How to hide money from an Insurance Company

October 8, 2005 7:05 AM

Auto-accident question: Is my health insurance going to come after me for money?

I was involved in a hit and run accident as a pedestrian a few months back, and I'm in the process of making a claim against my uninsured motorist coverage on my auto insurance. I've talked to several lawyers about this, both friends and professionals, and I've heard that I have an air-tight case (I was one of two people who was hit by a drunk driver while crossing a brightly lit, busy street and the other has already collected against his uninsured motorist coverage, although he's a resident of a different state).

Now, a insurance agent friend of my father has told me to expect my health insurance company to come after my "pain and suffering" money to re-coup their expenses, and that this happens all the time. He's also telling me to put the money into a trust to hide it from the health insurance company (Blue Cross Blue Shield of Ill.). My current lawyer has never mentioned anything like this to me, and I'm wondering if he's just not experienced enough. I'd like to hear from some of you before I bring it up.

I've got about 88,000 in medical bills all of which is covered by insurance minus 3,000 or so. The pain/suffering money is expected to be ~108,000, give or take. Is BCBS going to come after me for this? Can I hide the money in a trust?

Insurance agents, lawyers - can someone tell me what to expect?

posted by anonymous to law & government (4 comments total)

Check the wording of your health insurance policy. Often it contains "subrogation" language, allowing it to seek reimbursement in the event that you recover money from another person in a lawsuit. Depending on the language and on your state's law (or on Federal law if it is employer-provided health insurance), it may or may not be broad enough to allow for this recovery.

A lawsuit allows you to claim economic damages (lost earnings, medical expenses) and non-economic damages (pain and suffering, disability, disfigurement). In many states with no-fault insurance laws, there are limits on what kinds of damages can be claimed in a lawsuit. A typical restriction is that only non-economic damages may be claimed, if they are serious, and that any economic losses have to be paid by your own policy, without the need for a lawsuit.

Ideally, the BCBS subrogation right would extend only to medical expenses - it paid them and should be allowed to be repaid if you recover them from the defendant in the lawsuit. It did not compensate you for pain and suffering and should not have any right to try to grab that money. But that "ideal view" is very likely dependent on what the policy says and what the applicable state or Federal law provides.

If your lawyer has not discussed this with you, he should. If he does not know the answer, then you need a different lawyer.

There may be ways in which payments made in settlement of a claim under a lawsuit would be paid in trust, not to hide them from BC, but to avoid BC's claim. (There is a difference.) Again, that depends on your state's law, and your lawyer should know what can be done.
posted by megatherium at 7:35 AM on October 8, 2005

Your health insurance company can only try to reclaim money that it paid, which means at most it can only recoup the amount of your medical bills; as megatherium says, that's called subrogation. When I was in insurance our policy was to put auto-accident-related claims on hold temporarily while investigating whether any auto insurance company was going to be responsible for the medical bills. Some other companies will pay the claim and then hand it over to the subrogation investigators, who'll work to find out whether auto insurance was involved, and who will recoup the money in that case.

And note that in many cases, having both medical and auto pay off doesn't mean that you get the extra medical money; in order to prevent precisely this situation, both companies often pay the doctor or hospital directly. And when the doctor receives duplicate payments, he or she invariably notifies the medical insurance company, who then brings that whole subrogation thing to bear.

And I am not a lawyer, but to the best of my knowledge, causing two insurance companies to pay the same bill by hiding their payments from each other constitutes insurance fraud. And that just ain't worth it.
posted by ubernostrum at 1:37 PM on October 8, 2005

Another point: You apparently are pursuing a claim for uninsured motorists benefits, not a lawsuit directly, but UM coverage is intended to substitute for a lawsuit against the responsible party, and thus for the most part it adheres to the same rules.

Ubernostrum's last point is good but might not apply. If your state allows you to recover medical expenses in a lawsuit, the "collateral source" rule (still applicable in many states but not all) allows you to collect those damages even if the medical expenses have already been paid by insurance, and those damages are indeed paid directly to you and not to the providers. The subrogation language in the policy, though, trumps that common-law rule and allows the insurer to be reimbursed.
posted by megatherium at 3:07 PM on October 8, 2005

The first question you should ask your lawyer is if your health insurance company has placed a lien on any recovery from insurance proceeds, or what have you. If that is the case, they will be paid before you get your hands on any of the money, regardless.
posted by DawnSimulator at 5:29 PM on October 8, 2005