It is important to note that many states permit insurance providers to disclaim paying benefits already payable through other sources or to reduce the amount paid. These state provisions may be referred to as “priority rules” or “collateral source rules.” Priority rules stack the order of insurance liability in the event of a claim (common in complex automobile accident cases). Collateral source rules also affect whether persons who recover medical costs and expenses from other sources, e.g., a lawsuit, must reimburse the insurance company for benefits paid. In most states this is permitted, but many states require the insurer to play an active role in the settlement negotiations and/or contribute toward the legal fees.

Beneficiaries/insureds do have recourse against insurance companies that delay or deny payment of benefits for covered charges. Although the term is often misused or abused, “bad faith” denials of claims by insurers are actionable in most states. However, the patient/insured generally has the burden of proving that the charge was for “medically necessary” care or treatment, and the charge was reasonable. Many states award punitive damages to punish insurance companies for bad faith denials. Other states have express laws requiring response to a claim (either payment or formal denial) within a specified number of days of receipt.