The California Supreme Court put the fox in charge of the henhouse (Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541) and patients and medical providers are getting nervous. In Howell, the Supreme Court stated that it makes more sense (to them) to let health insurers determine the measure of damages in a personal injury action than the medical providers who charge the tort victims for medical treatment.
In other words, if you are in automobile accident caused by the negligence of another, the better your health insurance is means you will recover less.
Health care in the United States is big business. Naturally, insurance companies want to be a part of that big business money.
Health care providers (doctors and hospitals) figure out what it will cost for their medical goods and services and they post their “menu” to a website called the Chargemaster. What the Supreme Court got badly wrong is their assumption that different payors are charged by the health care providers different amounts. Everybody, and that means EVERYBODY, is charged the same amount for each medical good and/or service.
Different payors pay different amounts pursuant to their negotiated contracts with the health care providers. Many circumstances and situations enter into the health care provider’s decision to accept a lesser amount from the health insurance company. For instance, the health insurance company may promise to pay within a short period of time; or may promise to pay electronically so the health care provider will get paid sooner and more reliably. The health insurance company may agree to provide many more patients, so the health care provider can enjoy economies of scale that they otherwise could not. Moreover, the health insurance company may promise to pay a lump sum to the hospital at periodic times reflecting overall charges, not attributable to any individual patient.
What is the result of the Howell Rule? Automobile insurance companies have paid millions of dollars less to claimants as a result of Howell. (Have you noticed your automobile premiums falling? If premiums are based on payout of claims, premiums certainly should have dropped through the floor.)
Another result of Howell is that medical providers are illegally balance billing, in an attempt to give the injured victim the argument that they still owe the difference between what the health insurance company paid and what the health care provider billed. First, balance billing is illegal. Second, the health care provider’s own records usually indicate that the amount they seek by balance billing was “written off.” This ploy has made the victim worse off, not better. As a result of Howell, injured victims are paid less and they in turn are paying the health care providers less. The Supreme Court made everybody else worse off except the insurance companies.
