HMOs: Some Share Patients’ Injury Awards
Few consumers are aware of a provision "deep in the fine print of most insurance contracts that gives insurers the right to a share of damage awards," won after a patient has received compensation for injury, the Los Angeles Times reports. Susan DeGarmo and her son, Stephen, as well as patients that joined her in class action suits against their HMO, Health Plan of the Upper Ohio Valley, learned that the hard way. In 1990, Stephen was riding his bike when a pickup truck smashed into him, paralyzing him from the waist down. After the DeGarmos won a $950,000 settlement (reduced by legal fees to about $500,000, which "seemed like the bare minimum Stephen would need"), their HMO sent a letter requesting $128,000 of it, claiming that "it had paid for Stephen's health care while the family had paid nothing more than the monthly premiums and small co-payments required for each doctor's office visit or hospital stay." Susan DeGarmo said, "What they were doing infuriated me. Stephen won this minimal amount of money that he's going to need to take care of himself for the rest of his life ... and they were trying to take it away." Further raising their ire, the DeGarmos discovered that the HMO actually was demanding the "full amount that Stephen's doctors and hospital had billed, not just the discounted amount the health plan actually had paid them" and in fact sought nearly twice as much as it had paid. In deciding the case, West Virginia Circuit Judge John Madden ruled that the health plan owed $68,000 to the 80 HMO members who joined the DeGarmos in the suit. He wrote, "There is something offensive to a proposition that permits an entity to profit by its members' misfortune." A jury awarded the claimants $4 million as compensation for their "aggravation, annoyance and inconvenience," as well as $6 million in punitive damages. In the end, the health plan agreed to pay $9 million to those joining the DeGarmos in the suit and others in three separate suits. Susan DeGarmo received $10,000 for being a class representative and the $118 each member of the lawsuit received, but "most important to her, she did not have to pay back any of the money from Stephen's settlement." In response to the suit, Health Plan of the Upper Ohio Valley no longer requests amounts over what the plan has actually paid.
The Los Angeles Times reports that asking "consumers injured in accidents to pay their health plan a portion of the money they recover from third parties turns out to be commonplace." According to Mark Driggs, a Salt Lake City, UT, consultant who tracks HMO business strategies, 311 of the 635 HMOs nationwide pull in some of their revenue from the practice. But it is "unknown how many health plans attempt to recover the billed amounts rather than the smaller amounts they actually paid." No federal regulations govern the practice and the courts have not yet decided whether it is legal. In a Minnesota case, the U.S. 8th Circuit Court of Apeals ruled against consumers, and in California, state courts have ruled in favor of HMOs to recover more than they have paid (Rubin, 12/29).