Why Does My Health Insurance Company Get Paid Out of My Settlement?

by David Herman | October 9th, 2012

Understanding Subrogation

A common question I hear from clients involves the confusing matter of subrogation. Subrogation is a health insurance company’s right to be reimbursed for medical bills it has paid on an injured person’s behalf following an accident. Most often, the reimbursement to the insurance company is made out of the client’s settlement at the end of the case. Subrogation is upsetting to many clients who feel as if a large portion of their settlement is being stolen by their own health insurance company.

To better understand how subrogation works, consider the following common scenario:

Paul is injured in a car collision when the defendant runs through a red light and hits Paul’s car in an intersection. Paul goes to the emergency room and attends physical therapy for the next two months as he recovers. He submits all of his medical bills to his health insurance company. A few months later, defendant’s automobile insurance company accepts liability and offers Paul a settlement. Paul agrees accept the settlement only to learn that over half of the settlement will not go to him, but will go directly to his health insurance company as reimbursement for payment of the medical bills.

Paul is left wondering why does his health insurance company get paid more than he does? Better yet, why does his health insurance company get paid anything? After all, doesn’t Paul pay premiums so that his health insurance will cover the bills?

Paul’s health insurance company has a right to be reimbursed out of his settlement because Paul signed a contract allowing it to do so. Most health insurance policies include subrogation provisions which guaranty the company’s right to be repaid if the injured person obtains a settlement or jury verdict. Truth be told, most people never
read the details of their health insurance policies closely enough to know that subrogation clauses even exist.

Individuals with government healthcare such as Medicare and Medicaid also must account for subrogation. The government has an automatic right to be reimbursed from an injured person’s settlement. In other words, the government must always be reimbursed because it is the law, not because of any contractual provision. The failure to reimburse the government out of a settlement can result in significant penalties.

Keep in mind that subrogation only applies when the injuries (and resulting medical bills) are brought about by a negligent third-party. The health insurance company does not want to foot the bill for expenses that should be the responsibility of the negligent person who caused the injuries in the first place.

A Nurenberg Paris automobile accident attorney can help you to maximize your compensation without allowing most of your settlement go to your health insurance company. For example:

  1. We will review your health insurance contract to make sure it has a right to subrogation in the first place. If there is no subrogation clause in the contract, or if its language is not legally sufficient, then the insurance company has no right to any of your settlement.
  2. Many times the health insurance company will ask to be reimbursed for medical bills that have nothing to do with your accident-related injuries. Nurenberg Paris will review the insurance company’s claim for reimbursement to make sure that it is not asking for more than it is due.
  3. Finally, we can negotiate with the health insurance company to reduce their subrogation claim. Often times, we can help clients reduce the amount of their settlement which goes to the health insurance company by up to 50%. The less money that goes to the health insurance company the more the client recovers.

Subrogation is just another reason that you should retain Nurenberg Paris following an automobile collision. The defendant’s insurance company will not counsel you on how subrogation can reduce the amount of your settlement. Nurenberg Paris will minimize subrogation and get you the recovery that you deserve.

David A. Herman is an associate attorney at Nurenberg Paris.  His practice focuses primarily on automobile collision litigation.