Why Do I Have to Pay Back My Health Insurance From My Settlement?

By Rocky McElhaney | April 25, 2014

Every time I give a client a breakdown of their settlement to let them know where each and every penny is going, they are shocked that a portion of their recovery has to go to their health insurance. Clients will ask, and rightfully so, why should my insurance company get paid from my settlement?  Because you have recovered money from a third party, (the at-fault party/person who caused your damages) your health insurance is entitled, pursuant to your contract with them, to be reimbursed for all payments they made on your behalf.

Regardless if your health plan is through your employer, a private company or a government-funded plan, all plans have a provision that entitles them to  pursue a "subrogation" claim. A standard subrogation clause in a health insurance plan will generally read as follows:

"The plan assumes and is subrogated to a covered person’s rights to recovery of any payments made by it for medical expenses where the covered person’s illness or injury resulted from the action or fault of a third party. Medical expenses shall include all covered expenses paid by the plan. The plan has the right to recover through their right to subrogation amounts equal to its payments by suit, settlement or otherwise from the insurance of the injured party, from the person who caused the illness or injury or his/her insurance company, or any other source such as uninsured motorist coverage."

You only have to pay back what the insurance company payed out, not the amount you were billed

The good news is, you only have to pay back the actual amount that was paid by the health insurance company, not the billed amount from the medical provider. This is important because companies like BCBS or Cigna have contracts with various hospitals, doctors and medical providers that require them to pay a certain percentage of the total billed amount and then depending on the type of plan you have, you may have a remaining balance (to meet your deductible) or the facility may- pursuant to their contract with the health insurance company- write-off the remaining balance.

So, while you are giving a portion of your recovery to your health insurance, it will generally be significantly less than what was actually billed and what you could potentially owe if you did not have health insurance. When we meet with a potential client for a free consultation, we make certain to tell them that if they are insured, all their medical expenses should be paid by their health insurance. Once our client has completed treatment, we will request an itemization of all the bills paid by their health insurance and then contact each  medical provider to see if there are any remaining balances with the provider. Then, we attempt to negotiate a reduction on any balances as well as attempt to reduce the health insurance companies subrogation claim. Depending on the plan, sometimes the reduction is significant and sometimes the plan does not allow for a reduction. Nonetheless, we make every effort to ensure that our clients are receiving not only the maximum recovery on their claim but that we maximize their recovery.

Give yourself the best change to get the maximum possible claim for your injuries

Our attorneys consider every detail of your injury and its impacts on your life to help you recover what you require to heal comfortably. If you or someone you know has been injured, give us a call today. Our team of lawyers, paralegals, law clerks and staff are ready to fight for you every step of the way.

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