You are correct the payment to you should not be in box 6. In fact what should have happened is the insurance company pays the medical bills and issued them a 1099-misc with box 6 filled. If you had already paid the bill then the medical facility would then refund your money and no tax event for you at all.
Payments for physical injury generally are not taxable. Here is a link for reference.
Next best option is to have a corrected 1099-Misc with the amount moved to box 3. You would report that 1099 form box 3 information.
You would also then enter a negative amount to deduct the medical expenses you paid as "Other reportable income" in the "Less Common Income" topic. That would satisfy the reporting requirement for the 1099 and still zero out the income on your return.
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