SUBROGATION:
What is it?
How can it effect you?
For additional information: link to Radosevich, Mozinski, Cashman & Olson LLP
Frequently, when a person is injured by the negligence of another, the injured person's medical bills will initially be paid by someone other than the negligent person's insurance. This could be a group health insurance plan or by the injured person's own medical payments insurance (a type of insurance coverage common in automobile, homeowner's and renter's policies). It could also occur if the injured person is eligible for Medicare or Medical Assistance.
When the injured person's own insurance pays medical bills, the insurer will have a 'right of subrogation'. Subrogation means that, for example, the group health plan has a right to be repaid for medical bills it paid which legally should have been paid by the negligent party's insurance company. Subrogation can arise either by contract language contained within the insurance policy, or by law.
Having a group health plan initially pay medical bills is advantageous to the injured person for several reasons. First, the doctor or hospital providing treatment has a right to be paid promptly, which will generally not be the case with the negligent party's insurance. Second, the group health plan will likely have negotiated provider discounts with the doctor or hospital. This means that, for example, if the doctor or hospital bills $10,000 for services, the group health plan may only pay $9,000 and the injured person is not responsible for the difference. However, under Wisconsin law, the injured person is allowed to collect the full, reasonable value of medical bills from the negligent party's insurer. Thus, the injured person can collect the full $10,000 while only being subject to a $9,000 subrogation claim.
A third reason it is helpful to have the group health plan pay initially is Wisconsin's 'made whole' doctrine. That doctrine states that, until the injured person is made whole, the group health or medical payments plan is not entitled to be reimbursed. Why? Wisconsin courts have decided that, since the subrogated insurer has collected an insurance premium in exchange for its initial payment of medical bills, the subrogation claim must take a back seat to the injured person's claim until the injured person has been 'made whole'.
Every case is individual and, to some extent, unique. Also, federal law known as the Employee Retirement Income Security Act (ERISA) can have additional effects on an injured person's rights, as can legal requirements for repaying governmental plans such as Medicare.
For additional information: link to Radosevich, Mozinski, Cashman & Olson LLP