After the Settlement, Do I Really Have to Payback Health Insurance?

1) Bob Blameless is driving his car down Broadway when he gets rear-ended by Chuck Careless. Bob spends the next year off of work, in hospitals and enduring painful physical therapy. Bob racks up $70,000 in medical charges paid for through his employer's health insurance. His excellent attorney at Anderson Hemmat convinces Chuck Careless' reluctant auto insurance company, Scoundrel Mutual, to pay their full policy limits, $250,000.

Now, even though Bob had $70,000 in medical billing, his health insurance paid only $38,000 in medical charges. As part of the doctors and hospitals contract with Bob's health insurance, they wrote off the rest of their charges. In this situation, the next issue that the fine Anderson Hemmat attorney has to address, is whether Bob's health insurer is entitled to get all, some or none of the money they paid for Bob's medical expense back, now that he has settled.

The requirement of paying back health insurance for what they paid in medical expenses specific to injuries you just reached a settlement on is called subrogation.

2) Subrogation is almost always a surprise to our new clients who didn't realize that nearly every health insurance policy written provides that they get ALL the expenses back that they paid toward their insured's medical expenses caused by someone else's negligence. This subrogation obligation requires that you tell your health insurance company when you receive a settlement, and they then send you a bill for the medical charges that they paid toward the injuries you just settled on.

3) Simply ignoring your health insurance's right to subrogation is really not an option. There are legal ways that you can resist paying back health insurance. But, simply not addressing their claimed right of interest is foolish. The health insurer can sue you and they can drop you from insurance. All good attorneys are proficient in dealing with health insurance claims of subrogation.

4) Health insurance these days seems to be segregated into two types: insurance that subject to Colorado law and insurance that subject to Colorado law. Colorado adopted the Make-Whole statute effective August 11, 2010 found at C.R.S. 10-1-135. This law provides a user-friendly process for the determination as to whether you were made whole by a settlement (and therefore must pay subrogation), or were not made-whole (and therefore, regardless of insurance policy language to the contrary, legally not required to pay subrogation). For a more in depth discussion of subrogation rights of health insurance subject to Colorado's make-whole statute.

A) Health Insurance that Subject To Colorado Law:
Colorado's make-whole laws apply to private health insurance, purchased by individuals or families. Colorado's make-whole laws also apply to group health insurance where an employer simply selects a health insurance and the company pays a monthly premium.

B) Health Insurance that Subject To Colorado Law:
As distinct from your "garden variety" group health insurance, where an employer simply selects a health insurance company for their employees, some companies create a self funded employee benefits plan. To the unsuspecting employee with this health plan, it looks and tastes and even smells like traditional health insurance. You get an insurance card, which often has the name of a health insurance company on the card, and you will get periodic statements from them detailing what they are paying related to your medical bills.

So, what's the difference? Pretty much the only difference is that money that is paying your medical care is employer money, not insurance money. While a health insurance company is still involved, they are simply acting as a liaison from the employer whose self funded money is paying for medical care to the employee who is getting the benefits of that coverage.

While it seems like an immaterial distinction between health insurance that takes premiums in exchange for covering employees (subject to Colorado make-whole laws), and health insurance that simply administers an employer's self funded benefits plan (not subject to Colorado make-whole laws), the devil is truly in the details. Because of this nuance, employer self administered benefits have an additional layer of Federal oversight. It is with that Federal oversight on employer self administered funds, that Federal preemption of state laws occurs. So, like your mother might have told you when you asked too many questions; self administered funded employee health benefits are not subject to state laws (like our make-whole statute) because the law says so, without much more rhyme or reason to it than that.

5) This is a question we are often answering for other attorneys. Unfortunately, great numbers of Colorado citizens have health benefits that are NOT subject to Colorado's wonderful make-whole statute. In addition to the situation discussed above, if an employee's health benefits come from a government job, or Medicare, or Medicaid, all of these sources of coverage do not allow you to use the make-whole laws to avoid paying back benefits received. Sadly, for those folks, not being made whole from a settlement will not matter at all. They still owe their health benefits plan the money they shelled out, if the language of the policy requires payback.

Rest assured, virtually all of these plan languages require subrogation. But that doesn't mean that our clients are completely left without any possibility of reducing the claimed right of subrogation in each of these situations.

A) Medicare / Medicaid / Government Sponsored Health Insurance:Each of these entities have their own specific administrative procedure that must be followed to seek from them a reduction in the amount of money that needs to be paid back in subrogation, claimed rights of interest or liens. A good attorney is well versed in the procedures necessary to get to an acceptable resolution with each of these distinct entities.

B) Health Benefits Subject To Colorado Make-Whole Statute:
We discussed earlier what won't work with these self administered (Federally preempted) health benefits providers. Your lawyer is wasting her time saying anything close to "we think our client hasn't been made whole." They won't care, and unfortunately they are immunized from Colorado law enough that they don't have to care about whether you see any of your settlement.

However, there are at least 3 approaches that we regularly find varying degrees of success in getting large and sometimes even complete relief from our client's obligation to pay back subrogation:

i) Forgiveness Approach:
When dealing with an employer's self administered funds, you need to understand that basically, it is the employer, not a "godless, faceless" insurance company, but our client's employer who paid the medical bills after the employee's car crash. Often, these employees are still working for the employer by the time we are trying to resolve the subrogation issues. Sometimes, our clients are really well regarded by their employer. Understand, even when a separate company is administering the employer's money, they always are talking with the employer.

Accordingly, we often request that the company agree that under the circumstances of the accident, the injuries, and based on the nature of the esteem and devotion that the employer has for their employee, that they forgive the debt and agree to take nothing back from the settlement. While, these employer self administered funds are not required to abide by the Colorado Make-Whole Statute, particularly in the very catastrophic injury cases, we have gotten these perceived "godless, faceless giants" to forgive millions of dollars of money that they paid out. We once represented a Director of Human Resource for a large company. In the process of seeking forgiveness for her large subrogation obligation, it was our own client that had to sign off on behalf of the employer on our request. Not surprisingly, that request for forgiveness went quite smoothly.

Accordingly, we always consider asking for forgiveness. It works more often than you might think.

ii) Subrogation Language Approach:
So...say seeking forgiveness doesn't work. Now it's time to put on your "butt-kickin" boots. We carefully review the policy (called a plan) language. The plan will have a section that talks about under what circumstances they will pay benefits, and also under what circumstances they get their money back (subrogation). Believe me, with all the smart college educated people thinking about this stuff in the corporate world, you would be surprised how often poorly worded provisions can save my clients millions of dollars.

These plan administrators are limited to only the provisions provided in their plan. Many times the subrogation language calls for the company to "get back money that the Plan paid from any settlement or judgment collected against the negligent party or his insurance company." Well, since my client was hit by an uninsured driver and just collected uninsured motorist coverage from her own insurance, guess what?

Yes, what looked hopeless (no good laws to combat this big giant with his hand out) suddenly they get nothing. This is a nifty trick. I just hope these companies never hire college English majors to fix their poorly worded plan language. But, as long as they don't, I will be out there saving my clients from having to pay, one poorly worded provision at a time.

iii) Related to Injury Approach
Assuming that forgiveness doesn't work, and the language in their plan does seem to apply to the money our client received from a settlement or a judgment, I start the process of carefully reviewing the medical care services the plan administrator paid for. Again, you would be surprised how often the itemized bill for my client's injured back care has other care included, or care that even predates my client's injuries as what they are looking for my client to payback.

Recall, if my client had a back injury and subsequent back treatment during a period of time followed by a settlement with the negligent party's insurance, no matter what laws apply, my client is never obligated to pay back more than the related expenses for the related injury care. Not, other medical charges such as foot x rays, or an emergency room visits when my client ate bad Chinese food.

Certainly my client is never responsible for money spent on dates of treatment that predate the crash. However, on nearly every occasion where we carefully review these itemized billing statements, we find something, if not many things that serve as substantial overcharges of what our client's true subrogation obligation should be.

Another consideration is to use the weak aspects of your case against them. If my client had years of prior back problems, before he had this latest auto related back injury, I will ask for a discount on the bills based on apportionment. Just like what the defense lawyers ask jurors to do, I will make the argument that my client shouldn't have to pay back the entire expense for the back surgery, since all the doctors agreed that this latest injury (for which we just got a settlement) was only 25% of the overall problem. I will accordingly ask that the Plan agree to receive as payback of just 25% of the total charges. It usually works like a charm.

At Anderson Hemmat a good recovery isn't enough. The gross amount identified on the insurance check is much less important than what our client gets to keep. We know that it is how much they get to keep that makes them refer us their friends and family members. We recognize that we have to be skilled in championing the rights our clients in the courtroom.

But, we also serve our client by being good ship captains navigating though the perils of our clients' complex issues collateral to simply a good injury recovery. In our view, good representation of a client requires proficient understanding of subrogation rights and an approach that pays those entities as little as possible, returning to our client the very most possible from settlements or judgments. If you are concerned about how much of your settlement you will actually get to keep, please call and speak with one of our attorneys today.