HEALTH INSURANCE SUBROGATION RIGHTS

If you have been involved in a personal injury accident and you have health insurance, it may be of great benefit to you to submit all of your medical bills incurred to your health insurance provider. This ultimately may lead to the net recovery, should you pursue a third party injury claim, to increase for you. The downside, however, is the fact that if it is a group health policy there may be subrogation/payback language requiring you to refund monies from any third party settlement.
Although Arizona has anti-subrogation laws, certain insurance plans may be subject to ERISA depending on the plan language that specifically whether or not the particular plan is self-funded or funded by insurance. There are many instances when we are able to defeat the health insurance company’s subrogation claim or reduce it substantially based upon the amount of recovery, attorney’s fees and other equitable arguments.
Recently the Texas Supreme Court reaffirmed the right of a health insurer to contractual subrogation against recovery by the insured in Texas Health Insurance Risk Pool v. Sigmundik, 2010 WL 2136625. Prior to the Texas Supreme Court decision, contractual subrogation rights of the health insurance were frequently cutoff by the long standing “made whole” doctrine. That doctrine provided that a health insurer cannot recover monies paid on behalf of an insured who was injured through the fault of another until the insured had recovered all of his/her damages, that is, was “made whole.”
This decision by the Texas Supreme Court confirms an insurer’s right of contractual subrogation. The Plaintiff, Thomas Sigmundik was insured by the Risk Pool. He was severely burned in an oil field explosion and after 52 days in the hospital burn unit died. His family filed a wrongful death action against the contractor among others and the Risk Pool intervened to recover the $336,000.00 in medical expenses paid for the deceased medical care. Ultimately, a settlement was reached with the contract insurance carrier for $800,000.00, although no agreement was made between the Plaintiffs and the Defendants insurance carrier on the amount to be reimbursed to the Risk Pool. The Trial Court ruled that the family had not been “made whole” an allocated the entire settlement to the family leaving nothing for the estate of the deceased and, therefore, nothing for the Risk Pool. The Texas Supreme Court in its ruling found the contractual subrogation provision to be fully enforceable. It also found that the Trial Court abused its discretion by failing to allocate any of the settlement funds to the deceased for the subrogation claim. The case was sent back to the Trial Court to allocate a portion of the settlement proceeds for reimbursement to the Risk Pool.