Most people believe that when they obtain a recovery from a personal injury settlement, they get to keep all of the net settlement proceeds. Unfortunately, this may not always be true.
Generally, when someone is negligent and causes harm to another person, the negligent party is legally responsible for all of the injured party’s damages, including their medical expenses. However, because it may take many months to resolve a personal injury claim, it is not unusual for a health insurer or governmental entity to make payment for the accident related treatment in the interim.
When that happens, the health insurer or governmental entity may have a legal right to reimbursement known as “subrogation”. Subrogation is founded on the principle that when a third party pays for the medical expenses that should be paid by the negligent wrongdoer, it is only fair that the third party be reimbursed at the time of recovery. The right of subrogation is dependent on many factors including the type of entity that paid for the accident related medical expenses.
Private Heath Insurance
Subrogation claims by private health insurance plans are controlled by Minnesota Statute § 62A.095. Under this statute, the private health insurer is entitled to reimbursement ONLY if the injured party has received a “full recovery.” In other words, not until the injured party has been fully compensated for all of their damages. Even then, the reimbursement must be reduced for a pro rata share of attorney’s fees and other expenses, unless the private health plan is represented by its own attorney.
Employer Health Plans Governed by ERISA
Many employer health insurance plans are governed by the Employment Retirement Income Security Act (ERISA). These plans are controlled solely by federal law and are exempt from state law, including Minnesota Statute § 62A.095. Reimbursement obligations for these plans are dependent on the contractual language contained in the plan itself. If the policy language is clear and unambiguous, courts will enforce repayment of the entire subrogation claim, even if it means the injured party is left with nothing.
Medicare, Medicaid, or Medical Assistance
If Medicare, Medicaid, or Medical Assistance pays for accident related medical expenses, they have a right to reimbursement by state or federal statutes. Typically, these statutes contain a formula for determining the amount of reimbursement obligation, taking into account such things as the amount of the settlement, the attorney’s fees and expenses incurred, and other outstanding medical bills yet to be paid.
Over the last ten years, health insurers and governmental entities have become more aggressive in pursuing their subrogation rights. Dealing with these claims can be a complicated process, and can have severe financial consequences for anyone who ignores them. The attorneys at Nelson Personal Injury have significant experience dealing with all types of subrogation claims and work hard to ensure that you receive the maximum recovery for your injuries.