The Texas legislature recently helped some injury Plaintiffs with a recent statute that took effect in January of 2014. Chapter 140 of the Texas Civil Practice and Remedies Code limits the subrogation interests of health insurers against injury Plaintiffs.
The new law only applies to Plaintiffs who have medical insurance. It also only applies to medical insurance carriers and not actual health care providers. Further, certain insurers are exempted; including Medicare, Medicaid, Chips and self-insured ERISA plans. However, Plaintiffs with traditional medical insurance will see benefits from the new law.
Prior to the passage of Chapter 140, Plaintiffs with health insurance frequently had difficulty settling claims with their health insurer. A little background will be helpful here; after an accident, individuals with health insurance will seek medical treatment that is paid for by their own health insurer. However, the health insurer will then have a subrogation interest (or lien) on any recovery that the Plaintiff gets from the entity/person that injured the Plaintiff. Part of the damages recovered for a personal injury lawsuit is for the Plaintiff’s medical bills. Since the health insurer (and not the Plaintiff) paid for these medical bills, the health insurer is legally entitled to be paid back for the medical bills that the health insurer paid for on behalf of the Plaintiff.
However, due to a variety of reasons (liability issues, insolvent defendant or other case issues), Plaintiffs sometimes recover less in damages than the amount of the health insurance lien. In these situations, the Plaintiff was stuck paying all of the recovery to the health insurer even though the Plaintiff hired the attorney, litigated the case and underwent the pressure and stress of litigation while the health insurer did nothing. In other cases, it made settlement of a case impossible because the health insurer stood to recover the entire settlement (no Plaintiff is going to settle a case where they recover nothing), which sometimes forced cases to trial that really needed to settle.
The new law guarantees Plaintiffs some amount of a recovery after settlement or trial. The statute dictates that the health insurer(s) can only recover the less of: (a) half the total recovery minus attorney’s fees (33% of pro rata recovery) and a pro rata share of litigation expenses; or (b) the total amount of benefits paid on behalf of the Plaintiff/insured minus attorney’s fees (33% of pro rata recovery) and a pro rata share of the expenses. For example: if a Plaintiff recovered $100,000 on a case and the health insurer paid $100,000 for the Plaintiff’s medical bills and the case expenses were $10,000, then the Plaintiff would recover a net $28,333.34 (assuming a contingency contract of 1/3). Prior to the statute, the Plaintiff would have either been unable to settle the case or would have recovered nothing.
A second example: if a Plaintiff recovered $100,000 on a case and the health insurer paid $10,000 for the Plaintiff’s medical bills and the case expenses were $10,000, then the Plaintiff would recover a net $49,000.00 (assuming a contingency contract of 1/3). Prior to the statute, the Plaintiff would only have recovered $44,666.67. As you can see from these two examples, this statute should put more money in the pockets of Plaintiffs.
Further, this statute also helps provide certainty to Plaintiffs as well. Prior to the statute, Plaintiffs’ attorneys had to resort to negotiating with health insurance companies in order to try to reduce these liens and Plaintiffs occasionally had to resolve cases without knowing how much (if at all) the liens would be reduced and how much the Plaintiff would receive from the settlement. After the passage of this statute, this calculation is simple and provides predictable numbers for the Plaintiff.
The only negatives for Plaintiffs that I see in this statute are the fact that it does not apply to all insurers. It would also be helpful if the statute applied to health care providers (for the benefit of Plaintiffs who have no health insurance and pay out of pocket). Further, the predictability that the statute provides for Plaintiffs is also provided for health insurance companies; on occasion, in the past, Plaintiffs’ attorneys could negotiate better deals than the statute provides. However, in the future, health insurance companies will most likely be unwilling to accept less than what the statute provides (although the statute allows for less). Finally, in extreme situations where the medical bills paid far exceed the recovery, the statute would still not allow for a Plaintiff to recovery anything. This breaking point seems to be where the medical bills paid are twice as much as the recovery. It would have been nice to see a statute that guarantees some amount of recovery for Plaintiff’s no matter the disparity between the medical bills paid and the amount of the recovery.
If you have questions regarding this statute or your legal rights afforded by this statute, please contact us at 512-562-7000 or email@example.com.