Subrogation – Why Should I Have to Pay My Health Insurance Company From My Settlement?

Posted On June 28th, 2011 By CSSFIRM.COM

Childers, Schlueter & Smith is NOT taking any subrogation (medical lien) only cases. This information is for educational use only. If you have a personal injury case that has not been settled and you are not represented by another attorney already, we may be able to help you. If you are represented already please contact your existing attorney for further information.

What is Subrogation?

When a case is settled, clients are often surprised and confused when their health insurance makes a claim for a portion of the settlement payment.  Clients will ask, and rightfully so, why should my insurance company get paid from my settlement – wasn’t my insurance company supposed to pay my medical bills?  The answer is yes, your insurance company was supposed to pay your medical bills, and hopefully they fulfilled that duty; but once those payments have been made, and your case is finished, your insurance company may be able to be seek reimbursement for those medical payments made on your behalf.  In fact, quite often, insurance companies will have a “health insurance lien” or subrogation interest on the proceeds of the lawsuit so that before you can get paid, the insurance company is first able to recoup the medical bill expenses it paid.

The concept of subrogation is that your insurance company has a right to be indemnified, or “paid back” for the bills they have paid on your behalf.  Essentially, your insurer can “step into your shoes” to go after the negligent party on your behalf. If however you go after the negligent party and file suit or negotiate a settlement yourself, then the proceeds which are above and beyond the subrogated amounts will belong to you.  Think about it this way – but for the other person’s negligence, your insurance company would not have had to pay any medical bills.  Your insurance company will honor their obligation and pay for your medical bills, but they protect themselves by getting reimbursed for those payments. [We do not like it, but many health insurance policies contain this language and exercise these rights all the time].

When you pay for health insurance you are paying for the assurance that in the event you are injured, you have that safety knowing that your medical bills will be paid by your health insurance company.  Whether you are responsible for causing an accident or whether someone else injured you (you are not at fault for causing the accident), your health insurance is responsible for providing you with medical coverage.  Even if someone else hit you and their actions caused you to seek medical treatment, most health insurance plans cannot choose to delay or refuse coverage simply because someone else might be held legally responsible for your injuries. [There are certain exceptions to this for sure but that is another topic for another day]

Can I Contract Out of Subrogation?

Health insurance companies understand what their duty is – to pay your medical bills when you seek medical treatment.  They also understand how to recover their expenses.  When you signed your insurance agreement or started using your insurance coverage, although you may not have known it at the time, you probably signed a contract which allowed your insurance company to seek repayment from you for medical bills from an at fault third party. This is commonly referred to as subrogation.  Most health insurance companies include subrogation clauses in their agreements which guarantee them the right to reimbursement.

You may be thinking to yourself why in the world would you ever agree to sign a contract like this with your health insurance company?  Well the answer is you probably did not have a choice.  Almost all insurance companies have subrogation language.  But fortunately not all insurance policies are able to subrogate. If the insurance policy is governed by state law (which usually covers smaller plans) then the reimbursement that the insurance company will receive from the settlement will be much lower than what the insurance company actually paid.  In the State of Georgia, some non-ERISA health insurance plans are subject to the “Made Whole” doctrine.

What is The Made-Whole Doctrine and How Does It Work?

The Made-Whole doctrine is an equitable defense to the subrogation or reimbursement rights of the insurance company.  It states that before subrogation (reimbursement) will be allowed, you as the insured must be “made whole” for all of your damages. Put another way, unless your insurance company can affirmatively show that you have been made whole (think of it as the same as you were pre-injury), then they may be barred from obtaining reimbursement.

Compared to Made Whole plans, insurance health plans that are governed by federal law and the Employee Income Retirement Security Act of 1974 (“ERISA”) usually are paid back a high percentage of the payments they make. ERISA-protected plans are generally found in larger corporations and typically are not subject to the Made-Whole doctrine.  ERISA plans will allow subrogation more often than not.

How Much of My Settlement Is Subject to Subrogation?

Bear in mind that even if you have to pay back your insurance company from the proceeds of your settlement, you are only expected to pay back the actual amount paid by your insurance company.  Oftentimes a doctor/hospital/physical therapist/imaging facility etc. will “charge” a higher fee than what they will actually accept from insurance.  So for example, if your doctor tells you that as a result of your trucking collision, you need an x-ray and the x-ray “costs” $2,000.00, your insurance company may only actually pay $1,200.00 for that x-ray.  As a result, when your insurance company seeks subrogation from you, you will only have to pay them $1,200.00 – the balance of $800.00 is not owed by you to either your insurance company or the x-ray provider.

What Plan Do I Have?

To determine what health insurance plan you have, you should consult with the health insurance plan advisor (if provided through your employer) or an attorney familiar with the different plans who can better advise you of your options and best course of action.

Why Do I Need a Lawyer?

Having explained the process and how subrogation works, it always helps to work with an attorney experienced in the field as that attorney will often able to negotiate with the insurance company to reduce the amount the  health insurance company will accept.  Taking the aforementioned x-ray example, it would not be uncommon for a good personal injury attorney to reduce the $1,200.00 your insurance company wants paid back down to $800.00, saving you another $400.00.

Beyond all of this, the insurance company that represents the negligent driver will often try and settle the case at the lowest limits possible.  A good personal injury attorney will also know whether the insurance company’s offer is reasonable (which is often not the case) and whether to proceed with the filing of a lawsuit. Having an attorney that can navigate both areas (settlement value and potential subrogation interest(s) is key to maximizing your potential claim.

Contact Us

Our experienced trial attorneys will meet with you free of charge to discuss the facts of your case and help you decide if a lawsuit is appropriate in your situation.  Call us to speak with one of our experienced trial attorneys.

Again, Childers, Schlueter & Smith is NOT taking any subrogation (medical lien) only cases. This information is for educational use only. If you have a personal injury case that has not been settled and you are not represented by another attorney already we may be able to help you further. If you are represented already please contact your existing attorney for further information. 

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