When Can You Use A Letter of Protection To Receive Medical Treatment?

A letter of protection (LOP) is a document that a lawyer provides to a medical provider. It allows the medical provider to give you the medical services you need, but do not receive payment upfront. A letter of protection helps guarantee patients will receive treatment, especially after being involved in a car accident. Letters of protection are useful for people who do not have health insurance or medical payments coverage.  Additionally, many health insurers refuse to pay for certain medical treatments e.g. certain MRIs or chiropractic care.  Letters of protection are useful for people who would ordinarily be out of luck, are suffering serious injuries, and are unable to pay for proper treatment.

In New Mexico, many residents of the state simply do not have health insurance at all. Even then, many residents do not have med pay to help cover very expensive treatment after a wreck. Unfortunately for the injured, auto insurance companies typically refuse to pay for medical costs associated with treatment during care.  It is best to use your health insurance in this situation, but if you do not have health insurance, an LOP can make sure you get proper treatment.  A settlement with the insurance company will then repay those medical providers. Some medical providers refuse to treat car wreck victims through regular health insurance simply because the injury was caused by a car crash.  This is unacceptable, but it does happen and an LOP can provide assurances to the medical provider that they will be paid after providing care.

Letters of protections are typically sent to medical providers by an injured parties attorney to specify that the injured person will pay all medical expenses to cover the bills from future money recovered in a settlement. An LOP is only used where the client has no health insurance and no medical payments coverage.  An LOP is usually a last resort for the client.  If there is no settlement or judgment awarding money to the injured, they will have to pay the full treatments costs themselves.

Treatments from chiropractors or acupuncturists can be needed to handle pain associated with a car wreck. But health insurers usually do not cover all these services and its then up to the injured person to decide if they want to seek treatment by using a letter of protection to receive services. The important thing to remember is that a letter of protection does not require you to pay up front. You must keep in mind, however, that if you are unable to settle the case then you must repay the health care provider out of your own pocket. It would be a good idea to call your health insurance provider to see if they cover services such services or if a letter of protection is needed.

Typically, a doctor’s full rate will be what is paid back under an LOP.  Unlike health insurance, there is not a discounted rate for repayment.  Therefore, it is always better to use your own health insurance because the repayment is much less.  This means the medical providers billable rate will apply when repaying medical providers out of a settlement or judgment.  If health insurance was used, the repayment would be much less than under an LOP.

In addition, if a non-ERISA health insurance is used, the common funds doctrine and other equitable doctrine help reduce the amount the client must repay after a settlement.  The common funds doctrine requires non-ERISA health insurance companies to contribute to attorneys’ fees for the injured victim because the health insurance company benefited from the settlement but didn’t have to pay any attorney’s fees. The idea behind the common fund doctrine is that insurance companies should share the cost of litigation.

For example, if a medical provider billed $5,000.00 to the health insurance company, the health insurance company may only pay $3,000 under their negotiated rate.  Then the health insurance company will ask for $3,000 to be repaid by the settlement.  The common fund doctrine states that the health insurance company must pay its share of attorney’s fees and expenses.  In our example, the health insurance would likely only be entitled to a repayment of less than $2,333.33 if the contingency fee is one-third.  This does not include other costs and gross receipts tax.  Likely the attorney would ask that the health insurance company accept less than $2,000 in repayment.  If, however, an LOP was used, the client would have to repay the entire $5,000.  That leaves the client with $3,000 less in their pocket after the settlement is complete.

If you need help using an LOP or getting a proper settlement after a car wreck reach out to our office at (505) 242-7200. The Davis Kelin Law Firm is Albuquerque’s Premier Personal Injury Law Firm. We serve all of New Mexico and are here for your personal injury needs.