Insurance Case Uncovers Legal Quirk

June 13, 2002
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GRAND RAPIDS — Employers with workers’ compensation coverage and group health insurance benefits possibly may experience what seems like foot-dragging in processing group health claims.

That’s a possibility about which Kevin J. O’Dowd, an attorney with the Dickinson Wright law firm, told the Business Journal recently.

O’Dowd said group insurers might delay settling some claims if the slightest shred of doubt exists about whether an employee’s health problem is work-related.

If this happens, he said, it probably results from a recently adjudicated Michigan suit in which a group insurance company paid an employee’s health claim.

Subsequently, however, the health issue was determined to be job-connected.

Accordingly, the group insurer applied to the firm’s workers’ compensation insurance company for reimbursement of the claim it had paid in the employee’s behalf.

But the workers’ comp carrier gave the group carrier reimbursement only to the extent that it would have paid under the schedule of fees state law dictates in workers’ comp liability.

The state-set fees sometimes are significantly lower than the sums that group insurers customarily pay for ordinary health claims.

State government imposed the caps some years ago to prevent the runaway inflation of workers’ comp coverage. During the 1970s and 1980s, such runaway costs were a major inducement for employers to migrate out of Michigan and an equally important discouragement for other employers to move to the state.

At any rate, the group insurance carrier sued the comp insurance carrier for the differential. O’Dowd said that the courts understood and sympathized with the group carrier’s view that that it should receive full reimbursement.

In fact, the group carrier’s suit noted that since workers’ comp law requires a workers’ comp carrier to fully reimburse any employee who pays his or her work-related medical bills, it should by the same token fully reimburse the group carrier who, in essence, did the same thing.

But O’Dowd said the judges declined to subrogate an employee’s rights to group carriers and, thereby, refrained from making law where none exists. And that, O’Dowd said, is a matter that the Michigan legislature needs to start addressing.

Until it does, he believes, group insurers will be very deliberate about making payments on any claim until there’s a clear finding that the claim does not regard a work-related injury or health problem.

The bottom line is that in cases where any doubt exists concerning whether a claim is work-related, doctors, hospitals and other medical providers will be waiting longer times to receive payment for services rendered.  

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