One of the more difficult things to explain to a client is health insurance subrogation, which is when we have to repay health insurance (or medicare, medicaid or even workers’ compensation) from the verdict or settlement of a personal injury cases. A few examples: 1) client falls at grocery store and health insurance pays all of their medical bill; 2) client gets into a car accident and medicare pays some of some of their medical bills; 3) client trips at concert and medicaid pays their hospital and surgery bills; 4) employer sends client to hardware store where a box from a shelf above falls on clients causing injury and workers’ compensation pays the related medical bills. In ALL of these examples and ASSUMING THE CLIENT MAKES A RECOVERY against a THIRD PARTY, the client must repay the insurance company what they paid toward the medical bill.
This falls under the legal category SUBROGATION. The legal definition of subrogation is: assuming the legal rights of a person for whom expenses or a debt has been paid. Typically, subrogation occurs when an insurance company which pays its insured client for injuries and losses then sues the party which the injured person contends caused the damages to him/her. In injury cases, the insurance company that pays the medical bills is able to assert a “lien” against the personal injury verdict or settlement such that the injured person sues for the medical bills paid by the insurer and then has to pay them back.
The idea is that the law requires in these instances that the client sue (or make claim against) the third party for BOTH the client’s pain and suffering (and lost wages, etc.) but ALSO for the medical bills that were paid by the insurance company (health insurance, medicare, medicaid, workers’ compensation). The client cannot simply sue for the pain and suffering but instead the client must ALSO sue for the medical bills that were paid by the insurance. If the client loses the case or chooses NOT to sue, then obviously the client does not have to pay the insurance company back; however, if the client does sue the other party and collects a verdict or settlement, the client DOES HAVE TO PAY THE INSURANCE COMPANY BACK.
Using example 4) above, the client whose employer sent him to the hardware store where a box fell from the shelf above would sue the hardware store for his medical bills, lost wages and pain and suffering. Assuming he wins at trial or receives a settlement, the client will have repay the workers’ compensation what it paid.
Often times, under the law, the lawyer is often able to get the insurance lien reduced for various legal reasons. That part goes beyond the scope of this blog entry.
