What Is Subrogation?

Subrogation Rights by Health Insurance Companies

Serious accidents often result in serious injuries and substantial medical expenses. In most cases, the injured victim’s own medical insurance will cover or pay for at least a portion of the medical expenses.

Subrogation is when your own health insurance company seeks reimbursement from you for payments it made out on your behalf to your hospitals, doctors, and therapists.

The health insurance company’s argument is that if someone else caused your injuries and you collect money from that negligent person, then they as your health insurance company should get paid some of that money because they paid part of the original costs of your injury. And because your health insurance company cannot proactively pursue that negligent person and collect money directly from them, they tell you that you owe them.  This is what is called subrogation.

But just because your health insurance company says they have a right to subrogate, do they? Does the health insurance company have an absolute right to reimbursement?

What is the “Made Whole” Doctrine?

No amount of money will ever put you in the same position that you were in before the crash.  No matter how small or how big the injuries are, you have changed.  Georgia follows the “Made Whole” Doctrine.  The Made Whole Doctrine is an argument that where the injured victim is not fully compensated for all of her injuries, the victim’s health insurance company should not be able to subrogate and collect any money.  The rationale is that the health insurance company had been receiving premium payments from their insured/the injured victim and would have paid the medical expenses regardless if they were for injuries incurred from a third party’s negligence. Duncan v. Integon Gen. Ins. Corp., 267 Ga. 636 (1997); O.C.G.A. § 33.24.56.1(b)(1).

Whether your insurer can seek reimbursement for the medical expenses it has paid out is a question of law and not one of fact, meaning that it is for the court to determine. The issue is whether you have been fully and completely compensated. Liberty Mutual Ins. Co. v. Johnson, 244 Ga. App. 338 (2000).  In cases where an injury victim has won a jury verdict or a policy limits settlement and there is no designation as to economic and non-economic damages, there is no way to determine if the victim has been made whole or fully compensated for his losses.

ERISA Plans

Having said all of the above, if your health insurance is an ERISA based Plan, then regardless of the Made Whole Doctrine you may be stuck having to pay back your health insurer.

An ERISA Plan is governed by federal law under the Employer Retirement Income Insurance Act. An ERISA based Plan usually has a provision that specifically refers to reimbursement.  Plans that are not ERISA are subject to Georgia law and the “Made Whole” doctrine that we discussed above.

Your Plan may not be an ERISA-governed Plan but may be an HMO or PPO so that state law governs rather than federal since it is not self-funded. Sereboff v. Mid-Atlantic Medical Services, Inc., 547 U.S. 356 (2006). Also, if your Plan is not an ERISA based plan, then the only way the health insurer can make a claim for reimbursement is for your case to go before a jury and for the jury to deliver a special verdict that specifically lists the damages for which it has awarded you before you may be considered “made whole.” But if you settle before trial, there is no way to determine this.

Before your case is settled you or your attorney should make a request by certified mail to your health insurance provider asking for the Plan’s documents and for a detailed list of all medical payments that were paid on your behalf for your injuries.  The Plan administrator has to respond within 10-days by certified mail with the requested list.

To establish if your Plan has the power to subrogate, you or your attorney should review the Summary Plan Description once you get it from the Plan administrator.  Specifically, you may want to consider:

  1. Is the Plan self-funded or is it an insurance plan?
  2. Does the Plan’s language refer to reimbursement to third party cases or to first party (uninsured or underinsured motorist)?
  3. Does the Plan identify a specific source for recovery?
  4. Does the Plan purport to waive the “Made Whole” doctrine?
  5. Does any separate subrogation agreement exceed the scope of the Plan?
  6. Is there a provision as to whether attorney’s fees are to be considered?

If the Plan does not refer to a specific source such as settlement funds, then there is no constructive trust or equitable lien created from which the Plan could claim reimbursement. This can be instructive in a wrongful death claim where a medical Plan may state that it has a right to reimbursement from the decedent. Since a wrongful death action is not one that belongs to the decedent, the lien claimant has no right to reimbursement from the settlement.

At the end of the day, whether your Plan is a self-funded ERISA based Plan or a State Based Plan subject to Georgia’s laws, you or your lawyer can try to negotiate down the amount to be reimbursed. Best practice is to talk with an experienced personal injury lawyer about your options early on!