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Do Hospitals and Health Insurance Companies Work Together?

April 24, 2019 by Robert Caldwell

Health insurance application form with banknote and stethoscope concept for life planning.

Regarding the bills for treatment incurred by injured people, historically hospitals regularly ignored, at the expense of the credit history and financial status of certain patients, the existence of available health insurance for those injured people because it would get hospitals more money.  If hospitals billed the insurance carriers, the hospitals would be forced to be compensated for services rendered at reduced rates pre-negotiated by the insurance companies.  Hospitals would just ignore the insurer and demand to be paid the full charges out of any settlement or judgment that had come from a claim against the person who caused the injuries. To resolve the charges, the average person would have no protection under the law to have the charges reduced.  Hospitals were allowed to make this assertion through something called a “lien.” The injured consumer could be forced to pay in full at the time of settlement because the hospital lien itself would damage credit even though the consumer may have insurance to pay the bills, even though if insurance was billed, the insured would end up paying a lower amount.

Frustration with this practice led to attempts at a remedy as exhibited in the 2014 case Wainscott v. Centura Health Corp. In Wainscott, people injured in a car wreck sued a hospital for violating the Colorado Consumer Protection Act in attempt to tell the hospital it was wrong to assert a lien. Mr. Wainscott claimed that the hospital failed to disclose that it would seek a hospital lien instead of bill his health insurance. If the lien were deemed invalid, Mr. Wainscott and his wife would receive $600,000. If not, the they would receive no compensation. Based on Colorado law at the time, this Court ruled that the lien was valid. There was no remedy for the Wainscotts.

Many injured people experienced consequences because of the liens asserted by hospitals. The liens came up on credit checks, affect business deals, and of course take valuable money away from injured people who had perfectly good health insurance available. Facing aggressive lien practices by Colorado hospitals, the 2015 General Assembly, went to work and passed a fix. On May 1, 2015, Speaker Hullinghorst introduced the bipartisan bill by explaining that hospitals were filing liens against insured patients even after patients begged them to bill their insurance:

Senate Bill [2]65 corrects a problem that I think is very egregious in the State of Colorado.  We have situations now where when someone is injured by another party, and that’s primarily an automobile accident in Colorado, hospitals rather than bill, and you are admitted to a hospital or you have emergency room charges, hospitals are, rather than billing the insurance company for the medical claims, they are immediately filing a lien against the individual who is in the hospital for the hospital charges.  We heard testimony in committee where people are begging the hospital.  They give them all the information about what their health insurance is, what other insurance they have, begging them to file their insurance claims and the hospital doesn’t do it.

Now the reason for that is if they just file a lien against someone for their medical claims, they bill the full amount of the charges, which we all know are very, very much higher than if they bill to an insurance company that has a contract for the charges that they will provide.  This is totally unfair. . . .

Colorado’s amended Hospital Lien Statute went into effect on August 5, 2015. The amended statute continues Colorado’s longstanding policy of increasing the odds that hospitals get paid to treat injured persons and maintaining availability of emergency medical care while adding protection against hospitals’ abuse of the system by requiring that hospitals bill a patient’s health insurance before filing a lien.

Requirements to Have a Hospital Lien in Colorado

Under C.R.S. § 38-27-101(1) (2015):

Before a lien is created, every hospital duly licensed by the department of public health and environment, pursuant to part 1 of article 3 of title 25, C.R.S., which furnishes services to any person injured as the result of the negligence or other wrongful acts of another person … shall submit all reasonable and necessary charges for hospital care or other services for payment to the property and casualty insurer and the primary medical payer of benefits available to and identified by or on behalf of the injured person, in the same manner as used by the hospital for patients who are not injured as the result of the negligence or wrongful acts of another person, to the extent permitted by state and federal law.

          Under Colorado law, before a lien is created, the hospital must (a) submit all reasonable and necessary charges for hospital care to the property and casualty insurer and (b) submit all reasonable and necessary charges for hospital care to “the primary medical payer of benefits” available to the injured person and (c) identified by the injured person or on behalf of the injured person.

Payers of benefits under the statute includes:

(a) An insurer;

          (b) A health maintenance organization;

(c) A health benefit plan;

(d) A preferred provider organization;

          (e) An employee benefit plan;

          (f) A program of medical assistance under the “Colorado Medical Assistance Act”, articles 4 to 6 of title 25.5, C.R.S.;

(g) The children’s basic health plan, article 8 of title 25.5, C.R.S.;

          (h) Any other insurance policy or plan; or

(i) Any other benefit available as a result of a contract entered into and paid for by or on behalf of an injured person.

After the above requirements are satisfied, the hospital shall have a lien. If a hospital violates this law, it can be sued for two times what it wrongfully sought to be paid.

Because of the harm the hospitals’ avoidance of billing existing insurance was causing patients, in 2015, after Wainscott, the Colorado legislature amended the Lien Statute to stop the hospitals’ harmful lien practices.  Very simply, it prevented a lien from being filed against an injured person where the injured patient identified a medical payer of benefits and a liability insurance carrier, unless the bills for treatment were at least sent to those payers first.

If you have health insurance, but a hospital won’t bill it and instead has been demanding to be paid from your lawsuit settlement or judgment, you might have a remedy. Please call us to discuss further.

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