Do I Have to Pay My Health Insurance Company Back From My Auto Wreck Settlement?





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Published on Apr 15, 2011

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When you signed up for health insurance at work did they tell you that if you get a in car wreck, you will have to pay your own medical expenses?

Burt True, a lawyer with True & Associates, discusses insurance subrogation. Subrogation is when your health insurance plan claims they get paid back for the medical expenses they paid before you get paid for your injuries. Missouri (and other states) prohibit the assignment of personal-injury claims. In a recent case, Scroggins v. Red Lobster (2010), a woman agreed to a settlement with Red Lobster after she fell there. But, her employer, St. John's Hospital in Springfield, claimed that its health insurance plan gets paid back out of her settlement. The court said, "Missouri courts have never allowed a provider to be reimbursed for medical expenses that the insured recovers in a settlement from a liable third party under a lien theory, and we declined to do so now."

But, your health insurance plan does not stop there. They want a way around state law. So they go to the feds. They get qualified under a federal law called ERISA. ERISA stands for Employee Retirement Income Security Act. Since federal law trumps state law, the health insurance plan claims it can still get paid back even though state law prevents this. Now it gets complicated.

ERISA does preempt state law, but there are exceptions listed in the federal law. One exception is state insurance law. But then there is an exception to the exception called the Deemer Clause. The Deemer Clause states that if a health insurance plan is "self funded" state law is preempted. What does self-funded mean? It means your employer provides health insurance to its employees using only its own money. Yet, many companies do not want to take the risk of a catastrophic illness or injury bankrupting the company. So they purchase stop-loss insurance. This is an insurance policy that kicks in when the expenses reach a certain amount. So, how about now? Is the health insurance plan self-funded? I would say no. Debt collectors for your health insurance plan (like Meridian and Ingenix who get paid a percentage of what they collect from you) say yes.

Rather than risk bad precedent (a published court opinion saying they cannot collect), health insurance plans will settle for pennies on the dollar once they see you have a good lawyer that understands the law in this area. I have been able to settled subrogation claims for 10% of the amount the health insurance plan actually paid.

One final note: Remember, we are talking about personal-injury claims here. Wrongful death claims are not subject to health insurance plan reimbursement for medical expenses.

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