issue of SmartMoney may cause readers to read
the fine print in their insurance polices, looking
for the word subrogation, a process that allows
a health plan get reimbursed for its costs if
members collect on personal-injury suits. In
"Adding Insult to Injury," Michelle Andrews
reveals how health plans and hospitals are
claiming big parts of victims' settlements.
Jim Ridler of Minnesota wishes he had scanned
his policy's boilerplate before he suffered major
injuries as the result of a head-on collision with a
mini-van while riding his motorcycle. Although he
eventually won a settlement of $450,000 from
the driver of the minivan that struck him, Ridler's
health plan collected $406,000 through a clause
in the contract's fine print: subrogation. "I feel
like I was raped by the system," said Ridler.
Hospitals have jumped into the game as well,
using state statutes that allow them to place
liens on an injured person's recoveries. Pam
Henline of San Diego became painfully familiar
with this tactic after a collision with a tow truck
that partially severed her spine. She sued and
won $2.5 million in various settlements related to
the accident. She was still a patient at Scripps
Memorial Hospital in La Jolla, California when she
received her first lien notice from the hospital.
Even though her health plan had paid her bill, the
hospital was demanding an additional $16,000 to
cover what it claimed was its actual costs.
When Henline refused to pay, the hospital
continued to send her notices at one point
allegedly threatening to ruin her credit rating.
Eventually, a judge ruled that the hospital had
no right to pursue a lien on her settlement. "It's
as if a paramedic saved your life but then stole
your wallet," commented Henline's attorney.
Lawmakers are slowly beginning to react to this
second victimization of accident sufferers.
"When they (HMOs) go after compensation in
excess of their costs, they're depriving victims of
revenues that may be very necessary to help
them recover," said California state senator
Adam Schiff. As chairman of the state's Senate
Judiciary Committee, he proposed a bill this year
that would prohibit managed-care companies in
California from collecting more than they spend
on a member's care.
In Maryland, an appeals court ruled that the
state's HMO Act prohibited managed-care
companies from pursuing subrogation at all. "An
HMO, by its definitions, provides health care
services on a prepaid basis," the court said. "A
subscriber has no further obligation ... beyond
his or her fee." Other states are following suit.
Recent higher-court rulings in Arizona, New
Mexico, Texas and Wisconsin have struck down
the right of hospitals to recover additional money
once they've been paid by insurers. In Georgia, a
state representative introduced a bill last year to
eliminate hospital liens altogether in that state.
The July issue of SmartMoney, a joint venture of
Hearst Magazines and Dow Jones & Company,
hits newsstands yesterday.