Health Insurance Subrogation in Personal Injury

Do I really need to pay back my health insurer after a Minnesota personal injury settlement? This is one of the most common questions we get as personal injury attorneys. After all, the injured person and their personal injury attorney have done all the work to get a settlement. It seems unfair that the health insurer comes back with its hand out looking for money at the end. This post looks at how much and in what circumstances a person’s health insurer has a health insurance subrogation right and must be paid back out of a personal injury settlement.

Health insurance subrogation

As a quick background, a health insurer’s right to money out of a personal injury settlement comes from a legal principle called subrogation. When a person is injured in a Minnesota car accident, Minnesota slip and fall, or some has another Minnesota personal injury claim, often that person incurs medical bills. When medical bills are incurred and paid by health insurance, the health insurer has a health insurance subrogation right if the injured person collects money as a settlement or verdict.

A health insurer’s right depends on a number of factors. The first one is the type of health insurance policy covering the injured person. There are four main categories of health insurance policies that apply to Minnesota personal injury claims: (1) fully-insured plans; (2) self-insured plans; (3) Medicare plans; and (4) Medical Assistance plans. Each has a different right to recover.

Fully-insured plans

A plan is fully insured when the insurance company is responsible for making payments for medical care. This is distinguished from a self-insured plan that will be discussed below, in which the employer and employee provide all money used to pay claims for medical expenses. A fully-insured plan is typically used by small or medium-sized employers or by people who purchase private plans off the exchange. A person or employer pay premiums to an insurance company. If the person then needs medical treatment the it is the insurance company’s money that pays for the treatment.

Fully-insured plans are governed by Minnesota law. Minnesota Statutes section 62A.095 addresses recovery rights for these private plans. Subdivision 2 states:

“No health plan…shall contain a subrogation, reimbursement, or similar clause that provides subrogation, reimbursement, or similar rights to the health carrier issuing the plan, unless:

• the clause provides that it applies only after the covered person has received a full recovery from another source; and
• the clause provides that the health carrier’s subrogation right is subject to subtraction for actual monies paid to account for the pro rata share of the covered person’s costs, disbursements, and reasonable attorney fees.”

This means that if an injured person has a fully-insured plan and does not collect every dollar that the injury is worth, the person should not have to pay back the health insurer. Even if the person does collect a full recovery, the amount to be paid back is the health insurer’s interest less the percentage of the settlement that was the attorney fees and costs.

For example, if a person is injured in a Minnesota car accident and value of the case is $150,000 but there are insurance limits of $100,000, then the person would not need to pay back the private health insurer because the injured person did not obtain a full recovery.

To change the example, if there were $1,000,000 limits and the case was settled for $150,000, the health insurer would be entitled to its interest less the proportionate share for costs of collection.

Self-insured Plans

Unlike fully-insured plans, a self-insured plan is one in which all money being paid for medical bills is funded by the employer or employee. Self-insured entities are typically only found in big companies or unions. Because Minnesota has a number of large companies (for example, Target, 3M, General Mills, Medtronic, among many others, are all self-insured) and unions, we often see these self-insured policies.

Self-insured entities are governed by a federal law called the Employee Retirement Income Security Act (“ERISA”). ERISA does not specifically address recovery rights. Every self-insured entity is supposed to create a master plan document that outlines the plan’s rights, including a recovery rights when a third party causes injuries that forces the plan to pay medical bills. Following the Unites States Supreme Court decision in US Airways v. McCutcheon, many plans have been updated to indicate that the plan is entitled to 100% of its interest without regard to whether the injured victim or attorney receive anything.

For example, a person is injured in a Minnesota slip and fall. The plan paid $50,000.00 for medical treatment. The injured person went to trial and received $40,000.00 total for all damages. If the self-insured’s plan documents indicate that the plan gets the first dollar up to 100% of its interest, the plan will receive all $40,000.00 an no one else will receive anything.

Despite this plan language, significant debate exists surrounding the rights of a self-insured entity’s right of recovery. First, there is an argument that state law would apply to Minnesota personal injury claims with ERISA involvement because ERISA does not address recovery rights and Minnesota’s state law on recovery would apply. This argument was recently made and won in Hawaii and the Ninth District Court of Appeals.

There is also an argument that by hiring companies like Optum and Rawlings to recover money, these self-insured entities violate ERISA’s anti-inurement provision. The anti-inurement is a mandate that “the assets of a plan shall never inure to the benefit of any employer and shall be held for the exclusive purpose of providing benefits to participants in the plan and their beneficiaries and defraying reasonable expenses of administration.” The argument is that by paying companies significant amounts to recover this money, the plan is violating the anti-inurement statute and will lose ERISA-qualified status.

In any event, you must be very careful in dealing with ERISA plans. If you take a shot at defeating the plan and lose, the rights will be strict and you may end up costing yourself significant amounts of money.

Medicare Plans

Medicare plans exist for people who are at least 65-years old or who have become eligible at a younger age after being granted Social Security Disability.

Medicare recovery is run by the Center for Medicare and Medicaid Services (“CMS”). Medicare’s recovery rights are governed by statute. Per statute, Medicare has the right to recover for money it paid on behalf of an injured Minnesota personal injury victim. Medicare will reduce for costs of collection. Nothing in the statute requires that the injured victim get any money.

For example, a person is severely injured in a Minnesota semi-truck accident. Medicare pays $150,000.00 in benefits. There is $1,000,000 in coverage. Assuming the attorney fees and costs make up 35% of the gross settlement, Medicare will reduce its by 35%, meaning it will reduce its interest from $150,000 to $97,500.00.

Now, let’s take another example in which Medicare pays more than the coverage. If Medicare pays $1,500,000.00 in benefits and there is only $1,000,000 in coverage, Medicare will reduce the amount it is owed to $1,000,000 less the costs of collection (attorney fees and costs). Unfortunately, that ultimately means only the attorney and Medicare get paid something, not the client. This is when having an experienced Minnesota personal injury attorney makes a difference. If this happens, the attorney can appeal to Medicare and request a hardship waiver to make sure the injured client – the person who really needs the money – receives compensation.

Medical Assistance Plans

Medicaid in Minnesota is called Medical Assistance. Medical Assistance (“MA”) is a needs-based program for people who may not be able to obtain private health insurance. These plans are administered either through the Minnesota Department of Human Services (“DHS”) or through a private health insurer administering a Prepaid Medical Assistance Plan (“PMAP”). Regardless of which entity is administering the claim, the rights of recovery are the same.

Unlike most of the other plans discussed, Minnesota laws give a direct right of action to the entity administering an MA plan. For example, Person A causes a car crash and injures Person B. Person B has an MA plan that pays bills, but Person B does not want to pursue a claim against Person A. The MA plan administrator can sue Person A directly for the amount of MA benefits paid. Despite this, MA plan administrators rarely directly pursue these claims.

If the claim is not pursued directly, there is very little clarity in the law as to what the recovery rights are. One thing is certain and has been confirmed by both the Unites States and Minnesota Supreme Courts: the MA plan cannot assert a right to money that is the property (including pain and suffering and wage loss claims) of the injured person. After that, there is little agreement.

The statutes do have a formula for recovery, but that formula is almost certainly invalid after the United States Supreme Court invalidated an almost identical statutory recovery formula in Wos v. E.M.A. Some insurers believe they are entitled to 100% of what the paid on behalf of an MA recipient. A number of people on both sides (insurers and plaintiffs) believe that they are entitled to 100% of their interest less costs of collection. There is authority for the position that if the MA administrator takes no active role in the recovery, the MA plan should have no more rights than a fully-insured plan.

Dealing with health insurance subrogation interests may seem like a small part of a Minnesota personal injury case, but having an experienced Minnesota personal injury attorney who is knowledgeable about health insurance subrogation can be pivotal to maximizing the settlement money for the client. After a settlement, some attorneys just want to be done with the case and will tell their clients to settle the subrogation interests for what the insurers want. Good attorneys will not do that and even if it is not making the attorney extra money, it is important to spend time and energy negotiating with the health insurer on the client’s behalf.

Call Tyroler Leonard Injury Law at 651-259-1113 to discuss whether there is a way to negotiate your health insurance subrogation interest to maximize money for you.

Attorney Isaac Tyroler

Attorney Isaac Tyroler has been a strong advocate for injured people his entire legal career. He has a passion for righting wrongs, and he deeply cares about representing injured clients who may feel overwhelmed or uncertain about how to navigate the legal system. He is compassionate toward clients and aggressive with insurance companies and defendants. He is on the elected Board of Governors of the Minnesota Association of Justice (MAJ), the top personal injury lawyers’ group in Minnesota. And is currently the chair of MAJ’s legislative committee. [ Attorney Bio ]