These articles have been published in "The Advocate", a monthly publication of the Arizona Association for Justice/Arizona Trial Lawyers Association, November 2007 â€“ January 2008 issues, @2007& 2008 by Steven J. Bruzonsky, Esq.
MEDICAL PAYMENTS COVERAGE, PART 1
(This is the first of a three part series on Medical Payments coverage. The second and third parts will be in next two issues.)
How to Obtain Maximum Benefit from Medical Payments Coverage
Every personal injury attorney has an ethical duty to competently and zealously represent the injured client. This includes reasonably minimizing and avoiding liens, so that the client gets more of the settlement funds after payment of attorney's fees and costs, liens and outstanding medical bills. This also includes properly advising the client regarding using the client's health and Medical Payments insurance, if available, so that to the extent that these insurances pay the client's accident-related medical bills, and that any healthplan providers take the required network/contract adjustments, then there are more funds left over for the client from settlement proceeds.
Medical Payments coverage is an optional coverage, not required by Arizona law, which provides for payment of an injured person's accident-related medical expenses up to whatever the policy limit is, usually $1,000, sometimes $5,000, sometimes even more. An additional premium is paid to purchase this coverage. The insurer is not required to offer this coverage. This coverage may be pursuant to several different types of insurance, including auto/motor vehicle, premises and homeowner insurance. Coverage of course generally depends upon the express terms of the insurance policy. Generally, auto Medical Payments will cover the driver and occupants of the vehicle, and may follow the insured as a pedestrian, bicyclist or in another motor vehicle, again depending upon the express terms of the insurance policy. Premises medical payments generally covers someone injured on the premises. Medical payments are covered without regard to anyone's fault in causing an accident or injury.
Many personal injury attorneys represent the injured client to collect the Medical Payments coverage without charging any additional attorney's fees for this. The attorney may simply view this as a "free" service and not put much effort into this. Perhaps the attorney will simply have the client give medical authorizations to the insurer to directly obtain the bills and pertinent medical records. Perhaps the attorney doesn't give the injured client any assistance concerning the Medical Payments claim other than advising the client to contact the insurer and make a claim. Or perhaps an injured party is unrepresented and deals with the insurance company directly. What sometimes occurs in these situations is that the hospital or other health care provider becomes aware of the dual insurance coverages (health and Medical Payments) and bills both insurers or perhaps its full charges only to the Medical Payments insurer. Although a provider may be in network or contracted, the provider may insist on billing its full billed charges to collect from either the Medical Payments insurer or from both insurers; and if the provider has received any overpayment it may be difficult after the fact to obtain reimbursement. Moreover, if a hospital or other health care provider hasn't already filed an A.R.S. § 33-931 statutory lien, once contacted by the Medical Payments carrier, the provider's billing department will now have notice that this involves a third party liability situation, a lien may be filed, a balance billing claim may be generated, and the provider may get paid by both health insurance and Medical Payments.
Now that we have identified the problems, how do handle the Medical Payments situation to hopefully maximize our client's financial position? My approach is as follows:
(1) During our handling of our client's personal injury claim including but not limited to the Medical Payments claim, we must always prioritize our concerns that law firms should avoid contacting health care providers directly when that contact may trigger their filing of a timely A.R.S. § 33-931 statutory lien or balance billing claim; and that law firms should avoid contacting health insurers directly when that contact could trigger their claiming an ERISA healthplan lien (if they have not done so already). In view of these concerns, sometimes we will have a client obtain a bill, medical records, or contact a provider re billing health insurance, or contact the health insurer to check on payment of full benefits, instead of our firm doing so.
(2) We initially caution clients not to volunteer that they have Medical Payments coverage to their health care providers who are already covered by their health insurance plan. We also forward a detailed letter of representation to the Medical Payments carrier, warning them that we will later be submitting our client's bills and pertinent medical records; that they are not to pay any bills until they receive our prior written authorization to do so; and that this is necessary to avoid overpayment to health care providers and to minimize the filing of statutory liens and balance billing claims. We then follow-up with as many phone calls to the adjuster as necessary, and a confirming letter, that they agree to flag the file and follow our instructions.
(3) Over subsequent months, we check to hopefully verify that health insurance has been paying full benefits and that providers are properly adjusting networked/contracted accounts. Our clients provide us with some health insurance EOBs, medical records and bills, and we obtain directly some medical records and bills. We (or our client in some cases, as discussed above) contact health care providers to request that they resubmit to or call health insurance to check on status of payment; and we (or our client) may even sometimes contact the health insurer as appropriate to demand payment of full benefits or inquire regarding payment status. We document all of this. Once the client is discharged from active care, or we have sufficient bills to meet the Medical Payments policy limit, then we forward pertinent medical records and the bills to the Medical Payments carrier, along with information regarding the balances due after payment by applicable health insurance.
(The second and third parts will be in next two issues. The second part includes the initial letter to the Medical Payments carrier to best protect your client's interests. The third part addresses Medical Payments liens against personal injury settlements and includes a letter to the Medical Payments carrier requesting lien reduction.)
MEDICAL PAYMENTS COVERAGE, PART 2
(This is the second of a three part series on Medical Payments coverage. The first part was in the previous issue, and the third part will be in next issue.)
The Initial Attorney's Letter to the Medical Payments Carrier
Every personal injury attorney has an ethical duty to competently and zealously represent the Following is my form letter that I use to initially contact the Medical Payments carrier when my client has health insurance, whether public (AHCCCS, Medicare, military, etc.) or private/ERISA health insurance. Sometimes I delete portions of the letter as appropriate depending upon the specific circumstances of my client's situation, e.g., if there is no health insurance (public or private).
Mailed and Faxed to __________________
[Name and Address of Med Pay Carrier]
Re: Our Client/Your Insured: Date of Accident: Policy No.: Claim No.: ____________, Medical Payments
Dear Claims Representative:
Our firm represents the above-named client(s) concerning Medical Payments claim(s) due to a motor vehicle accident which occurred on the above date. [Give brief information here regarding the accident location, time and date, parties, vehicles, circumstances and vehicle damage; and client's medical care to date and symptoms/injuries.]
We understand that your policy has $__________ medical payments coverage available. Please confirm the amount of coverage and provide us an explanation of the benefits available, including any deductibles or copayments or exclusions or limitations, in writing as soon as possible.
PLEASE BE SURE TO ENSURE THAT THE BELOW PARAGRAPH IS FOLLOWED TO PROPERLY PROTECT YOUR INSURED'S MONETARY INTERESTS IN HIS/HER MEDICAL PAYMENTS COVERAGE, IN CONSIDERATION OF HIS/HER HEALTH INSURANCE COVERAGE:
Our firm will be in the process of obtaining our client's accident-related medical records and bills, which we will then submit to you for payment pursuant to Medical Payments coverage. Please do not pay any accident-related medical expenses from this Medical Payments coverage without first obtaining our firm's written direction to do so. Our reasons for this are as follows: (1) Our client(s) often have health insurance coverage with some or no copay due, and we don't want the medical care provider to be overpaid, as this will create lots of extra work to obtain refunds. We will later provide you with bills and the balance due so the balances can be paid, with any remaining funds paid to our client(s). And we will desire that all payments be mailed first to our office, and we will then mail them to the medical care providers, so we can keep track of medical payments paid and ensure proper payment. If you do not follow our above direction, then this can create a lot of extra work on our part. And we really don't want to have to charge our client(s) for extra work involved in collecting and distributing Medical Payments coverage, as we intend to hopefully not charge our client for obtaining Medical Payments coverage. (2) ARS 20-1072 provides that a healthcare provider may only charge the patient the health insurance copay/deductible and any non-covered amounts. The only clear way around this is for liability insurance proceeds as set forth in the Arizona healthcare provider lien statutes, ARS 33-931 et seq., in that if a healthcare provider files and perfects a lien within thirty days of treatment, then the provider may balance bill its "full" charges over and above what it is paid by health insurance against the liability settlement; further, for hospitals only, if they file the lien within thirty days of the liability settlement then they may balance bill their "full" charges. Our firm generally has the client contact the hospital, because contact from attorneys or auto insurance carriers will remind them that they can file a statutory lien to get more of our client's settlement funds. As our client's attorney, we owe our client fiduciary duty to maximize their settlement proceeds - and we believe that your insurance company, providing first party Medical Payments coverage, owes the same fiduciary duty to our client/your insured as well.
As I'm sure your company is aware, in Samsel v. Allstate, 204 Ariz. 1, 59 P.3d 281 (2002), the Arizona Supreme Court held that a plaintiff had "incurred" liability for the full amount of her medical bills, even if the bills were subject to payment by a collateral source. The hospital charges in question were covered by an HMO, but the court held that an automobile insurer had to reimburse the plaintiff for the full amount of the bills under the policy's medical expense coverage, despite the fact that most of the bills had already been paid by the health plan. The court specifically rejected the med pay carrier's argument that the insured had not "incurred" liability for the amount of the bills that were covered by the HMO. More recently, in Banner Health v. Medical Savings Insurance Company, 1 CA-CV 05-0432, filed 8-14-07, Division One of the Arizona Court of Appeals held that a non-network health insurance carrier and its patients were liable for the full billed (not the "reasonable" charges determined by the insurer) hospital charges. Accordingly, even if our client has health or medical insurance/coverage, the Medical Payments carrier generally is liable for the full amount of the charges, not the contract health insurance rate. If for any reason your company disagrees with this proposition, then please immediately provide a complete written explanation, pertinent policy provisions and legal citations for applicable statutes and caselaw in this regard.
I am concerned when sometimes auto Medical Payments carriers request that their insureds sign blanket medical authorizations, which technically permit the insurance company to obtain any and all medical records and bills all the way back to the insured's birth from any health care providers. As a practical matter the Courts will not uphold the practice of some auto insurance companies to require the insured to submit such OVERBROAD authorizations as opposed to medical information and records which are reasonably accident-related (including pre-accident medical records for conditions aggravated or at issue as a result of an accident). Federal law - HIPAA - sets forth reasonable requirements which must be complied with by health care providers in releasing medical information and records and I have seen some auto Medical Payments requested authorizations which clearly do not comply with HIPAA requirements.
In consideration of the above concerns, our firm's practice is that we will periodically provide you with our client's/your insured's accident-related medical records and bills (including updates), as we will obtain them from our client/your insured's health care providers. This should meet your claims processing needs yet reasonably protect your insured's legitimate health care confidentiality concerns. If you desire to obtain specific medical records or bills, please let us know this in writing and assuming they are reasonably accident-related, we will obtain them for you. If this is not acceptable to you, then please explain why in writing, and then be sure to provide us with medical authorizations for our client/your insured to sign which fully comply with HIPAA, and each authorization should be specific per one health care provider named listing dates of service for which records or bills requested. It is not our responsibility to prepare proper limited medical authorizations in full compliance with HIPAA for your company - if you want our client to sign them, then this is your responsibility. But again, there's no need for this, as we are obtaining the accident-related medical records and bills for you, anyway. Please provide us with your prompt written response to this letter, answering our above questions and notifying us regarding which Claim Representative will be assigned to this file.
Thank you for your courtesy and assistance.
Very truly yours,
Steven J. Bruzonsky
(The third part in the next issue will address Medical Payments liens against personal injury settlements and includes a letter to the Medical Payments carrier requesting lien reduction.)
MEDICAL PAYMENTS COVERAGE, PART 3
(This is the third of a three part series on Medical Payments coverage.The first and second parts were in the previous two issues.)
Medical Payments Liens
A.R.S. § 20-259-01(1)(J) provides for Medical Payments liens for coverage provided by automobile or motor vehicle insurance policies only, not premises or homeowner's insurance. The lien applies against any amount in excess of $5,000 paid. E.G., the carrier pays a $25,000 policy limit, then the lien is that amount less $5,000, so the lien is for $20,000. The lien appears to apply separately for each person on whose behalf Medical Payments are paid, given the statutory language that the lien applies against any amount in excess of $5,000 "that is paid to or on behalf of that insured". Its clear that the lien applies against defendants and their liability insurance companies. There is no Arizona caselaw on whether the lien applies to Uninsured and Underinsured Motorist settlements, but there is excellent argument that the lien does not apply in such situations. The statute requires that the recorded lien include "to the best of the insurer's knowledge, the names and addresses of all persons, firms and corporations and their insurance carriers that the insured or the insured's legal representative alleges are liable for damages arising from the accident." The term "liable" arguably refers to legal causation of the accident. The legislature could have included more specific statutory language clearly inclusive of first party uninsured and underinsured motorist coverage if they had intended the lien to apply for such coverages. The carrier must timely perfect the lien, including recording the lien in the office of the County Recorder where the accident occurred within 60 days after issuing a payment that is more than $5,000. Be sure to be familiar with the complete statute and to ensure that the carrier has met the complete lien perfection requirements. Also, the insurer is required ("shall") to "compromise the lien in a fair and equitable manner".
Following is the form letter that I use at settlement to contact the Medical Payments carrier and request Medical Payments lien reduction. Recently, I've had two State Farm Medical Payments liens, with no circumstances suggesting the need for equitable reduction other than procurement costs (pro-rated attorney's fees and costs), and in each case State Farm immediately agreed to reduce for procurement costs.
Mailed and Faxed to __________________
[Name and Address of Med Pay Carrier]
Re: Our Client/Your Insured:
Date of Accident:
Claim No.: ____________, Medical Payments â€“ Lien Compromise Request
Dear Claims Representative:
Please be advised that we have settled this client's personal injury claim with ___________ , the liability insurance carrier, for the sum of $_____.
Our understanding is that the amount of your lien claim is $_______ (which is the amount of Medical Payments paid less $5,000, as authorized by A.R.S. §20-259.01, as our check indicates that your lien was timely filed with the local county recorder's office.
A.R.S. §20-259.01 states that "The insurer shall compromise the lien in a fair and equitable manner." This is mandatory, not optional. As our client/your insured's first party insurance carrier, you owe your insured the responsibility of "good faith" and promptly taking reasonable care concerning his claim without undue delay. If you fail to promptly and reasonably compromise the lien "in a fair and equitable manner" then you have failed to discharge the duty of "good faith" required under Arizona law.
The "common fund doctrine" requires that your company must at minimum reduce your lien by procurement costs â€“ the percentage determined by taking the attorney's fees and costs, divided by the amount of the personal injury settlement. Applying the "common fund doctrine to this case: Our attorney's fees are $_________ (33 1/3% of settlement) and our costs are $_____, a total of $______ procurement costs; which divided by the settlement of $_________ = ____% . Reducing your lien of $______ by that percent = $________.
Also in support of the "common fund" reduction, see Labombard v. Samaritan Health System, 195 Ariz. 543, 991 P.2d 246 (App. 1998) (cert denied Az Supreme Court) in which the "common fund doctrine" is applied to an A.R.S. §33-931 hospital lien. In Labombard, the Court states that "Without the litigation by LaBombard (and the assistance of her attorney), (the hospital) would recover nothing. We agree with the - - - Martinez court's observation that "[b]y seeking payment from the fund in reliance on the lien, the hospital directly receives the benefits of the work done by the patient's attorney. . . . Because of this, it would be fundamentally unfair to allow the hospital to collect on its lien without paying its prorated share of the legal expenses.- - - (The hospital) must share in paying the attorneys' fees and costs incurred in obtaining the settlement." The Court in LaBombard is quoting an earlier Arizona case, Martinez v. St. Joseph Healthcare Sys., 871 P.2d at 1366-67. The common fund doctrine in Arizona has its basis in Steinfeld v. Zeckendorf, 15 Ariz. 335, 342, 138 P. 1044, 1047 (1914), aff'd, 239 U.S. 26 (1915). In that case the Arizona Supreme Court upheld an award of fees from a common fund as a matter of "right and justice." Id. The basis for the doctrine is the equitable consideration that parties who benefit from the efforts of counsel in creating a common fund should pay for their fair share of the work required to bring about that benefit. Kerr v. Killian, 197 Ariz. 213, 217-78, Â¶ 19, 3 P.3d 1133, 1137-38 (App. 2000). The "doctrine serves the twofold purpose of compensating counsel for producing benefits for a class and preventing the unjust enrichment of the class members who receive them." Burke v. Ariz. State Ret. Sys.,206 Ariz. 269, 272, 77 P.3d 444, 447 (App. 2003). The "general rule of equity long recognized in Arizona that a person or persons who employ attorneys for the preservation of a common fund may be entitled to have their attorney's fees paid out of that fund." In re Estate of Brown, 137 Ariz. 309, 312, 670 P.2d 414, 417 (Ct. App. 1983) To hold otherwise would allow the insurer a free ride on the efforts of the plan participant's attorney, contrary to the equitable concept of "common fund" that governs the allocation of attorney's fees in cases in which the lawyer hired by one party creates through his efforts a fund in which others are entitled to share as well." Wall-Mart v. Wells, 213 F.3d 398 (7thCir 1999); See, also, Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980); Sprague v. Ticonic National Bank, 307 U.S. 161, 166 (1939); Davis v. Carl Cannon Chevrolet-Olds, Inc., 182 F.3d 792, 795 (11th Cir. 1999); 1 Dobbs on the Law of Remedies-Equity Restitution § 3.10(2), pp.393-398; John P. Dawson, "Lawyers and Involuntary Clients: Attorney Fees From Funds," 87 Harv. L. Rev. 1597 (1974).
In this case, there are good reasons why your company should reduce your lien further than required by the above "common fund doctrine". We request that you reduce your lien by ____% to $_____ for the following reasons:
Please provide us with your response to this request as soon as possible.
Thank you for your courtesy and assistance.
Very truly yours,
Steven J. Bruzonsky
If the circumstances of the case and settlement equitably call for more than a procurement cost reduction, then be sure to explain this in your letter and include some attachments to document this as well.