REIMBURSING YOUR HEALTH INSURANCE COMPANY AFTER SETTLEMENT

Persons in Kootenai County or elsewhere in Idaho will find that, after successfully settling a personal injury case, they must now deal with reimbursing their health insurance company out of the proceeds of the settlement.

This principle is known as the right of subrogation. That is, if a portion of your settlement reflects a $1000 medical bill paid by your health insurance company, then out of your settlement you must reimburse your insurance company for that $1000. Obviously, this principle is based upon an avoidance of the injured person obtaining a double recovery.

The doctrine is totally fair except in one respect – the client’s fee agreement is generally a contingency fee agreement, in which the attorney takes a certain percentage (usually one third) of the amount of settlement or jury verdict. Therefore, if the insurance company insists upon demanding the full $1000 paid for the particular medical treatment, the client will have his or her recovery reduced because the client had to pay the attorney one third of that $1000.

Some insurance companies will, as a matter of practice, allow the attorney fees on that portion of the reimbursement to be withheld. Thus, the insurance company would only receive two thirds of the $1000.

However, many persons covered by health insurance are covered by an ERISA insurance plan. If that is the case, the ERISA insurance company will absolutely refuse to make any reduction in the right to the receive the full $1000 reimbursement.

Before caving in to such an ERISA demand, the attorney representing the injured person should make sure that it is truly an ERISA plan. There are multiple criteria that must be met before a plan can truly be labelled and ERISA plan.