Beware of Subrogation Claims
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When a personal injury case is settled and the victim receives money from the insurance company which insures the negligent party, many times the health insurance carrier makes a claim against the victim for medical bills paid by the medical insurance company.
The medical insurance company claims that they have right of "subrogation" and that as such they are entitled to be reimbursed for any bills they paid under their health insurance policy. A subrogation clause provides that the person or company who has the right of subrogation is entitled to "step into the shoes of" the person who makes a third party claim against a negligent party.
Subrogation clauses are unfair to the insured. The insured pays premiums for health insurance and shou8ld, therefore, be entitled to all the benefits from the health insurance policy. It is not fair to the insured that they would have to give this money back to the health insurance company merely because they made a claim against the third party for the same injuries.
The North Carolina Commissioner of Insurance has issued a regulation which outlaws subrogation clauses in health insurance policies.
However, health insurance companies seek to get around that regulation by their claim that if a health insurance policy is provided by or through an employer, the policy is covered by a federal statute commonly known as ERISA. Under this law, insurance companies are allowed to insert subrogation clauses into the insurance policy. Federal law trumps state law and, according to the health insurance carriers, they may insert subrogation clauses into their health insurance policies. Federal law does allow such subrogation clauses. However, the basic unfairness of these subrogation clauses remains.
In January of 2001, the United States Supreme Court held that neither an employer nor a health insurance carrier can sue an insured to enforce a subrogation clause.
The rules on this entire issue are very complex. In many cases, a lawyer can help the injured victim avoid subrogation clauses. This will result in the victim collecting both from their health insurance policy and from the negligent party. This is only fair since the insured pays premiums on the health insurance policy and should be entitled to its full benefits without any reduction or penalty.