When you resolve a personal injury claim, expect your health insurer to try to recover any medical expenses it paid.
When you get money for a personal injury claim—from a settlement or a verdict—you might have to pay other claims (sometimes called "liens") out of your proceeds. For example, if your health insurer paid any medical expenses that were covered by your personal injury claim, the insurance company will expect to be repaid, at least in part. Known as a "subrogation lien" or a "right of reimbursement," the insurer's claim is usually a legally-enforceable obligation you can't ignore.
So what are these claims, how do they work, and how do you resolve them? In this article, we'll explain subrogation and reimbursement claims, and we'll describe some things you might do to take care of them.
What Are Subrogation and Reimbursement Claims?
Subrogation and reimbursement claims are, technically speaking, different things. But it's common to refer to them both simply as "subrogation claims." Let's begin by explaining both kinds of claims and how they're different.
Subrogation Claims
When your health insurance company is subrogated, it means that the insurer could—if it chose to—pursue the at-fault party on its own to recover medical expenses the company paid on your behalf. In almost every case, though, the insurance company simply waits for you to win a settlement or verdict, then it looks to you for repayment.
Reimbursement Claims
If your health insurance company has a right to reimbursement, it has a legal right to seek repayment from you out of any personal injury proceeds you receive. Unlike subrogation, a reimbursement claim doesn't give the insurer the right to pursue recovery on its own. Instead, the insurer has to wait for you to make a recovery, then it will demand reimbursement from you.
Subrogation Notice Letters
If you've been involved in an accident, you might get a letter from your health insurance company—sometimes called a "subrogation letter" or a "notice of subrogation letter"—that asks for details about what happened. In particular, the letter will ask if your injury was work-related, if a third party was involved, and for the name and contact information of the at-fault party's insurance company.
The letter will also ask whether you've hired an attorney, and if so, for the attorney's contact information. Finally, the letter likely will remind you of the insurance policy language that gives the insurer a right to seek reimbursement from any personal injury recovery you win.
Oftentimes, your health insurer will send a subrogation letter to all parties, attorneys, and insurance companies involved in your personal injury claim. Putting everyone on notice helps to protect the company's right to recovery.
The Purpose of Subrogation
Subrogation and reimbursement rights exist to make sure that the party who's responsible for your injuries ultimately pays for the related costs. Here's how it works.
Your health insurance protects you in the immediate aftermath of an accident because chances are, you've got no other way to pay hundreds or thousands of dollars in medical bills. When you make a recovery from the party who's legally responsible, your health insurer then looks to you for repayment out of your recovery.
Because the money all came from the legally responsible party (or their insurance company), the at-fault party has borne the costs of their careless behavior.
What to Do If Your Insurer Claims a Subrogation Lien
If your health insurance company claims a subrogation lien, it can throw a monkey wrench into the payout of your personal injury settlement proceeds. Anyone who has notice of the lien, and who pays money to you, will look for assurances that the lien has been paid. Before it comes to that, here are some steps you can take to help the process go smoothly.
Get a Copy of Your Health Insurance Policy
If you don't have a copy of your health insurance policy, get it from your plan administrator. Your employer should have given you a summary plan booklet that describes your health insurance benefits. The plan administrator will be identified in that summary plan booklet.
Once you get your health insurance policy, read it carefully. You're looking for policy language that gives the insurer rights to subrogation or reimbursement. Under federal law, if the policy doesn't contain this language, the insurance company might not be able to assert a claim against your personal injury recovery. If you're not sure whether the policy language gives the company a right to seek repayment, you should speak to a lawyer.
Check Your State Insurance Laws
Some states limit or prohibit health insurance companies' subrogation rights. Your state's insurance department might be able to tell you if any restrictions apply. If you can't find answers there, ask an attorney.
Ask That Unrelated Medical Expenses Be Removed
Your health insurance company can't seek reimbursement from your personal injury recovery of medical expenses that aren't related to that injury. If you don't already have it, ask the insurance company for an itemized list of medical expenses the company says are related to the accident. Review those expenses carefully. Ask the insurer to remove any expenses that aren't related to your personal injury recovery.
Negotiate With the Insurance Company
While your health insurer probably has a right to recover what it paid, oftentimes the amount the company will accept to satisfy its lien is negotiable. You (or better yet, your lawyer if you have one) should ask the insurance company to reduce its lien so that you receive a fair payout.
Here's a quick example. Suppose you're badly injured in a car accident. Your medical bills, all paid by your health insurer, total $400,000. You settle the car accident case for $1.5 million. Your lawyer takes a fee of 33% of your recovery, plus case expenses. Assume that fees ($500,000) and expenses ($200,000) total $700,000.
Here's how the payout looks. From a total recovery of $1,500,000, subtract $700,000 (fees and expenses) and subtract $400,000 (subrogation lien), leaving a net payout of just $400,000.
Now suppose that you (or your attorney) negotiate with the insurance company and it agrees to accept half of its lien, or $200,000, in full payment of its claim. Instead of $400,000, you get to keep $600,000.
Be Sure the Insurance Company Pays Attorneys' Fees
If your attorney resolved your personal injury case, and if part of your payout is going to your health insurance company, it's only fair that the insurer should pay the attorneys' fees and case expenses on the amount it receives. Let's return to our example above to see how the math works out.
Suppose that the insurance company agrees to take $200,000 in full satisfaction of its lien. Total attorneys' fees are $500,000 and the total case expenses are $200,000. Here's a table that shows the breakdown of proceeds and expenses:
|
Item |
You |
Health Insurance Company |
|
Gross Recovery |
$1,300,000 |
$200,000 |
|
Share of Attorneys' Fee |
$433,300 |
$66,700 |
|
Share of Case Expenses |
$173,300 |
$26,700 |
|
Net Payout |
$693,400 |
$106,600 |
Get Help From a Lawyer
We've covered some of the subrogation lien basics here. But truth be told, subrogation and reimbursement issues can be exceptionally difficult to understand and resolve. You may have to deal with questions under both federal and state laws, and these laws are notoriously complicated.
If your health insurance company claims it has a subrogation or reimbursement right against your personal injury recovery, your first call should be to an experienced lawyer. Here's how to find a personal injury lawyer who can help guide you through the subrogation lien process.
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