What Do I Do If My Medical Bills Exceed the Total Recovery in My Case?

The day every plaintiff (and their attorney) in a personal injury case has been waiting for is finally here: a verdict or settlement has been reached! Understandably, the first question most clients have is, “How much of that amount actually goes into my pocket?”

The short answer is easy: from the total amount recovered subtract the amount owed for attorney fees, litigation expenses, and medical bills/liens and the rest goes directly to the client! However, things can get much more difficult when the medical liens exceed the amount actually recovered in a case. Unfortunately, this can be a reality in some situations.

For example, let’s assume that you were in a major car accident and your insurance company paid out on your behalf $200,000.00 to your medical providers. Your insurance company has a lien on any potential settlement or verdict you receive for the $200,000.00 it paid out. Now, let’s assume that the only source of recovery in your case is the other driver’s insurance policy which is a $100,000.00.

OK, we have a problem. The full policy of $100,000.00 is being offered by the insurance company, but what incentive is there for the client, the injured plaintiff, to accept the offer if none of the settlement proceeds actually makes it to her? This scenario has caused many headaches for even the most experienced personal injury attorneys, myself included.

The Good News.The Texas legislature has begun to address this issue with a law that took effect in 2014. Under the new law, the health insurance company in the scenario described above would be limited to taking no more than 1/3 of the Plaintiff’s settlement amount when the plaintiff is represented by an attorney. This would be true regardless of the size of the actual lien. So in the scenario above, the insurance company would be limited to recovering $33,333.33 instead of $200,000.00.

The Bad News.The 2014 Texas law only covers a fraction of health insurance plans and their liens. Among those plans not bound by the Texas law: Medicare, Medicaid plans, and self-funded ERISA plans. These plans are controlled by federal law and therefore Texas does not have the right to regulate them. While individuals are typically aware of whether or not they have a Medicare or Medicaid plan, the same cannot always be said for self-funded ERISA plans. Many people’s plans through their employers, such as some BlueCross/BlueShield plans, are in-fact self-funded ERISA plans. Dealing with these liens can be far more troublesome come settlement/verdict time.