Personal injury and subrogation by health insurance

If you have been injured in an accident which is the fault of another and you have health insurance benefits you should be aware that the legal landscape has been changing in favor of the health insurance companies. This blog is more of a heads up rather than a full legal treatise. In other words, it is putting you on notice rather than fully informing you of your obligations to your health insurance company.

1. If you have Medicare or Medicaid there is a detailed and somewhat cumbersome process in terms of reimbursing any payments that they have made on your behalf. If you do not make proper reimbursements it is possible that they can come after you and also your attorney and perhaps even the insurance company of the tortfeasor.

2. If you are self-insured, and sometimes that is not obvious because it seems like an insurance company is administering the self-insurance plan, you are likely required to pay back 100% of any benefits that they paid. A recent Supreme Court case, U.S. Airways, Inc. v. McCutchen, 2013 WL 1567371 (2013), was a unanimous decision where the Court ruled that equitable principles (e.g., the Made Whole Doctrine and Common Fund Doctrine) cannot override the clear terms of an ERISA Plan requiring reimbursement.   If you have a Employee Retirement Income Security Act health insurance plan, you should consider this when resolving your case.

3. If you are not self-insured and you are health insurance is provided by a payor as defined by the Maryland code which I include for your convenience below, generally the subrogation amount is reduced by the same percentage as the attorney fees. In other words, if the payor is claiming $6000 as subrogation that $6000 would be reduced by the percentage attorneys fees (for arguments sake let's say the attorney receives one third of the award) that would reduce the subrogation claim to $4000. Sometimes a payor will argue that they are controlled by federal law which supersedes state law. As you can see this can get somewhat complicated. You should at least be aware of it.

What I find particularly interesting is that the payor has no obligation to advise you that you have the right to have the subrogation amount reduced. Look at the statute below and you will see that in Maryland, "no obligation to advise.-A payor has no obligation to advise an injured person or an attorney for the injured person of the injured person's right to reduction of the subrogation claim described..." In other words, the insurance company is legally allowed to hide the ball from you.

When choosing your personal injury attorney choose one who is aware of the various pitfalls that are part of the case.



Health Gen. Article Section 19-132 Defines Payor As Follows:

(m) Payor. -- "Payor" means:

(1) A health insurer or nonprofit health service plan that holds a certificate of authority and provides health insurance policies or contracts in the State in accordance with this article or the Insurance Article;

(2) A health maintenance organization that holds a certificate of authority in the State; or

(3) For the purposes of this Part III of this subtitle only, a person that is registered as an administrator under Title 8, Subtitle 3 of the Insurance Article.

Courts and Judicial Proceedings 11-112 addresses reduction in subrogation claims by the health insurance company. More specifically:

(a) "Payor" defined. -- In this section, "payor" has the same meaning stated in § 19-132 of the Health - General Article. 

(b) Applicability of section. --

(1) Except as provided in paragraph (2) of this subsection, this section applies to any right of subrogation under a contract or applicable law for payment of health care benefits or services for an injured person paid or payable by a payor or under any system of self-insurance or indemnification for health care expenses, if the amount of the subrogee's claim as determined under subsection (c) of this section is voluntarily paid by the injured person from the injured person's recovery in a claim for personal injury.

(2) This section does not apply to a voluntary reduction of a subrogation claim by a payor that exceeds the reduction of the subrogation claim described in subsection (c) of this section.

(c) Reduction related to attorney's fees incurred. --

(1) Unless a subrogee files a petition to intervene in the personal injury action and is independently represented by counsel, in a subrogation claim arising out of a claim for personal injury, the amount permitted to be recovered by a payor for health care benefits or services paid or payable on behalf of the injured person shall be reduced by the amount that is determined by:

(i) Subject to paragraph (2) of this subsection, dividing the amount of the total recovery in the claim for personal injury into the total amount of the attorney's fees incurred by the injured person for services rendered in connection with the injured person's claim; and

(ii) Multiplying the result under subparagraph (i) of this paragraph by the amount of the payor's subrogation claim.

(2) The percentage under paragraph (1)(i) of this subsection may not exceed one-third.

(d) No obligation to advise. -- A payor has no obligation to advise an injured person or an attorney for the injured person of the injured person's right to a reduction of the subrogation claim described in subsection (c) of this section.

(e) Certification regarding fees incurred. -- On written request by a payor, an injured person or an attorney for the injured person who demands a reduction of the subrogation claim described in subsection (c) of this section shall provide the payor with a certification by the injured person that states the amount of the attorney's fees incurred by the injured person for services rendered in connection with the injured person's claim.