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WHAT IS SUBROGATION?

Subrogation is the recovery of medical costs originally paid by a benefits plan from a third party. It makes up a significant piece of the health claims picture as it allows all liability associated with the payment of medical costs to be directed to the appropriate party, thus maintaining premiums of health plans.

Health plans and insurers pay medical expenses on claims caused by defective or high-risk products unnecessarily. As subrogation tends to be underused - it usually pursues claims in the areas of automobile insurance, workers compensation' and property insurance, or is used by health insurers and plans on third party claims that are easily identifiable.

Unfortunately, as a general rule health payers and plans lack the necessary tools to identify and pursue recovery opportunities in complex and costly claims, which involve harm caused by high-risk drugs and medical devices as well as toxic chemicals. Dependent on the size and structure of a particular plan, the overall effect of these costs can be significant when it comes to the claims and underwriting profile of the plan. Ultimately, the design of a plan will be directly affected by the adverse impact of its utilization, the benefits available to participants, and the value of the plan in the long run.

Healthcare Subrogation Self-Insured Plans

HEALTHCARE SUBROGATION
SELF-INSURED PLANS

Employers and unions provide health benefit plans that frequently feature a right of subrogation, which allows the plan to recover medical benefits given to an employee or participant if the same has suffered a personal injury recovery from a third-party. Plans are also frequently known to provide that if the employee’s or participant’s injuries were the fault of a third party, however, no medical benefits will be paid at all if and until the employee or participant agrees in writing to reimburse the plan in the event of a recovery.

These subrogation provisions, and the health benefit plans rights provided by employers and unions, are based on the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. (“ERISA”). ERISA is a comprehensive federal statute that regulates all employee benefits plans, including such sponsored by employers and unions for medical benefits to employees. 29 U.S.C. § 1002(1) and (3). With certain exceptions, ERISA secures state laws on employee benefits plans.

Healthcare Subrogation Fully-Insured Plans

HEALTHCARE SUBROGATION
FULLY-INSURED PLANS

Plans funded by insurance companies are sometimes subject to state laws that regulate the industry. If a plan is funded through employer or union-purchased insurance, it is treated as any other group health insurer in determining whether a subrogation claim is enforceable. These plans are frequently subjected to laws which may limit the subrogation right of the insurer’s as well as limit or eliminate their recovery opportunity.

State laws that regulate insurance and limit the rights to a fully-insured plan’s recovery include the made-whole doctrine, the common fund doctrine, and anti-subrogation statutes. Although non-ERISA plans differ from the ERISA preemption and may be subject to state laws, significant recovery opportunities are still available to an insurer or fully-insured payer who offers health care benefits to plans and participants across several jurisdictions.

Mass Tort for Product Failure

MASS TORT FOR
PRODUCT FAILURE

Employers and unions provide health benefit plans that frequently feature a right of subrogation, which allows the plan to recover medical benefits given to an employee or participant if the same has suffered a personal injury recovery from a third-party. Plans are also frequently known to provide that if the employee’s or participant’s injuries were the fault of a third party, however, no medical benefits will be paid at all if and until the employee or participant agrees in writing to reimburse the plan in the event of a recovery.

These subrogation provisions, and the health benefit plans rights provided by employers and unions, are based on the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. (“ERISA”). ERISA is a comprehensive federal statute that regulates all employee benefits plans, including such sponsored by employers and unions for medical benefits to employees. 29 U.S.C. § 1002(1) and (3). With certain exceptions, ERISA secures state laws on employee benefits plans.