larry’s attorney to recover for Larry’s injuries, he has to calculate the amount which he should ask Dale’s auto insurer for. Although Larry was billed $2,000 for his hospital visit, he (and his insurance company) only had to pay $1,200 to satisfy the claim. According to Rule 414, Larry’s attorney would only be able to use the $1,200 amount as evidence at trial. Thus, he can only use that amount in settlement negotiations in calculating what they believe the claim is worth, and the adjuster will only accept that amount when the attorney submits a demand to their company.
Rule 414 shows why there is often a difference between total medical bills and what cases eventually settle for. Though a claim might look big on paper, an adjusted total can take a significant portion away from an expected settlement. If you have been involved in an accident, please call King Law and let us make sure you get what you deserve. 1-888-748-KING (5464)