Jonathon Layden was once confident that if he were ever injured, he could count on his health insurance to help pay his medical bills.
But after he was patched up following an auto accident in 2011, Research Medical Center didn’t submit his bill to his Blue Cross Blue Shield insurance.
Instead, it sent a bill to Layden — but without subtracting the big discounts Blue Cross would have required. The hospital eventually sent a bill for the full amount to a collection agency.
Layden, a student, had to borrow $5,400 from his parents to pay the bill.
Can hospitals reject your health insurance? As it turns out, yes — and many hospitals are doing just that in auto accidents.
But accident victims around the country, helped by lawyers filing lawsuits and in one state by legislators of both parties who earlier this year passed a bill to ban the practice, are now fighting back.
In the Kansas City and St. Louis areas, lawsuits have been mounted against three major hospitals.
Layden and other accident victims say they never dreamed that a hospital could pick and choose in taking their health insurance.
“They’re going to come after you any way they can,” said Layden, who is suing Research for not submitting the bill to his health insurer. “It’s all about the money.”
When hospitals turn down your health insurance, they are then able to avoid the discounted charges they have agreed to with health insurers. In Layden’s case, the hospital went directly to him for the full bill, but the usual practice around the country is to go after whatever money a person injured in an vehicle accident might get from an auto insurance settlement.
Here’s how the practice usually works:
• The hospital first refuses to submit your bill to your health insurer.
• It calculates your bill without the health insurer discounts and instead files a lien against whatever settlement you might receive from an auto insurer.
• The hospital gets paid from the settlement.
In Layden’s case, the hospital allegedly didn’t even file a lien and instead demanded payment directly from Layden before a car insurance settlement was in hand.
A spokeswoman for Research would not comment, citing the ongoing litigation. HCA, the owner of Research and one of the nation’s largest hospital chains, also declined to comment. The hospital in its initial legal brief in the court case denied the allegations.Practice is growing
No figures are available to show how often bills aren’t submitted to health insurance. But the practice is thought to be growing because hospitals are looking for new sources of revenue as health care reforms seek to curb costs.
That hospitals are tapping auto insurance settlements is not new. In state laws dating back to the Great Depression, they got the right to place liens on injury judgments and settlements. Hospitals were struggling financially because of a growing number of patients unable to pay. The liens were seen as contributing to the public good by helping the hospitals stay open and treat patients.
But critics say in recent years that the liens have morphed into a tool to help maximize hospital revenues by getting more out of patients with health insurance.
Kenneth Berger, a South Carolina lawyer, said that in the last two years, it has become an epidemic in his state.
“This is something that really does add insult to injury,” he said.
In this region, Research Medical Center and St. Luke’s Hospital in the Kansas City area and SSM DePaul Health Center in Bridgeton, Mo., are facing lawsuits against the practice. The three cases seek class action status to represent other patients who may have been affected.
Kerry O’Connor, a spokeswoman for St. Luke’s Health System, said in an email response that filing liens on injury settlements is expressly authorized by a Missouri statute and that other hospitals in the state are doing it as well.
O’Connor said, however, that the hospital is not “asserting” new liens pending resolution of the court case.
She added that St. Luke’s is assuming the risk of not being paid anything if there isn’t an auto insurance settlement. And it still contends it didn’t have to file health insurance for the person now suing the hospital.
Ralph Phalen, one of the attorneys representing patients in the suit against St. Luke’s, disagrees: “It’s our belief the contract (with the health insurer) requires them to accept.”
In some other states, the practice has suffered legal setbacks dating to the late 1990s. But an Illinois court ruled it was legal.
The most public rebuke to the practice occurred in Indiana. Hospitals there were either not filing insurance to collect the gross charge or filing it and then using liens against auto insurance settlements to recover the part of the bill lost to the discounts. Earlier this year, the legislature approved a bill stopping it with large bipartisan majorities, and a conservative governor signed it. The new law went into effect July 1.
Alan Smith, director of the Midwest office of R Street Institute, a think tank based in Washington, called the Indiana move praiseworthy. The state won a skirmish in the battle to make medical bills more reasonable and to help vulnerable patients, he said.
“I can’t believe they (the hospitals) thought they could get away with this.”Insurers concerned
The practice puts patients in the middle of disputes over medical bills that they thought would be paid with health insurance.
Auto insurance settlements can indeed help pay the hospital bill in many instances, but the inflated cost without the health insurer discount can take an outsize chunk from a pot of money that is also used to cover other expenses, such as lost wages, attorney fees and replacement vehicles.
Auto insurance policies have limits on how much they will pay in a settlement. In some cases in other states, hospitals have submitted bills worth more than the settlement.
Auto insurers have a budding concern that because they don’t have the power that health insurers have to impose discounts, more of the medical costs will be shifted to them. That could end up boosting auto insurance premiums.
“It’s a significant issue,” said David Corum, vice president of the Insurance Research Council, a nonprofit group supported by such insurers as Allstate and State Farm.
Specialized companies are helping hospitals sidestep the discounts.
In its sales pitch to hospitals, Medical Reimbursements of America, based in Brentwood, Tenn., says that while accidents represent just 2 percent of claims, they can generate higher reimbursement rates than any other category.
The company contends that its AcciClaim Auto system ensures that hospitals get more when treating those injured in auto accidents, often 100 percent of the gross charges.
The company recently formed an alliance with Firstsource Solutions of Louisville, Ky., which has employees stationed in emergency rooms and admissions offices at 300 hospitals across the country. Part of their job is to identify and interview auto accident victims.
It was Medical Reimbursements of America that sent a letter to Britanie McKeever telling her that SSM DePaul Health Center in the St. Louis area would file a lien on any settlement gained from the other driver to pay her $31,000 hospital bill.
Her attorney got the bill slashed, but she was shocked that her health insurance didn’t come into play.
“I thought I had full-coverage health insurance,” she said.
SSM DePaul said in a statement that it follows all state and federal guidelines and any requirements set forth by insurance agreements. When treating a person who has been involved in a motor vehicle accident, it works with the patients to identify all sources of insurance payers.Kansas City area cases
Layden didn’t discover that Research wouldn’t be using his health insurance until more than a month after his accident.
His initial bill actually showed the $10,896 bill dropping to $3,281 after an adjustment for the insurer’s discounts. He called the hospital asking if the bill had been sent to Blue Cross but didn’t receive an answer. Soon after, he received a $10,896 bill, the amount without the discounts.
The hospital eventually sent his account to a debt collection agency, which agreed to cut the bill in half. Faced with a falling credit rating, Layden got the loan from his parents.
The hospital ended up getting about $2,000 more by not submitting the claim to the health insurer. The physician who treated him in the emergency room submitted his bill to Blue Cross.
“It’s time for them (Research Medical) to take responsibility for their actions,” said Layden, who eventually received a $14,000 auto insurance settlement.
A spokeswoman for Blue Cross Blue Shield said hospitals it contracts with, including Research Medical, are required to submit a claim.
When the issue appeared in the Kansas City area isn’t clear, but it has been simmering for years.
“It seems to have started (in the Kansas City area) five or six years ago,” said Mitchell Burgess, a lawyer with the Kansas City firm Burgess Lamb, who is representing patients who have filed lawsuits, including against St Luke’s.
St. Luke’s has gotten a Kansas case dismissed, but it received mixed rulings in others.
In 2009, Iretta Morgan was in a car accident and was taken to a St. Luke’s hospital. The hospital submitted an $11,452 bill to her health insurer, which paid a discounted amount. The hospital sent the check back to the insurance company and filed a lien against any settlement Morgan received.
In Jackson County Circuit Court, St. Luke’s argued that Missouri’s liens law gave it authority to use it on health insurance patients. It rejected arguments that it was unjustly enriching itself by seeking to recover the medical bill without the discounts.
The judge agreed, handing St. Luke’s a victory.
Morgan appealed her case to the Missouri Court of Appeals. It ruled the hospital didn’t have unfettered rights to use the liens to collect a higher bill. Instead, the case hinged solely on whether the hospital was required to submit the health insurance and accept the discounts that satisfied the debt.
The case was sent back to Jackson County Circuit Court to determine if the hospital’s contract with the health insurer did require a claim to be filed. It is still pending.
St. Luke’s said the appeals court merely held that the plaintiff is entitled to review the insurance contracts.
“Yes, St. Luke’s contends it was not required by contract, nor by law, to submit the claim to the insurer,” the hospital said in an email response to a question.
Aetna, the health insurer for Morgan, did not return a call seeking comment, but her attorneys say they have seen enough hospital contracts with insurers to be confident there is such a requirement.
Indiana Sen. Brent Steele, a Republican who sponsored the bill reining in the hospitals in his state, said the legal arguments may be beside the point. In Indiana, liberals and conservatives, Democrats and Republicans, and even trial lawyers and insurance companies united to stop the practice.
The medical treatment by the hospitals wasn’t questioned, but by sidestepping the health insurance they were making up their own rules. He said their attitude reminded him of a scene in the Mel Brooks movie “History of the World, Part I.”
A king was playing a game of skeet, but instead of clay discs, he ordered live peasants catapulted into the air to shoot. He turned to an adviser and said: “It’s good to be the king.”