Prior to October of 2011, juries could consider the full amount of an injured person’s medical bills; however, that was changed when Rule 414 of the North Carolina Rules of Evidence was amended to read as follows:
“Evidence offered to prove past medical expenses shall be limited to evidence of the amounts actually paid to satisfy the bills that have been satisfied, regardless of the source of payment, and evidence of the amounts actually necessary to satisfy the bills that have been incurred but not yet satisfied. This rule does not impose upon any party an affirmative duty to seek a reduction in billed charges to which the party is not contractually entitled.” (2011-283, s. 1.1; 2011-317, s. 1.1.)
Said slightly differently, evidence of medical expenses is limited to the amounts actually paid to satisfy the bills, and the amounts actually necessary to satisfy the bills not yet paid. This rule has become to be known as “Billed vs. Paid.”
This is important because the State Health Plan, Private Health Insurance, Medicaid, and Medicare all receive significant discounts when paying medical bills.
Before October of 2011, evidence of payments made by health insurance, Medicare or Medicaid were not admissible in trial and were not to be considered by a jury in determining damages for medical expenses.
Now, Plaintiffs generally can only present to a jury the amounts paid by health insurance or other collateral sources to satisfy medical bills.
To illustrate this with an example, Bob is crossing in a crosswalk, when a vehicle suddenly runs a red light and breaks Bob’s legs. Bob is insured with Blue Cross Blue Shield of North Carolina. Bob incurs $50,000 in medical bills at a local hospital for reconstructive surgery to his legs. Blue Cross Blue Shield of North Carolina receives 50% off Bob’s medical bills pursuant to its provider agreement with the local hospital. Therefore, under Rule 414, Bob can only present $25,000 of medical expenses to the jury. Before October of 2011, Bob could present the full $50,000 of bills to the jury.
You may think that Rule 414 will not affect the pre-litigation value of a claim because it is a Rule of Evidence. This is not the case. The insurance companies calculate medical damages in settlement negotiations in the same way that the courts do during trial. They are adjusting what you may ultimately recover in Court, so they are using Billed vs. Paid. Over the past 6 years, Billed vs. Paid has significantly reduced the average value of personal injury claims.