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Rule change for personal-injury cases hits roadblock

By: Erika Strebel, [email protected]//March 7, 2016//

Rule change for personal-injury cases hits roadblock

By: Erika Strebel, [email protected]//March 7, 2016//

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Once again, the state Legislature has proved a dead end for bills that would have eliminated a long-established rule that critics argued allowed plaintiffs in personal-injury cases to obtain “phantom damages.”

The rule at issue, known as the collateral-source rule, prevents defendants in tort cases from presenting evidence of payments or benefits a plaintiff receives from a third party, such as discounts for getting treatment through a health-care network. The rule also prevents defendants from citing such payments as a reason for offsetting a judgment.

This year two bills, known formally as Senate Bill 405 and Assembly Bill 539, would have made admissible any insurance payments a plaintiff received relating to a personal-injury claim. Without the collateral-source rule in place, argued supporters of the legislation, plaintiffs would no longer be able to collect in excess of what their health insurers actually pay following negotiations with hospitals and other medical providers.

Critics use the term “phantom damages” to refer to the difference between the amounts billed for medical treatments and the actual amounts paid.

Yet, despite various attempts in recent years to get rid of the collateral-source rule, it appears destined to stick around for a while longer. Representatives of state Sen. Chris Kapenga, R-Delafield, and state Rep. Mike Kuglitsch, R-New Berlin — authors of SB 495 and AB 539 — confirmed last week that the proposals will not be going forward this year.

A representative of Kuglitsch’s office said lawmakers fell short of reaching a compromise that could have drummed up more support for the bill. And now time appears to be running out. The state Assembly came together last month for what many believe will be its last floor meeting of the current session. Although legislators could still take the proposals up in the Senate, they could not pass them without a vote in the Assembly.

Among the various reasons why the bill stalled is that it pitted the interests of health-care providers and health insurers against those of liability insurers.

Proponents of the bill have said that admitting evidence of third-party payments would let juries make better-informed decisions in personal-injury cases and prevent injured plaintiffs from collecting money beyond what their health insurance actually paid to cover their medical expenses.

Lawyers who represent general-liability insurers and insurance companies such as American Family Insurance supported the changes outlined in the bill, which would most likely decrease what injured plaintiffs could recover in personal-injury cases. The general-liability insurers that tend in personal-injury cases to provide coverage to defendants would, as a result, pay out less.

On the other hand, the Wisconsin Association of Justice, which represents the state’s trial lawyers, was among the groups that urged lawmakers not to eliminate the collateral-source rule. Opponents had argued that the proposal, by decreasing what plaintiffs could recover, would cause health-insurance premiums to skyrocket. What’s more, they argued, wrongdoers would get a benefit for doing nothing more than having had the good fortune to have injured someone who had medical insurance.

Russ Golla, president of Wisconsin Association of Justice, said the bills would have essentially shifted costs from liability insurers to medical insurers.

“It should be viewed for exactly what it is,” he said. “This is using the court system to help underwrite the cost of liability insurance using premiums paid by individuals.”

Golla said he hopes the changes won’t pop up again, but there’s not guarantee because similar bills have surfaced from the time to time over the years. The last time such changes were proposed, only to die in the Legislature, was in 2013.

That pattern is alarming to Matt Falk, a Milwaukee attorney who mainly represents health insurers. He said many other states have adopted legislation in recent years that significantly rolls back their collateral-source rules, if not eliminating them altogether.

Further complication comes from the federal Affordable Care Act. Current law lets plaintiffs receive money for future medical expenses under the assumption that all those costs will be paid out of pocket. But now that all U.S. residents are required to have health insurance under the Affordable Care Act, such future payouts would also be greatly decreased if elimination of the collateral-source rule were to make evidence of that coverage admissible.

“The impact of this legislation can’t be understated,” Falk said. “It would have created a monumental shift of the cost of health care to the government or businesses.”

Editor’s note: This story was corrected to state that one of the reasons the collateral-source proposal failed was that it pitted the interests of liability insurers against those of health insurers.


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