Lawyers’ Corner: Coordinated Plans in Farm Bureau v Blue Cross

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Coordinated plans for health insurance and auto insurance may save clients money and make it easier for them to get their medical expenses covered quickly. But a recent published case from the Michigan Court of Appeals shows the challenges a coordinated plan poses behind the curtain.

In Farm Bureau General Ins Co v Blue Cross Blue Shield, the Michigan Court of Appeals refereed a dispute between a medical provider, a health insurance company, and an auto insurance company over who was responsible to pay for an injured motorist’s medical expenses. The court interpreted the policies and the medical provider contract, and found that in this case the provider was the only one liable for the motorist’s care.

On October 22, 2011, Julie Klein was serious injured in an auto accident. She was taken to Spectrum Health Rehab and Nursing Center, a skilled nursing facility, for care.

The Coordinated Plans & Participation Agreement

Klein had coordinated plans: Blue Cross Blue Shield (BCBS) was her health insurance provider and Farm Bureau was her auto insurance provider. Under the policies, Farm Bureau would be a secondary insurer, only responsible for allowable expenses not covered by Blue Cross.

Spectrum Health had a participation agreement with BCBS, which controlled how it billed for its medical services. Specifically, the agreement required Spectrum to seek preauthorization for custodial care at a skilled nursing facility. Under the participation agreement, a BCBS physician reviews the medical necessity of any service. If any proposed service is medically unnecessary, BCBS will deny coverage for that treatment. Spectrum Health or the policy holder can appeal any denial. If they don’t, Spectrum “assumes full financial responsibility for the denied claims” unless the policy holder acknowledges the denial and assumes financial responsibility in writing.

BCBS approved the first 14 days of Klein’s stay at the nursing facility. But then it denied the next request for pre-certification. Its physician determined that Klein was not functioning at a level where she would benefit from skilled nursing services. BCBS didn’t appeal the decision and Klein’s family never assumed financial responsibility. Instead, Spectrum submitted the denied bill to Farm Bureau, which paid under protest.

Auto Insurer’s Liability Under Coordinated Policies

Farm Bureau’s objection was that it was not liable for any of Klein’s medical expenses. The court said “the no-fault insurer is not subject to liability for medical expense that the insured’s health care insurer is required, under its contract, to pay for or provide.” Farm Bureau at *5, quoting Tousignant v Allstate Ins Co.

As the secondary insurance provider, Farm Bureau was only responsible for medical expenses Klein was legally obligated to pay. Spectrum and Klein didn’t do everything they could to get coverage under the health insurance policy. Also, Klein never assumed financial responsibility for the medical expenses Blue Cross refused to cover, so she was not liable. There was no obligation for Farm Bureau to assume or pay for under the no-fault act.

Medical Provider Liability

With the auto insurance provider eliminated as a possibility, the court had to determine who was ultimately liable for the medical expenses: Blue Cross, Spectrum, or Klein. The participation agreement guided the decision. Under that agreement, Spectrum explicitly agreed that if Blue Cross denied pre-authorization and Spectrum treated the patient anyway, it would assume liability for those services. Spectrum was contractually prohibited from billing Klein directly unless she, or someone on her behalf, explicitly assumed the financial responsibility in writing.

The court determined that BCBS could not be held liable to pay for services it had denied as medically unnecessary. Klein could not be billed either. Under its participation agreement, Spectrum assumed financial liability and could not seek reimbursement from either defendant in the case.

Advising Auto Injury Clients of Coordinated Policies

Conflicts between health insurance companies and auto insurance companies can cause significant delays and complications in an otherwise straightforward auto accident case. The Michigan No-Fault Act requires insurance providers to pay out the benefits and then seek compensation from other insurers, but often, insurance companies will file Motions for Summary Disposition based on coordinated policies and other priority issues in the midst of the First Party case. The time and energy spent to defend that motion can put pressure on an injured motorist to settle for less than they should.

Even if the insurance provider follows the proper procedure, your client might still be called back into court, or required to produce documents, to resolve arguments between the various insurance providers. As an auto accident attorney, it is up you to pull back the curtain and explain to your client how the law works and why they are still involved. Fighting between insurance providers can cause your client a lot of anxiety. They need to know that their medical expenses will be paid for, no matter who writes the check.

David Christensen is a veteran auto accident attorney for Christensen Law in Southfield, Michigan. He has been representing injured motorists and medical providers for over 20 years. David is also a Featured Speaker at the up-coming No-Fault Institute hosted by the Institute for Continuing Legal Education. If your client has been in a serious auto accident, contact Christensen Law for a referral today.