What is Health Insurance Reimbursement/Subrogation and How Can It Affect My Personal Injury Case?

When a person suffers personal injury due to the negligence of another, the law provides remedies allowing the victim to be properly compensated for losses. But anyone who has pursued a personal injury lawsuit knows that the process can be complicated.

If the injuries resulted from an automobile, motorcycle or semi-truck crash, there may be multiple automobile insurance policies and companies involved. These policies also have varying coverages, such as personal injury protection (PIP), liability, and uninsured motorist. Moreover, many personal injury victims also have health insurance which pays for some of the injured victim’s medical bills.

Make no mistake: when a case is ultimately resolved at trial or by settlement, some of these entities that have made payments will angle to get their hands on the injured party’s money. Unfortunately, they are sometimes successful, even when the injured party has not been made whole.

Sorting out these rules can be complicated. In this article, we’ll provide some information on how health insurance subrogation works.

What Is “Subrogation” or “Reimbursement” in the Health Insurance Context?

Technically, “subrogation” and “reimbursement” aren’t exactly the same thing, but when it comes to their impact on personal injury settlements, the effect is the same. Therefore, for the purpose of our explanation, we’ll treat them interchangeably.

Most health insurance policies (remember, the health insurance policy is a contract between the health insurance company and the insured) contain a subrogation or reimbursement clause. The wording of this type of clause essentially provides that if the health insurer pays for medical treatment from an accident caused by a third party, the insured (injured party) must pay the health insurance company back out of any personal injury proceeds received from the negligent third-party.

In other words, the health insurance company expects a big chunk of your personal injury settlement.

Rationale and Limitation of Subrogation and Reimbursement

The rationale behind subrogation and reimbursement is that the negligent party should be responsible for the costs of the injured party’s treatment. The problem is that many personal injury victims suffer damages much greater than just medical bills. Therefore, medical reimbursement takes money away before the victim has been fully compensated (or “made whole”) for these other damages.

Thus, many states pass laws that limit the health insurance company’s reimbursement rights to require that an insured first be made whole.

Where Does Oregon Stand on Health Insurance Subrogation or Reimbursement?

Oregon still permits health insurance companies to be reimbursed under subrogation clauses, even if the injured party has not been fully compensated. However, help may be on the way. Senate Bill 421 has been introduced in the 2019 session of the Oregon legislature. If passed, it would require that a victim be made whole by the party who is at fault before a health insurance company could enforce reimbursement rights. Such a change would align Oregon’s policy with that of many other states.

It should also be noted that we are discussing only health insurance here. The rules differ for PIP coverage, an issue which we will address at another time.

Cautionary Note – Not All Health Insurance Is the Same

Senate Bill 421, if passed into law, would apply to private insurers. Some benefits, including those paid by self-insurers, are governed by the federal law ERISA. In many instances, ERISA provides for reimbursement. Because federal law supersedes state law, a portion of the injured party’s proceeds would thus still be subject to reimbursement.

Call with Questions

At Nelson MacNeil Rayfield, our experienced personal injury lawyers know the ins and outs of both federal and state reimbursement and subrogation laws. If you have been injured in an accident, you may have questions about automobile insurance policies, health insurance policies, PIP coverage, uninsured motorist coverage, reimbursement, subrogation, and lots of other complicated issues. We would be happy to answer these questions for you - just give us a call today.


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