Assignment Definition Insurance Claim

I’ve been a trial lawyer for over 30 years, and I think I need to point out that corporate/transactional lawyers aren’t real lawyers.  If you haven’t been on the receiving end of an evidence ruling that makes you wonder whether the judge attended law school in a Winnebago, then I’m sorry, you may be a “practitioner,” but you’re not a real lawyer. On the other hand, corporate/transactional lawyers…er, practitioners…are way, way smarter than we litigators are. They have to understand things like complicated tax laws and how to structure complex commercial deals, which is generally far above our pay grade.  Most of us became trial lawyers because we can’t do math.

In structuring transactions, one issue that sometimes comes up is whether insurance claims, or insurance policies, can be assigned to another party. This issue also occasionally arises in the litigation context, when a plaintiff may be willing to settle a case in exchange for the assignment of the defendant’s insurance claim with its carrier.  (That may include an assignment of the bad faith claim, if any.)

Warning:  Assignments can be tricky.  But, while insurance companies may attempt to disclaim coverage based upon any assignment of a policy or claim, in general, the assignment has to increase the carrier’s risk in order to provide a valid basis for denial of a claim.

The New Jersey Appellate Division recently considered the implications of an assignment in Haskell Properties, LLC v. American Ins. Co.  The case involved certain insurance companies’ refusal to provide coverage for the cleanup of a contaminated property that Haskell had acquired in an asset sale approved by the bankruptcy court. The carriers argued “no pay,” in part because (according to them) any assignment was invalid since Haskell did not obtain the consent of the insurance companies beforehand.

The Appellate Division first considered Section 541 of the Bankruptcy Code, which defines property that is considered part of the debtor’s estate. Haskell argued that the Bankruptcy Code preempted any contractual provision that attempted to limit or restrict the rights of the debtor to transfer or assign its interests in bankruptcy. The Court held: “Section 541 effectively preempts any contractual provision that purports to limit or restrict the rights of a debtor to transfer or assign its interests in bankruptcy.” But, “it does not govern transfers to third parties from the estate approved by the bankruptcy court under 11 USCA §363, as was the case here”. According to the court, “there is no provision under Section 363 that authorizes the trustee to sell property in violation of state law transfer restrictions.”

So, the Court ruled that insurance companies did not have to cover losses that occurred after a policy was assigned in contravention of a consent-to-assignment clause. If a policy prohibits assignment, and the insurance company does not consent to assignment of the policy…it’s a no go for the policyholder.

These prohibitions do not apply to claims that accrued before the assignment, however. The Court wrote: “The Seller’s claims for coverage under the policies relating tooccurrences that happened before the transfer to plaintiff were freely assignable by the Seller, to the extent the policies were ‘occurrence policies.’ Those policies insure ‘the occurrence itself,’ and provide coverage ‘once the occurrence takes place…even though the claim on may not been made for some time thereafter.’”  (Emphasis mine; citations omitted.)

The key is whether, by virtue of the assignment, the risk to the carrier increased. According to the Court, “no-assignment [provisions within insurance policies] do not prevent the assignment after loss for the obvious reason that the clause by its own terms ordinarily prohibits the assignment of the policy, as distinguished from a claim arising thereunder, and the assignment before loss involves a transfer of a contractual relationship while the assignment after loss is the assignment of the right to a money claim…The purpose behind a no-assignment clause is to protect the insurer from having to provide coverage for risk different from what the insurer had intended…once the insurer’s liability has become fixed due to a loss, an assignment of rights to collect under insurance policies is not a transfer of the actual policy but a transfer of a right to a claim of money.”

Bottom line:  assignment of the policy generally requires the consent of the carrier.  Assignment of an existing claim, not so much.

You can read the full Haskell decision by clicking here.

For each of your patients in Therabill, you have the ability to indicate whether or not you Accept Assignment.  This option can be found on the add / edit insurance card form for a patient.  The options for accepting assignment are yes or no.

What does accept assignment mean?

Just to be clear up front.  This is NOT meant to be legal or coding advice.  You should always check with the individual insurance plan or program (especially if you are a participating or in-network provider).  If you are a participating (or in-network) provider for an insurance company, then you should always check the contract that you have with that payer.

It would nearly be impossible for Therabill to give a general definition of "Accept Assignment".  But if we were to give a general meaning for accept assignment, it would be as follows.  

  • You are indicating that the case is being assigned to you and payment should be sent to you.  If you indicate No, then you are indicating that payment should be sent to the patient.
  • You are accepting the payers rate for the service.  You may be paid at a lower rate than what you charge for that service.

Can I freely choose to accept assignment or not to accept assignment.

Usually, the answer is no.  If you are billing Medicare, then you usually have to accept assignment.  If you are an in-network provider, then you probably need to accept assignment.   You should call the payer to find out whether or not you can not accept assignment.

I accepted assignment and the payer still sent payment to the patient.

You should call the payer to find out why they are sending payment to the patient.  Indicating that you accept assignment and having Box 13 of the CMS-1500 filled with patient signature (or on file) should indicate to the payer to send payment to the billing provider (Box 33 of the CMS-1500).  However, there are always cases where the payer doesn't send payment to the billing provider even when you have the CMS-1500 filled in correctly. 

I did not accept assignment and payer still paid me.

You should call the payer to find out why they are sending payment to you instead of the patient.  Indicating that you do not accept assignment and not having Box 13 of the CMS-1500 filled with patient signature (or on file) should indicate to the payer to send payment to the patient  However, there are always cases where the payer sends payment to the billing provider even when you have the CMS-1500 filled in correctly. 

What does Therabill do when I do not accept assignment for a patient.

Therabill will fill out the CMS-1500 in the correct way to indicate that you do not accept assignment.  Box 13 will be left blank and Box 27 will be marked as NO on the CMS-1500.  However, Therabill also uses the accept assignment to automatically set the status of your sessions to Closed / Patient Due after you have billed the session out to insurance.  Here is an explanation.

Remember, Therabill keeps a status of all of your therapy sessions (charges) to help you with your revenue cycle management.  When you create a new session, and you indicate that you want to initially bill it to insurance, then the status of that session is considered open (open to insurance).  A session that is open to insurance will show up as a pending charge on the client statement (billing your patient using Therabill).  If you send a session in to the bill insurance area for a patient that you did not accept assignment for, then once you actually create the insurance claim, Therabill will automatically change the status of the session (charge) to closed.  A closed session is a session that is closed to insurance and the patient owes the remaining balance due (the balance due is the charge amount minus any payments and adjustments applied to it).

Where do I indicate that I do not accept assignment for a patient.

This is on the add / edit insurance card form for a patient.  At the bottom of the add / edit insurance card form (in the Advanced section), you will see an option to indicate whether you accept assignment.  Make your selection there for the insurance card and then apply the edits.  IMPORTANT:  Always remember to save the client before you close the edit client form.

Can I set a default accept assignment?

Yes.  By default, Therabill will always mark Accept Assignment as Yes when you are adding a new patient in Therabill.  If you would like Therabill to automatically choose No when you are adding a new patient, then you will want to change your global settings for the clients.  To do this, in the top navigation bar of Therabill, hover your mouse over Admin and then in the drop down menu, put your mouse over Defaults/Settings.  In the sub-menu that appears, choose "Client Settings".  In the client settings page, put No next to Accept Assignment and then (important) Save.

NOTE: Changing the default accept assignment does not change anything you already have entered in to Therabill.  If you have already entered clients, and those clients were entered with accept assignment as Yes, then changing the default accept assignment to "No" will not change the accept assignment on those already entered patients.

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