Let’s say that you are involved in a personal injury accident in San Francisco. Let’s also assume that like thousands of other folks in the San Francisco Bay Area you have private health insurance (mostly likely through your workplace or employer). 
So, you go to the hospital for your injuries, say San Francisco General – and the good folks there send out bills for one amount (what was charged) but accept as payment from your insurance company another amount (what was paid).
If you go to trial on your personal injury case, which amount do you get at trial (assuming you win of course) – what was charged or what was paid?
Well, the Fourth Appellate District of California recently answered that question: the jury is able to award the injury victim what was charged. And assuming they do, you, the injury victim, are entitled to obtain without reduction what was charged by your hospital.
The case is Howell v. Hamilton and the scenario that I outline above is one that has caused an endless debate between personal injury attorneys (not just in San Francisco but across California) and insurance defense counsel.
Personal injury attorneys, like myself, want the jury to hear, be able to award, and the injury victim to be entitled to, what was charged. And insurance defense attorneys want the injury victim to be entitled to what was paid.
The Court in Howell settled this debate by examine the collateral source rule, its application, and fully evaluating what resides in the gap between what is charged by a hospital to an injury victim and what is paid by the injury victim’s health insurance company for her medical care.
In other words, what does the difference between what was charged and what was paid represent? The Court answered – a benefit within the meaning of the collateral source rule.
To put this as simply as possible: in California, the collateral source rules states that collateral source payments such as insurance or disability are irrelevant in a personal injury trial. The bad guys don’t get the benefit of the injury victim being responsible and having insurance. So, a jury is not allowed to hear about collateral source benefits like health insurance and an award by a jury to an injury victim is not reduced because of such payments for her medical treatment.
When a hospital negotiates with a health insurance company and agrees to take less that what it would normally charge for its services, it is not out of the goodness of its heart. It is because it is getting something for that reduction – a certain volume of business, faster payments, advertising, all sorts of things. Those things – those in-kind benefits – are benefits within the meaning of the collateral source rule. And when a hospital agrees to accept as full payment the negotiated rate – meaning the injury victim doesn’t owe any additional amount – that too is a benefit within the meaning of the collateral source rule.
So, you can’t reduce the plaintiff or injury victim’s award by the difference between what was charged and what was paid because that difference is a collateral source benefit. So there!
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