Understanding Health Insurance Claims on Personal Injury Settlements

Count on your health insurer trying to recover its expenses paid in connection with your medical care.

When you have a personal injury claim, odds are you will eventually find that others are competing to get their hands on part of your personal injury settlement. Perhaps one of the biggest surprises is that the company paying your health insurance claims may be at the top of the list. In this article, we'll look at how these claims arise and some simple approaches to resolving them.

(Note: If you have a personal injury attorney, the attorney may address these claims for you. Make no mistake, however -- the money needed to satisfy these claims will come out of your settlement regardless. These claims should be listed on the settlement sheet your attorney presents you for approval once your personal injury case has been resolved.)

How the Subrogation Process Works

You may hear the term “subrogation” applied in discussing health insurance carriers’ claims on personal injury settlements. Technically, subrogation and reimbursement claims are actually different. For purposes of resolving the claims on your settlement, the outcomes are the same. In the following discussion, we will follow the common practice of referring to the health plan’s claims as subrogation claims.

Subrogation Notice Letters

If you have been involved in an accident, you will likely receive a letter from your health insurance company that asks details about the accident. In particular, the letter will ask if the incident was work-related, if a third party was involved, and the name of the insurance adjuster for the at fault party.

The letter will also request information about whether you have hired an attorney, and if so, his or her contact information. Finally, the correspondence or form will likely remind you of language in the insurance policy that states the insurance carrier has rights to full reimbursement out of any personal injury recovery you obtain, whether by settlement or jury verdict.

The Purpose of Subrogation

The basis for the subrogation notice letter, and the concept behind a health insurance plan subrogation clause, is that health insurance is there to protect you if you are injured or ill. If a third party injures you, the health insurance covers your medical expenses initially because key issues of liability and damages have not been sorted out in your personal injury case. Ultimately, however, the health insurance carrier will assert that the at-fault party’s liability policy should be liable for your medical expenses, and the carrier will assert its rights to reimbursement for expenses it has paid in connection with your medical treatment.

Obtain a Copy of the Policy

If you do not have a copy of your health insurance plan policy, you must request one from the plan administrator. The plan administrator will be identified in the summary plan booklets that describe plan benefits. If the plan administrator does not provide the plan information, it may be subject to penalties.

To understand what rights your health insurance carrier may assert, you must read the policy language. At the outset, you need to see if the policy contains language that authorizes subrogation. Under federal law, if the policy does not contain this language, the carrier may be unable to assert a claim against your settlement.

Check State Insurance Laws

State law may restrict or prohibit health insurance carriers from subrogation. Check with your state’s insurance department to find out if any restrictions apply to subrogation against your personal injury settlement, or ask an attorney.

Find Out If Your Employer Self-Insures Medical Claims

Up to this point we have referred to health insurance policies. If you work for a large company, your company may self-insure the health claims of its employees.

This distinction is important because federal law may supersede state law if the plan is self-insured. In other words, even if state law says that health insurers may not assert a claim on your personal injury settlement, state law may not apply if your employer self-insures its health plan.

This information should be in the summary booklet that describes the plan benefits. Plans that are self-insured are typically governed by the Employee Retirement Income Security Act of 1974 or “ERISA”. More information about these plans may be found on the Employee Benefits Security Administration website.

Request Elimination of Unrelated Claims

If you obtained medical care unrelated to the accident that forms the basis of your injury claim, the health plan may not claim reimbursement of those expenses. Ask for an itemized list of medical benefits the claims administrator says are related to the accident and review them carefully.

Ask for a Reduction for Attorneys’ Fees

If you have retained an attorney to handle your case, and if the health plan does not state otherwise, you may be able to demand a reduction for the cost of attorney’s fees. In other words, if the attorney charges a 33 percent fee, you would ask for a 33 percent reduction in the reimbursement claim.

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