Although healthcare reform has been in the news ever since President Obama signed the Affordable Care Act in 2010, few people talk about how—or if—health insurance covers injuries sustained in a car crash.
Health insurance and car insurance
Imagine you’re in a serious car wreck. You have great health insurance at work that pays your medical bills. Excellent!
But what if your employer has a health insurance plan that is “ERISA qualified?” In that case, the health insurance company will take action to be reimbursed from whatever you recover from the driver-at-fault or that driver’s auto insurance company or your own auto insurance.
This is known as “subrogation.” Subrogation firms are experts at collecting reimbursement for those health care costs from accident victims.
When my client was hit by an under-insured driver
I recently handled a case on behalf of a husband and father of two who was in a car wreck. His medical bills exceeded $250,000.
The driver who struck him had the minimum liability limits required by North Carolina—$30,000—to cover of all my client’s medical expenses and lost wages. My client had $100,000 of under-insured (UIM) on his own auto insurance policy. Because the UIM insurance company gets “credit” for the liability coverage of $30,000 carried by the at-fault driver, my client’s auto policy only paid $70,000 in additional funds to reach the full policy limit of $100,000.
Therefore, between those insurance policies, my client had $100,000 in possible coverage against over $250,000 in medical bills. My client had great health insurance that paid for the majority of his medical bills but not for pain and suffering, loss of income, and so forth.
We obtained the $100,000 from the auto insurance. However, the company that administered the health insurance plan wanted every penny of the settlement I was able to get for my client to recover what it spent on his medical care.
What? How can that be?
It’s known as “subrogation”
“Subrogation” is the right of an insurer to recover the expenses paid on behalf of the employee for their medical care. Self-funded health insurance plans nearly always include the right to subrogate.
Even though your insurance ID card says your coverage is provided by, for example Blue Cross/Blue Shield, for example, it might be a self-funded insurance plan (ERISA-qualified) that includes a subrogation provision. The best way to know if your plan qualifies for subrogation is to examine the documents filed by your employer. .
In the case of an employee using health insurance coverage to pay for medical treatment for injuries sustained in a motor vehicle collision, the plan will seek to collect its costs from any settlement the employee receives using its right to subrogate.
What funds can my health insurer subrogate against?
Subrogation means the health insurance company can get reimbursed from your total settlement, including Medical Payments coverage, and uninsured or underinsured coverage collected from in your private automobile policy.
There is a common law rule that says the victim should be made whole before the insurance company’s interest can be considered, but the language in the plan overrides that. This doesn’t mean subrogation can’t be negotiated or litigated—it can—and I have done so successfully.
Short-term disability (STD) and long-term disability (LTD) insurance can work in the same way with subrogation. Many STD/LTD contracts says if you’re injured by a third party, the STD/LTD insurance company may subrogate. This subrogation might chip away substantially at your settlement.
Supplemental Insurance like AFLAC doesn’t qualify for subrogation because it’s an individually-purchased policy. If you, as an individual, buy health insurance from Blue Cross/Blue Shield or any other company, that policy does not qualify for subrogation, either.
What’s the best way to protect yourself?
He couldn’t avoid the crash, but here’s how my client could have avoided his terrible financial outcome: by purchasing $1million of UM/UIM coverage on his private auto policy (the highest limit available in North Carolina). This would have given him sufficient insurance coverage to repay the medical insurance subrogation claim and to have money to cover his pain and suffering, loss of income and to meet his future needs.
I was able to get the health insurance subrogation lien waived for my client but his coverage was still not enough, given the extent of his loss.
Readers, please call your insurance broker or auto insurance company TODAY. Ask if you have the maximum coverage available for uninsured and underinsured car crashes. If not, get as much as you can afford. I recommend at least $500,000, based on what I see in my practice. Even better, buy $1 million in coverage – the premium is not that much more.