Motorist Insurance Claims

Understanding Health Insurance Claims on Personal Injury Settlements

When you receive compensation for a personal injury claim, whether through a settlement or a court decision, you may be required to satisfy other claims, often referred to as “liens,” using the proceeds. For instance, if your health insurance provider covered medical expenses related to your personal injury claim, they will typically seek reimbursement, at least in part. This is commonly known as a “subrogation lien” or “right of reimbursement,” and it usually represents a legally binding obligation that cannot be disregarded.

So, what exactly are these claims, how do they operate, and how can you address them? In this article, we will clarify the concepts of subrogation and reimbursement claims and offer guidance on how to manage them.

What Are Subrogation and Reimbursement Claims?

Subrogation and reimbursement claims, from a technical standpoint, are distinct entities. However, it’s commonplace to collectively label them as “subrogation claims.” To get started, let’s delineate the characteristics of each type of claim and elucidate their differences.

Subrogation Claims

When your health insurance company exercises subrogation, it signifies that the insurer has the option, if it so wishes, to independently pursue the party responsible for the accident to reclaim the medical expenses it covered on your behalf. However, in nearly all instances, the insurance company typically waits for you to secure a settlement or court judgment and then seeks reimbursement from you.

Reimbursement Claims

If your health insurance company possesses a reimbursement entitlement, it holds a lawful claim to request repayment from any personal injury compensation you obtain. Unlike subrogation, a reimbursement claim does not grant the insurer the authority to independently pursue recovery. Instead, the insurer must await your receipt of compensation and then request reimbursement from you.

Subrogation Notice Letters

If you’ve been in an accident, you may receive correspondence from your health insurance provider, sometimes referred to as a “subrogation letter” or a “notice of subrogation letter.” This communication will request information regarding the incident, specifically inquiring if your injury is related to your work, whether a third party was involved, and the name and contact details of the at-fault party’s insurance company.

The letter will also inquire whether you have retained legal representation and, if so, request your attorney’s contact information. Additionally, it is likely to remind you of the insurance policy terms that grant the insurer the right to seek reimbursement from any personal injury compensation you obtain.

Frequently, your health insurer will send this subrogation letter to all parties, including attorneys and insurance companies, who are involved in your personal injury case. This practice ensures that everyone is aware of the insurer’s right to seek recovery.

The Purpose of Subrogation

Subrogation and reimbursement rights serve the purpose of ensuring that the party accountable for your injuries ultimately covers the associated expenses. Here’s the process:

Initially, your health insurance provides protection immediately following an accident because, in most cases, you don’t have another means to cover substantial medical bills that could amount to hundreds or even thousands of dollars. When you obtain compensation from the party legally responsible for the incident, your health insurer then seeks reimbursement from you using your recovery.

Since all the funds originated from the legally liable party (or their insurance company), the at-fault party has essentially shouldered the financial burden resulting from their negligent actions.

What to Do If Your Insurer Claims a Subrogation Lien

If your health insurance company asserts a subrogation lien, it can complicate the distribution of your personal injury settlement funds. Parties who are aware of this lien and provide you with money will typically seek confirmation that the lien has been settled. To prevent potential complications, here are some actions you can take to facilitate a smoother process.

Get a Copy of Your Health Insurance Policy

If you don’t have a copy of your health insurance policy, obtain it from your plan administrator. Typically, your employer should have provided you with a summary plan booklet outlining your health insurance benefits, and this booklet should specify the plan administrator’s contact information.

Once you have your health insurance policy in hand, carefully review its contents. You should be on the lookout for any language within the policy that grants the insurer the rights to subrogation or reimbursement. According to federal law, if the policy lacks this specific language, the insurance company might not have the grounds to assert a claim against your personal injury settlement. If you’re uncertain about whether the policy language authorizes the company to seek reimbursement, it’s advisable to consult with an attorney.

Check Your State Insurance Laws

Certain states impose restrictions or outright prohibition on health insurance companies’ subrogation rights. You may find information regarding any such limitations by contacting your state’s insurance department. In cases where you can’t locate the relevant information through these channels, consider seeking guidance from a legal professional.

Ask That Unrelated Medical Expenses Be Removed

Your health insurance company cannot pursue reimbursement from your personal injury settlement for medical expenses that are unrelated to that specific injury. If you haven’t already obtained it, request an itemized list of medical expenses from the insurance company that they claim are connected to the accident. Examine these expenses closely and request the insurer to exclude any costs that do not pertain to your personal injury recovery.

Negotiate With the Insurance Company

While your health insurance company likely has a legitimate claim to recover the amount it disbursed, frequently, there is room for negotiation regarding the sum the company will accept to satisfy its lien. You (or ideally, your attorney if you have one) should engage with the insurance company to seek a reduction in its lien, ensuring you receive an equitable settlement.

Here’s a quick illustration: Imagine you sustained severe injuries in a car accident, and your health insurer covered the entire medical bill of $400,000. You settle your car accident case for $1.5 million, with your attorney taking a 33% fee and covering expenses of $200,000, totaling $700,000 in deductions.

The payout calculation goes as follows: Starting with a total recovery of $1,500,000, subtract $700,000 (comprising fees and expenses) and subtract $400,000 (representing the subrogation lien). This leaves you with a net payout of $400,000.

Now, suppose you (or your attorney) negotiate with the insurance company, and they agree to accept half of their lien, which amounts to $200,000, as full settlement for their claim. In this scenario, you retain $600,000 instead of the initial $400,000.

Get Help From a Lawyer

While we’ve provided an overview of the fundamentals of subrogation liens here, it’s important to acknowledge that subrogation and reimbursement matters can be exceedingly intricate to grasp and navigate. You may encounter inquiries related to both federal and state laws, and these legal frameworks are renowned for their complexity.

If your health insurance company asserts a subrogation or reimbursement entitlement concerning your personal injury settlement, your initial step should involve reaching out to a seasoned attorney. Contact us and we will connect you to an approved lawyer.

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