Insurance Companies Can’t Always Get What They Want: Medical Bills and the Collateral Source Rule
Meritorious personal injury cases follow a similar trajectory. The plaintiff is injured and receives medical care. Medical bills are submitted to the plaintiff’s health insurer, which reduces those bills pursuant to a contractual agreement with the provider. The health insurer pays the bills and asserts a lien against the plaintiff’s case. The case goes to trial, and the jury awards damages based on the medical bills.
What happens next is the source of some confusion between practitioners and trial judges. The conundrum can be phrased as follows: should the judgment include the full amount of the medical bills, or is part of the judgment subject to reduction under Michigan’s collateral source statute, MCL 600.6303, et seq.? The answer is the former, and the explanation comes from statute and the Michigan Court of Appeals.
The statute begins with the premise that a defendant’s obligation to pay medical expenses covered by collateral sources like health insurance can be reduced in a post-trial proceeding. Specifically, MCL 600.6303(1) states that “if the court determines that all or part of the plaintiff’s expense or loss has been paid or is payable by a collateral source, the court shall reduce that portion of the judgment which represents damages paid or payable by a collateral source. . . .”
Yet the statute makes a key exclusion from what constitutes a collateral source. That is, MCL 600.6303(4) states: “Collateral source does not include benefits paid or payable by a person, partnership, association, corporation, or other legal entity entitled by contract to a lien against the proceeds of a recovery by a plaintiff in a civil action for damages. . . .” Otherwise stated, when medical benefits are subject to a lien, those medical benefits are no longer a collateral source and thus cannot be used to reduce the judgment.
But what about the fact that health insurers frequently reduce medical providers’ charges before paying the bills and asserting the lien? Surely, say some defense counsel, this “contractual write-off” must be a collateral source – meaning the judgment can be reduced to the amount of the lien. Incorrect.
That argument was rejected by the Michigan Court of Appeals in Greer v Advantage Health, 305 Mich App 192 (2014). The court held: “Although we find that an insurance discount is a ‘collateral source’ by which plaintiffs’ medical expenses were ‘paid or payable’ and that such a discount is a benefit ‘received or receivable from an insurance policy,’ the plain terms of the exclusion from the statutory collateral source rule of § 6303(4) when a contractual lien is exercised is not limited to the amount of the lien; it applies to all benefits that were paid or payable by a ‘legal entity entitled by contract to a lien.’” Id. at 209.
Otherwise stated, when medical benefits are paid and a lien is asserted, the defendant is liable for the full amount of the medical bills. Insurers would be wise to remember this the next time they force a case to trial.
About the Author:
Grand Rapids personal injury attorney Tom Sinas authored this piece and is highly experienced in dealing with matters concerning Michigan auto no-fault insurance. Serving and living in West Michigan for more than a decade, Tom has built a reputation across the area, as one of the most recognized personal injury attorneys in the Grand Rapids community. Tom regularly speaks at seminars across the state on the topic, author pieces for legal publications, and educates the public on the law on WOOD-TV and FOX 17.