JUST WHEN YOU NEED IT MOST, YOUR HEALTH INSURANCE DOES NOT PROTECT YOU IN ARIZONA

Let’s start with the basics. How does health insurance work? At its core, health insurance is a way to protect you from financial disaster in a time of need. You pay for health insurance so that, when you need it most, you will not have to pay huge amounts of money that sends you into bankruptcy.

OK, so health insurance is valuable to the average person. How about hospitals? Why do they accept patients with health insurance? Among other reasons, a hospital accepts health insurance because it is a guaranteed form of payment. Do hospitals get paid the total amount they bill health insurance companies? Of course not. For any of you who have seen a medical bill, a hospital may send a $10,000 bill to a health insurance company, yet only get paid $6,000. Why? Because that is the agreement between the health insurer and the hospital. If you have a $10,000 bill but your health insurance company sends an agreed upon reimbursement of $6,000 to the hospital, can the hospital come and take your money? No . . . right? Well, let’s just say under some of the most serious conditions – at times when you need it most – Arizona’s lawmakers have built in a way for hospitals to come and take money that would normally belong to you.

Imagine somebody, we’ll call him Mr. Unlucky, is involved in a serious Arizona auto accident. Through no fault of his own, Mr. Unlucky is sent to the hospital for care. After many weeks of care, Mr. Unlucky has incurred $200,000 in medical bills. Worse yet, he cannot go back to work. He will not be able to work for a full year. He is the main wage earner in his family. Without money, his house will be foreclosed upon, his debts will go through the roof, and Mr. Unlucky, his wife and his kids will be homeless.

Fortunately, Mr. Unlucky appears to be protected. Mr. Unlucky has health insurance, and they have paid the hospital the $120,000 that is the agreed upon rate of reimbursement. Mr. Unlucky also found a trustworthy personal injury lawyer. That lawyer has helped him receive a reasonable insurance settlement. Now, it looks like Mr. Unlucky will be able to get on his feet, again. Oh, wait just a second. We forgot about that unusual Arizona law that puts the hospital ahead of the victim.

Now, in most states, Mr. Unlucky would receive his settlement money, continue to pay his bills, get better, and eventually get back on his feet again. He would not have the stress of losing his family home piled on top of his daily pain and rehabilitation. At least the money troubles would be greatly diminished. Arizona? Well, here comes that law.
Since Mr. Unlucky was injured in a Phoenix auto accident, the hospital is going to take a big chunk of the money Mr. Unlucky was going to be able to use for his family. Even though the hospital agreed to accept $120,000 as full payment for the $200,000 bill and go away, the hospital gets to “double-dip.” Even though it has already collected once, the hospital gets to file a “hospital lien” and go after Mr. Unlucky’s portion of the insurance settlement. Mr. Unlucky will never see that portion of the money. His money troubles will mount, his anxiety will grow, and he may lose his family home . . . so the hospital can get paid a second time, and receive more than they ever would have under the health insurance agreement.

Have you ever heard of such a law? Probably not. It is one of those neat little deals done at the legislature when nobody is looking. And, the good news is it will not affect most people. Most people can rely on the health insurance company to work out a fair deal with the hospitals, and never have to worry about going bankrupt trying to pay the difference. In fact, that would defeat the entire purpose of health insurance we talked about at the beginning . . . using health insurance as a way to protect you from financial disaster.

Yes, that is the good news. Most people will never be harmed by this law. Unfortunately, it will be those most in need, those unable to work due to injuries caused by others, those least able to afford this strange little law, that will be most affected.

What can we do? Well, we can ask our legislators to vote down “balance billing.” When the election cycle comes back around, we can ask prospective candidates if they support repeal of the statute allowing “balance billing.” But, you ask, what if you know someone who is seriously hurt right now, while balance billing is in effect? What can I say . . . I recommend getting a good lawyer.

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