85% of the time, the standard indemnification language you use in settlement agreements is probably just fine. The other 15% of the time, you're dealing with a Medicare beneficiary and the entire situation changes.
Standard indemnification language
Although actual wording may vary, the following four basic statements likely appear in some form on all of your settlement release forms:
- Held harmless: By signing the release, you fully and completely release and indemnify the insurance company and insured party from having to pay you any additional money.
- Denial of Liability: The insurance company is settling your claim, but does not acknowledge or admit they or their insured had any liability for the incident or your resulting injuries.
- No future claims: You acknowledge that this is the only legitimate legal claim you have against the insurance company and the insured party.
- All-inclusive: The personal injury settlement terms in the release include all the agreements, promises, and representations made to you, both written and oral, from the claims adjuster, and/or the insurance company.
On the surface, this four-legged stool seems to fully cover the insurance company (i.e., the primary payer) from ever having to deal with this claim again. However, when the claim involves a Medicare beneficiary, the stool weakens and can actually collapse.
Medicare's recovery regulations
The following highlights become apparent when reviewing Medicare's recovery regulations:
- Because Medicare is not a party to the claim, there is no obligation on Medicare's part to abide by any indemnification language included in any legal settlement between the insurance company and the Medicare beneficiary.
- The beneficiary is required by law to cooperate with Medicare's efforts to collect reimbursement owed to them in connection with the claim, or risk being personally liable themselves.
- Medicare can and will charge twice the reimbursement amount, plus interest, if the insurance company is found to be non-compliant, and can even refer guilty parties to the Department of Justice.
- Everyone involved in a claim – the Medicare beneficiary, attorneys, insurance companies, healthcare providers, and state agencies – are all potentially liable for required reimbursements. (However, historically, Medicare often comes after insurance companies first because theirs are the deepest pockets.)
Many of our clients over the years have been shocked to discover that their standard indemnification language does nothing to limit their exposure to reimbursement to Medicare, not to mention the heavy fines for non-compliance. With newly upgraded auditing efforts going into effect for Medicare, even more of these claims will be caught, enforced and pursued in the coming months and years.
Of course, indemnification language is not completely valueless. After Medicare receives reimbursement from the insurance carrier, the carrier can certainly process a lawsuit against the claimant to recover the monies as per the indemnification language that was included in the settlement. But, realistically, the claimant rarely if ever has anywhere near sufficient funds to make such a course beneficial, and the insurance company is left holding the bag.
Many insurance companies have no idea how exposed they are in this situation. Most attorneys also don't realize these facts and may advise their clients incorrectly as a result. In the end, a lot of time, effort, and money can be lost.
You can rely on something other than indemnification language
At Flagship Services Group, our medicare compliance experts focus exclusively on helping insurance companies navigate the rough waters of Medicare compliance for personal injury claims. We've seen this medicare settlement-additional payment pattern play out over and over again throughout the years, and we're on a mission to make sure it never happens to our clients.
The good news? A Medicare beneficiary's P&C claim can be processed from start to finish to be accurate, fair, and legitimate for settlement, while making accommodation for Medicare's lien so there is no exposure after the fact. This isn't a product of higher-grade indemnification language, but rather of handling the claim properly from the start so no one has to draft crafty settlement language that ultimately doesn’t provide protection against Medicare.
If you want to know how much value and enhanced protection Flagship can produce in your Medicare P&C claims process, get your free Medicare risk assessment today. We specialize in mitigating risk to protect your financial resources.