Health Ins: employer made deductions but stopped paying prem. Am I liable for bills?

[toniom]

My employer (a small corp with 10 employees) deducted health ins. premiums from my check but stopped making payments to ins. company.

I was injured in a mountain biking accident and spent 3 days in the hospital. When I checked into the hospital, I presented my ins. card and no questions were asked.

One month later, I took a new job (with health ins.)

Two months later, I received notice from the hospital that my claims were being denied.

Some digging and investigation revealed that my former health ins. had been cancelled due to non-payment of premium. The insurance company did not notify me of this situation.


Since I didn't receive notice from the insurance co. and my employer was still deducting payments, I believed I had health ins. coverage when I checked into the hospital.

I contacted my previous employer, and he agreed to pay the bills, in light of the fact that he had committed fraud.

I didn't hear anything for nearly two years, and then a collection agency hired by the hospital noified me that no payment had been made and I was being held liable for the total amount due plus interest penalties.

By that time, the company had gone out of business and the owner was in the hospital with a terminal illness (with health coverage, of course). Since then, the owner has died and the widow is claiming ignorance and poverty. (both counts are contestable)

This is an awful predicament. I find it difficult to believe that an insurance company could cancel a policy without notifying its policyholder and that a hospital could admit a patient with and insurance card without verifying the validity of the card and notifying me that it was not valid.

The insurance company knew my policy was cancelled, the employer knew my policy was cancelled, and it seems the hospital would have known that my policy was cancelled. All this, and I had no way of knowing that my policy was cancelled!

How could this leave me liable for the amount due to the hospital? I'm not contesting that the hospital is owed money, I just don't believe it should be my obligation.

Please help!

 

[cbg]

Wow. What a tough situation.

Technically, you were not the policyholder; your employer was. The contract was between your employer and the insurance carrier, not between you and the insurance carrier. When I stopped working for a national health insurance carrier in 1998, only one state required that the insurance carrier notify the employees when coverage was cancelled for non-payment. In all other states, the onus was on the employer to make such notification. That's why the insurance company didn't notify you - it wasn't their job to do so. Your employer is at fault for that. As far as the hospital verifying the validity of the card, they had no reason to think that the card was NOT valid. In fact, they may have checked and been told it was in force; cancellations for non-payment are generally made retroactive to the last date for which payment was made. There is a grace period for the employer to pay. Therefore, if payment is due December 1 and the employer pays any time in the month of December, coverage is continued but if the payment is not received by the beginning of January coverage is cancelled retroactive to December 1. Most of the insurance companies I'm familiar with will eat any claims for that time that have already been paid, in that the check has already been cut and mailed; or if they charge them back at all they will charge them back to the employer, not the employee. But they will not pay any new claims that come in for that time period. Undoubtably this is how the situation came about.

Do you have anything at all in writing from your former employer acknowledging liability? That would be of enormous help. Ultimately what should happen is that the claims should be paid from his estate, but from what you've said that isn't going to be easy. And the sad fact is that at the bottom line, you are legally responsible for payment of these claims, whether your insurance does it or you do. I absolutely agree with you that morally you shouldn't have to pay a penny, but legally and morally aren't always the same thing.

I strongly advise that you find an attorney to help you sort this out. It's possible that under the circumstances you might be able to work out some kind of payment plan. And suing his estate is not outside the realm of possibility either. But for the sake of your credit record, you need to get this cleared up as quickly as possible.

By the way, I am not a lawyer, but I have been working with health insurance benefits from all sides of the desk for over 20 years. I've handled them from the insurance company aspect, the employer aspect, the administrator aspect and the employee aspect.

I wish you luck. Let us know what happens.

 

[ALawyer]

You got some GREAT advice. Some more thoughts.

Very often health plans work out arrangements with providers (the hospital and doctors) to accept significantly lower payments instead of their "rack rates" that they would bill in the absence of any insurance. I do not know what they billed you, but you should not have to pay them more than they would have been paid had the insurance been inforce. (The hospital may agree to compromise it to that level, or if they sue you you would argue that what they actually would have charged the plan is the "reasonable and customary" or contractual rate and that is all they are entitled to.)

Second, if you want to sue the old boss' estate, there is at most a 1 year statute of limitations from date of death, so don't delay.

Third, and weakest, given the fact that the hospital failed to notify you you were prejudiced in that you failed to proceed against the employer.

Fourth, you likely are now dealing with a collection agency. These guys essentially either buy the accounts that have been written off and keep whatever they get, or if not, get a high percentage of whatever they collect. They are vicious and not likely to cut you any deal. They have no sympathy, and understand only toughness and a willingness to defend regardless of the consequences. They imply that they will ruin your credit and claim they can also collect their legal fees (and unless you signed a contract enabling them to collect legal fees, they can't) and court costs (they can, but usually don't bother).

If they think it may likely cost them more to collect from you what you owe than the amount involved and/or that you have a decent defense, than they forget it and move on to the next. A lawyer could be useful in giving you the realities of how to proceed here.