Throughout this series on legal abuse, we've highlighted reasons why direct settlement with your insurance company usually benefits you more than hiring an attorney for minor claims. This article adds another important consideration: how attorney-referred medical treatment can reduce settlement amounts and increase the overall cost of claims.
Say you’re injured in an auto accident and decide to hire an attorney. Your attorney will most likely refer you to a medical provider who will offer to treat you and defer the billing. This arrangement can sound appealing during an already stressful time, as you’ll get treatment without paying upfront costs or dealing with insurance paperwork.
Fast forward several months to settlement discussions, and you notice something concerning about the medical bills. An MRI that might typically cost $700-$900 through health insurance is billed at $3,000 or higher. Each physical therapy session, usually around $75 with insurance, is now listed at $200-$250.
Why Claims Cost More Today
Most insurance premium statements don't break down the reasons for rate increases, but one key factor often overlooked is medical billing practices in injury claims. The cost of medical treatment after an accident can vary wildly depending on who's paying the bills. When treatment is coordinated through attorneys using lien‑based medical treatment or rather than traditional health insurance, the same procedures can cost three to five times as much. This inflation in medical costs, along with other factors such as attorney advertising, drives up costs throughout the system.
Lien‑Based Medical Treatment
Lien‑based medical treatment is an arrangement between your attorney, you, and a medical provider in which the provider agrees to defer billing until your case settles. On the surface, sounds helpful. But there's a big catch: medical providers treating under liens often charge rates far higher than what health insurance would pay for the same services. These bills fall outside the negotiated rates health insurers establish with providers, often with no caps on the costs.
Attorneys refer clients to specific medical providers who regularly accept lien‑based treatment, and in return, these providers receive a steady stream of patients. The providers benefit from guaranteed payment and the ability to bill at higher rates, while attorneys benefit from higher gross settlements that increase their contingency fees. Unfortunately, this system creates strong incentives to maximize both treatment and billing — incentives that don't always align with what's best for your health or your wallet.
The Cost Difference
The difference between health insurance billing amounts and letter-of-protection billing amounts is staggering. Health insurance companies negotiate rates with providers, and Medicare and Medicaid have set fee schedules. Personal injury billing under letters of protection operates outside these controls, resulting in significant differences in pricing for identical services.
Patient Welfare vs. Building a Case
When attorneys refer clients to LOP providers, they may order extensive treatment protocols, such as multiple visits, procedures, and tests, that exceed what’s medically necessary. This strategy shifts the focus from healing the injured claimant to building a high-value case, thereby creating a conflict of interest. Your primary care doctor's goal is to help you get back to health. An LOP provider's goal may include building the maximum billable treatment history.
The consequences are not just financial. Some patients experience serious complications or worse following procedures at LOP facilities. Others report the same pain after expensive surgeries as they had before treatment. These outcomes have led to multiple malpractice suits against LOP providers, raising serious questions about treatment protocols.
Why Bigger Medical Bills Mean Less Money for You
Higher medical bills don't automatically mean more money in your pocket. In fact, the opposite is often true. Insurance companies recognize inflated LOP billing and argue these bills don't reflect the reasonable cost of care. They're often willing to pay amounts consistent with health insurance rates, but they face the threat of a trial in which inflated bills are presented to juries as legitimate expenses.
Use Your Health Insurance
Using your health plan for treatment after an accident offers significant advantages:
- Negotiated rates mean substantially lower bills
- Established quality standards and oversight protect you
- Your doctors focus on your health rather than building a case
- Claimants typically net more money in settlements
Protect Yourself from Inflated Billing
Your best protection? File a claim with your insurance company. But if you have hired an attorney, watch for warning signs. Does your attorney insist you see specific doctors? Are providers asking you to sign letters of protection without fully explaining what they are? Have you been told not to use your health insurance? These are red flags. So is treatment that seems unnecessary, multiple referrals through an affiliated clinic network, or bills showing amounts many times higher than expected.
Keep in mind that you're not obligated to follow your attorney's provider referrals; you have the right to control your treatment decisions. You can use your health insurance, get second opinions, and question procedures that may be unnecessary.
State Reform
Growing recognition of inflated LOP billing has led to court cases, testimony before state legislatures, and calls for reform from the insurance industry and patient advocates. Reforms include:- Regulation of LOP billing practices
- Fee schedules or caps on personal injury medical billing
- Disclosure requirements for attorney-provider financial relationships
- Protection for patients who end up responsible for inflated bills
- Transparency in medical billing for injury cases.
If You've Been in an Accident
Use your health insurance for treatment when possible. If you do choose to retain an injury attorney, ask thorough questions before signing any letters of protection. Focus on treatment that helps you heal, and keep in mind that lower medical bills often mean considerably more money in your pocket.
Contact Wawanesa claims at 888-929-2252. Our dedicated team can help you understand your claim and work toward a fair resolution based on reasonable treatment costs.
Resources
- Insurance Journal. "Fla. Tort Bill Brings it: Limits Damages, Ends Fee Multipliers, Discloses LOPs – and More" (February 2023). https://www.insurancejournal.com/news/southeast/2024/02/08/758969.htm
- Claims Journal. "The $100K Medical Lien Problem." https://www.claimsjournal.com/news/southeast/2023/08/16/323766.htm
- PropertyCasualty360. "What's Really Driving the Rise in Bodily Injury Claim Frequency" https://www.propertycasualty360.com/2025/12/16/whats-really-driving-the-rise-in-bodily-injury-claim-frequency/
- American Tort Reform Association. "Majority of US States Block Juries’ Access to True Medical Costs" https://atra.org/majority-of-us-states-block-juries-access-to-true-medical-costs/
