CLAIMS | Plan Provisions and Taxation

Medical expense contracts that provide benefits on a service basis (such as HMOs and the Blues) generally do not require that covered persons file claim forms. Rather, the providers of services perform any necessary paperwork and are then reimbursed directly.

Medical expense contracts that provide benefits on an indemnity basis typically require that the insurance company (or other provider) be given a written proof of loss (that is, a claim form) concerning the occurrence, character, and extent of the loss for which a claim is made. This form usually contains portions that must be completed and signed by the employee, a representative of the employer, and the provider of medical services.

The period during which an employee must file a claim depends on the provider of coverage and any applicable state requirements. An employee generally has at least 90 days (or as soon as is reasonably possible) after medical expenses are incurred to file. Some insurance companies require that they be notified within a shorter time (such as 20 days) about any illness or injury on which a claim may be based, even though they give a longer time period for the actual filing of the form itself.

Individuals have the right under medical expense plans to assign their benefits to the providers of medical services. Such an assignment, which authorizes the insurance company to make the benefit payment directly to the provider, may generally be made by completing the appropriate portion of the claim form. In addition, the insurance company has the right (as it does in disability income insurance) to examine any person for whom a claim is filed at its own expense and with the physician of its own choice.

Most self-funded plans contain subrogation provisions. If state law allows, they are also commonly contained in the group medical expense contracts of HMOs, PPOs, the Blues, and insurance companies. A subrogation provision gives the plan (or the organization that provides plan benefits) the right to recover from a third party who is responsible through negligence or other wrongdoing for a covered person's injuries that result in claims being paid. If a covered person receives a settlement from the third party (or their liability insurance company) for medical expenses that the plan has already paid, the covered person must reimburse the plan. The plan also has the right to seek a recovery for benefits paid if legal action is not taken by the person who receives benefits.