If you receive a personal injury settlement from a car accident, workplace injury or defective product, you may be surprised to learn that on top of the attorney fees you may need to pay from your settlement, your health insurance provider could attempt to recoup the money paid for your medical claims. In many states, this process, known as subrogation, is entirely legal.
Many states make it legal for your health insurance company to try to recoup money paid from your settlement. Therefore, it's important to be aware of your subrogation rights and state laws.
Can Your Health Insurer Take Your Settlement?
When you receive a settlement that covers medical expenses already paid by your health insurance provider, your provider may have the right to a portion of your settlement. Your rights in this area should be covered in your health insurance policy. Whether you have employer-provided insurance, private insurance, Medicare or Medicaid, your insurance provider may be able to legally claim a portion of your claim.
Right of Subrogation
Right of subrogation is the phrase used to describe a health insurance plan’s ability to recover payments given to a plan participant for treatment if the participant received a settlement for the same expenses from a third party. The purpose of subrogation, from an insurer’s point of view, is to make sure the third party pays for your medical expenses, since the third party was found to be liable. Typically, the subrogation process begins when your health insurer detects that you’ve filed a claim for an accidental injury. Your insurer will ask for details about the accident, including whether a third party was involved. You may also be asked whether you have hired an attorney and plan to pursue a civil settlement.
Your Rights in the Process
If you are contacted by your insurer about medical costs related to an accident where a third party was involved, you can check your health insurance policy to make sure it authorizes subrogation. If it is authorized, you still have some rights when your insurer tries to recoup medical costs. Several states support the Made Whole Doctrine, a legal defense against subrogation that says a person is entitled to be compensated for all losses related to an insurance settlement before an insurer can use subrogation to reclaim a portion of the settlement. When in doubt about your subrogation rights, contact your state’s department of insurance or seek the advice of a qualified legal professional.
Exception for Self-Insured Employers
If your employer is a large company, it may self-insure its employee health plan. In this case, state laws that prohibit subrogation may not apply, and your employer/insurer may still be able to seek reimbursement from a third-party settlement. Your rights in this case are covered by the Employee Retirement Income Security Act of 1974, a federal law that defines standards for how private health plans protect the insured.
- FindLaw: Protecting a Settlement From Your Health Insurance Provider
- NOLO: Understanding Health Insurance Claims on Personal Injury Settlements
- MWL Attorneys at Law: Made Whole Doctrine in all 50 States
- AllLaw: Medical Liens in a Personal Injury Case
- U.S. Department of Labor: Employee Retirement Income Security Act (ERISA)
Catie Watson spent three decades in the corporate world before becoming a freelance writer. She has an English degree from UC Berkeley and specializes in topics related to personal finance, careers and business.