For people who have been harmed by someone else’s wrongdoing, a civil judgment or settlement is a crucial step towards healing. That healing includes the emotional release that comes from a court agreeing that they were not at fault, but it also includes the only remediation our court system is permitted to offer—money.
However, for many of those people, that financial relief could disappear suddenly because of a common clause in their insurance policy—the subrogation clause. In brief, subrogation allows an insurance provider the right to reclaim some or all of what they paid for medical care from a patient’s civil judgement or settlement. Medicare and Medicaid have subrogation rights under the law, and many private insurance policies have subrogation clauses in one form or another. But that doesn’t mean you have no recourse.
Over the course of this 3-part series, we’ll be looking closely at what subrogation is, and how it can be minimized.
Subrogation in public vs. private insurance
To understand the details of subrogation, it’s important to first understand that there are two different kinds of insurance providers and they each handle subrogation differently. The first is public, funded by the government, through Medicare and Medicaid. Subrogation is part of the law for Medicare and Medicaid programs. In nearly all applicable cases, some subrogation money will be taken. Even after trying to negotiate the amount down, there’s often still a minimum amount these government programs will take, and there’s no escaping it. But at least for Medicaid cases, the law also caps the amount, which assures that the injured party will get to keep at least some of the settlement.
The other type of carrier is, well, everybody else—all private insurers. Although their right to subrogation is also governed by state or federal law, rules for subrogation primarily depend on the written terms in the insurance contracts these companies sell. Some contracts may say little or nothing about it (thus you may be able to avoid subrogation claims altogether). Others may contain some very potent language, and the insurer may have the right to take your entire settlement to cover the amount they paid out.
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How is subrogation possible?
The most common reaction we get when people learn about subrogation is shock. It makes sense to assume the money you pay for insurance, either through premiums or taxes, is supposed to purchase coverage. It doesn’t seem fair for insurance companies to then take part of the judgement or settlement as well. The counter-argument is that you signed a contract and are therefore beholden to the terms of that contract—no matter how unfair they seem.
The problem is that you may not have had much choice in the matter. If you get your insurance through your employer (or the Affordable Care Act), it’s a take-it-or-leave-it situation. You, as a single private individual, can’t negotiate the contract language. You’re stuck with whatever subrogation rules are in the policy that covers you.
The idea of subrogation is that it will offset the cost of insurance and keep costs from going up. So it’s easy to understand why Medicare and Medicaid use it, since they’re funded by taxpayer dollars. It’s harder to see a good reason (for parties other than the insurer) for private companies to use it, because subrogation-friendly judgments have not kept the cost of insurance from rising. But whatever the reason for it, subrogation is a fact of life. Medicare, Medicaid, or your private insurance may be legally entitled to a portion of your settlement.
Civil litigation attorneys can help
The good news is that you may not be stuck. There are legal remedies that could help. In upcoming articles on subrogation, we’ll get into more detail about the specifics of public vs. private insurance subrogation claims and how they can be mitigated.
But if you’re caught in a subrogation mess right now, the Ohio civil litigation attorneys at Cooper & Elliott are happy to talk to you about it. Give us a call. We’re here to help.
The outcome of any client’s case will depend on the particular legal and factual circumstances of the case.
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