Once you have arrived at a satisfactory number that is acceptable and that you can live with, you can agree to settlement with the insurance company. However, in a sense this number has to be “backed into,” since before you can know what is an acceptable overall number you need to know what outstanding costs remain and need to be deducted from it. This is why many attorneys first (when they have a rough idea of what the settlement amount may end up being) start to negotiate with the medical providers to see if this could even be a possibility. Once the ultimate outstanding medical amount is known, and the subrogation lien amount is known (and negotiated down), THEN one can start to understand what the true bottom line “net amount” will be; the end figure you will walk away with. This is the number that, in the end, always matters most.
Another important consideration is that many insurance companies are attempting to offer plaintiffs “structured settlements.” This is an interesting concept, but we should remember our previous principle and precept; that insurance companies do WHAT IS BEST FOR THEM 100% of the time. Knowing that, it is recommended for a variety of reasons to shy away from a “structured settlement.” Essentially, a structured settlement is where the insurance company gets to settle your claim, but essentially pay you little or no money now. They promise yearly, quarterly or monthly payments against the principle. It goes something like this: if they “settled” your claim today for $100K instead of paying you this, they would pay you “prevailing interest rate” [of maybe prime rate plus a couple percent, so say 6% yearly], as such they would owe you $6,000 every year or $500 per month.
This may seem good to some people, and it might be for someone looking for a steady income, but this assumes that they will not go into bankruptcy (it does happen periodically) and that you cannot get a better rate than the 4% – 6% they might pay. This is a pretty modest return, and usually either the market or property will out perform these results. Further, there may be other business investments one could engage in, or they could take care of personal or family obligations if their money were not “locked up.” Some people consider such a settlement arrangement, if the settlement involves a child, or is only for a set number of years and then the entire principle is paid over. The reason insurance companies like, and push for, these types of settlements is obvious; they get to keep their own money and their normal 20% – 30% returns, meanwhile paying only a small portion of that interest percentage to the injured party. The great majority of people ignore this and demand the full amount upon settlement, and this seems advisable.
Obviously, then, your negotiation skills on the one end are as important as your negotiation skills on the other. The front end (the insurance company) money is only half of the equation. The back end (the money owed to medical providers and subrogation liens) is just as important and just as much a factor in what you will ultimately net. Thus, at this point in the process things may stall until you can make all of the “numbers work.” Likewise, you need to be just as patient here (in negotiating the back end) as you do in negotiating your settlement with the insurance company. Both must be integrated to come up with the best “whole” overall solution which nets you the most money. Taking the time to negotiate the back end, physicians and subrogation liens, can be lucrative and net you thousand of dollars more, if one is patient.
At this point not only is your patience a virtue, but can be your best ally. All medical providers want to be paid, as soon as possible. There are some companies which even buy doctors’ “collectibles” (money they are owed from patients, insurance companies, etc.) at a discount, say 50% on the dollar, just because the doctors get tired of waiting and simply want their cash. Remember time is a powerful element (and weapon) used by the insurance companies with great effect. You can use this time element in your favor as well.
Essentially letting the medical providers know that the matter MAY be on the brink of settlement [never let them know a matter IS settled, as then they begin pressing for their money and wanting to know the amount of the settlement so they know how much to reduce bills, etc.] and if only you could get some help from the respective medical providers, you could bring this matter to resolution. This, then, gives them the incentive and motivation to negotiate their bills down, and puts the onus on them. If the numbers simply do not work, sometimes just sitting on things and letting time tick by, can help push the physicians and the subrogation people to stop being ridiculous.
Insurance companies know the power of this concept, of dangling a figure out there and then just waiting. They let time do the psychological work of helping to turn around reluctant plaintiffs. The same can, and DOES, work with medical providers. Letting them know that there is a certain amount you could pay right NOW (based on the offer) if they could compromise their bill. Otherwise, let them know you will likely have to wait until litigation happens to be able to get the full amount to pay the bill in its entirety. It is up to THEM if they want to wait. If the proposed offer is not particularly that great, and you would be “netting” just a moderate amount of money, there is another technique that is sometimes used to get the doctors in line and get them negotiating their bills.
Many times, instead of playing “hide the ball” and not telling the doctors that one is netting a certain amount of money; attorneys will in more moderate cases show a complete breakdown of ALL of the figures, even how much YOU are clearing. This works in a couple of ways. First, it shows the willingness to be honest. Second, it shows that no one person here is “getting rich” (including the plaintiff). Third, it shows that EVERYONE is taking a reduction and IDEALLY, the same reduction percentage. This would all be reflected in your breakdown.
This might show that the amount being offered is a $25K policy limit. Next, that the overall medical bills were $15K, and the lawyers fees are $7,500 and that the plaintiff would only receive $2,500. This is obviously unfair. So what is proposed is something like this: That all parties, including the attorney (if one), is willing to do a 1/3 reduction of the bill ACROSS THE BOARD and that now the physicians (each taking a 1/3 reduction on his particular bill) would total $10K in meds, and the attorney fee is reduced to $5K and the client nets $10K. Something like this shows no one party is getting particularly rich, and that all are sharing in the reductions equally, etc. These type of proposals are almost never turned down. It is just that physicians do not want to be the only ones making reductions or concessions, which is usually thee case.
It should be remembered that when seeking reductions from doctors, that while they have a right to make an income, essentially most of what they make is “profit.” It is not like they are working for an hourly wage, or just barely getting by economically. They make good money and are paid mainly for their knowledge and expertise. Further, most of their prices are somewhat inflated to make up for the fact that there will be people who do not pay them, or only pay them half, and for insurance companies who constantly seek reductions. It is sort of cost spreading. Insurance companies know this all too well and are the ones who drive the hardest bargains with doctors. For instance, $1,300 MRI’s become $250 payments; $500 procedures are paid at $85, etc. and the doctors accept this all day long. Therefore, to a great degree they expect (and build into their payment structures) that there will be reductions in their billings. So, you should negotiate with them in the toughest way you know how, while still being fair – like showing them that ALL of them will be taking reductions, as well as the attorney and you as plaintiff; not just a few of them. This goes far in placating them and helping you to resolve a tough matter.