When someone is injured in an accident, they typically need medical treatment. There is a common misconception that the at fault driver’s insurance company will pay your medical bills on an on-going basis. This is generally not the case. Usually, a victim’s health insurer or medical payments insurer pays the medical bills. If the health or medical payments insurer has paid accident-related medical bills, they will almost always seek to get reimbursed from a personal injury case settlement. The health or medical payments insurer is exercising its right of subrogation.
This concept has been widely misunderstood by personal injury victims across Wisconsin. Generally, there is a clause in a health insurance contract that provides for a right of subrogation. The language may vary from plan to plan, but the fundamental concept is the same. If a person is injured and receives payment for his or her injuries, they may be required to repay their health insurer for the accident-related medical bills it paid.
Two common types of subrogation are common law subrogation and subrogation through the Employee Retirement Income Security Act (ERISA). Injury victims’ rights can vary considerably depending upon what type of insurance plan they have.
Under common law subrogation, an accident victim only has to pay back the health or medical payments insurer if he or she has been “made whole”. We routinely argue with health insurers about whether our clients have been made whole by a particular settlement. Common law subrogation allows greater flexibility between the victim and the health insurer in resolving the insurer’s subrogation interest because victims have good law to support their position.
ERISA subrogation is different. An injury victim’s rights are usually severely undermined with this type of plan. An injury victim’s rights may vary depending upon the plan. However, generally, ERISA insurance plans require 100% reimbursement of medical bills paid, regardless of whether the victim recovered enough money to be “made whole”. With this type of plan, there is less flexibility to negotiate concerning a subrogation interest because victims’ rights are more limited.
Subrogation is an issue that many personal injury victims do not consider. Yet, it is an important part of nearly every personal injury case.