Your lawsuit has been settled. The contingent fee has been paid to your attorney. The litigation costs have been reimbursed to a personal injury lawyer Miami FL trusts. Now- what’s that next item on the Closing Statement “Subrogation/Reimbursement to the Health Insurance Carrier”? Although attorneys should make the client aware of this early on in the representation process, almost universally, when there is a settlement in a negligence case the injured client’s health insurance company is entitled to “subrogation” or “reimbursement” of medical benefits paid to the client as a result of the negligent third party’s actions.
These obligations of reimbursement arise from the health insurance contract or through statutory or regulatory direction although a theoretical argument can be made that equity would require it even in the absence of contract or statute. Historically at common law, a personal injury recovery of medical expenses would be kept in its entirety despite any payment by the injured person’s own insurance company. This “collateral source rule” allowed a double recovery under those circumstances with the policy basis being to allow otherwise would be a windfall to the tortfeasor at the expense of the injured party who was socially responsible enough to have health insurance to cover their expenses.
As the forces of tort reform grew and the focus turned toward controlling premiums and not allowing an injured tortfeasor to recover twice for the same injury, insurance contracts and statutes entered the field that provided for reimbursement to the health insurance company, Medicare and Medicaid for benefits that they paid to cover expenses arising from a third party’s negligence. The rationale was that it was a greater social good to reimburse the health insurance company keeping premiums lower for all (in theory) or reimbursing the Medicare or Medicaid fund to allow benefits to a greater number of people than to allow a windfall double recovery to the injured person.
The amount of reimbursement to your own health insurer, Medicare or Medicaid varies. Medicare uses a formula that allows for a discount based on the amount of attorneys’ fees and costs relative to the recovery. No adjustment is made for the difficulty of the case or limitations in financial responsibility on the part of the tortfeasor. Petitions for further reduction however can be made but are extremely difficult to obtain. Medicaid reimbursement will depend upon the particular state where you live and is governed by state statutes. If you have a health plan through your workplace your plan is likely controlled by the Employee Retirement Income and Security Act (ERISA) and depending on the particular type of plan, will vary in its subrogation/reimbursement requirements. If a “pure” ERISA plan the contract will control how much is reimbursed and can be as much as 100% of the medical benefits that they have paid. If not a “pure” plan then it may be controlled by individual state reimbursement statutes. If a private health plan purchased by the individual then it is likely controlled by state reimbursement statutes and the formula they provide for. As a for instance, Florida Statute §768.76 provides for reimbursement but takes into consideration attorney fees, costs, and other elements which have affected the amount of recovery.
In conclusion, keep in mind that in every personal injury lawsuit, your health insurer is your silent partner in the proceeds and the amount that needs to be repaid to them must be accounted for.
Thanks to our friends and contributors from Needle & Ellenberg, P.A. for their insight into subrogation and personal injury lawsuits.