Capitation is a term used in medical billing to refer to a set fee paid by an insurance company. Non-capitation occurs when an insurance company pays for the specific, itemized services provided.
In other words, capitation is a set fee the insurance company pays a physician for each person they treat, regardless of the exact services provided.
Capitation is related to personal injury cases because it's an issue that could arise in subrogation, meaning a plaintiff's insurance company could recover any money it paid for medical expenses and from the person who caused the injury.
California Civil Code 3040 CCP says that if an insurance company pays a doctor on a capitation basis when they attempt to recover medical payments they made to the plaintiff, they are limited to recovering 80% of any standard charge by medical providers on a non-capitated basis.
Simply put, this California law limits how much health insurance companies can receive from a victim's personal injury settlement. Your insurance company is only entitled to recover the lesser of the following:
- The total cost of medical services provided;
- 1/3 of the settlement if the plaintiff had an attorney; or
- 1/2 of the settlement if the plaintiff did not have an attorney.
Under 3040 CCP, the service cost depends on how the insurer pays providers. With capitation, where providers are paid a flat fee for every patient they see, the cost is covered at 80% of what a provider will pay in non-capitated cases. Suppose the insurance company does not use capitation. In that case, the cost is the amount of the medical bill.
The terms are relevant in California personal injury cases because they may reduce how much money a plaintiff receives from a settlement or court judgment.
What is Subrogation?
Subrogation occurs when a third party, such as a health insurance company, assumes the plaintiff's right to collect damages. An easy way to remember the term is that subrogation is a type of substitution.
When a plaintiff is injured due to a defendant's negligence, the plaintiff often requires medical treatment. Their health insurance covers most or at least a portion of these costs.
When a plaintiff receives a settlement or judgment from the defendant, the health insurance company, as the third party, has the right to claim part of that amount to cover the medical bills they've paid.
Put another way; an insurance company may collect money from the person who caused the injury that required the company to pay for medical treatment.
A subrogation claim is primarily based on the concept that an insurer is often obligated to pay a policyholder (plaintiff) before they can file a lawsuit, which is an advantage to the plaintiff.
However, under the law, a benefit should be the responsibility of the party causing the injury. Subrogation is a way for insurance companies to make early payments and be paid back by the responsible party.
What is Capitation?
Capitation is a way to control healthcare costs. Rather than paying a doctor for the specific medical services provided, capitation pays based on an average determined by multiple factors. Capitation rates are determined by factors such as:
- The number of patients a doctor treats;
- What services does the doctor provide;
- A specific length of time;
- Patient ages and overall health;
- The expected use of healthcare services by the covered group;
- Local costs.
Whether an individual patient seeks care is not relevant to determining capitation rates. Patients are instead part of an overall group, and insurance companies average out the expected rate for that group.
In general, a group of 60-year-olds will have a higher capitation rate than a group of 20-year-olds. The older group is more likely to visit the doctor and need more expensive procedures.
Capitation can cover a range of services, including preventative care, immunizations, laboratory tests, and treatments. An increasing number of health care plans in the U.S. use capitation.
Capitation, Subrogation, and Lawsuits
When an individual is injured, one of the first things they will likely do is seek medical treatment. It may be months before an individual files a lawsuit against the person or entity that caused their injury. In the interim, they may have accrued thousands of dollars worth of medical bills.
If an individual files a lawsuit and receives a settlement or damages from a jury verdict, the health insurance company is entitled to part of the damages. The insurance company assumed partial responsibility for paying for the plaintiff's medical care due to the defendant's negligence.
California Civil Code 3040 CCP
Cal. Civ. Code 3040 outlines how a health care plan or health insurer may collect from a plaintiff's damages award. The statute includes limitations on how much insurers may collect.
Insurers should divide payments between those made on a capitated basis and a non-capitated basis. Generally, the services are non-capitated if the plaintiff received an itemized bill of services.
When services are billed on a capitated basis, a health plan may collect up to 80 percent of the “usual and customary charge for the same services by medical providers that provide health care services on a non-capitated basis in the geographic region in which the services were rendered.”
A health plan or insurer may collect what they paid for non-capitated services. Insurers may collect the entire allowable amount of medical payments or a percentage of the settlement, whichever is lower. If, for example, the plaintiff retained an attorney, the insurer may claim no more than 30 percent of the settlement.
Capping the total amount an insurer can collect is beneficial to plaintiffs. If their medical costs exceed the full damages they receive, they will still be entitled to a portion of the money.
California follows the comparative fault system, meaning that a plaintiff's damages will be reduced by the percentage they were at fault. When a plaintiff is found at fault, a health care plan or insurer's recoverability will be similarly reduced.
In California, when a plaintiff receives damages from an injury, their health care plan or insurer may collect a portion. California law provides guidelines for how a health care plan or insurer may recover their expenditures, including limiting the total percentage they can claim.
Contact our Los Angeles personal injury lawyers for a free case evaluation. Injury Justice Law Firm works on a contingency basis, meaning you don't pay any fees unless we win your case.