Do You Have to Pay Back Your Health Insurance From a Personal Injury Settlement?
One of the hardest concepts for many personal injury clients to understand—and frankly, one that can be confusing even for attorneys—is what happens to the money their health insurance company paid for medical treatment after a personal injury settlement.
If your health insurer paid some or all of your medical bills after an accident, the insurer may claim a right to reimbursement from your personal injury settlement. This is commonly referred to as a health insurance lien or medical lien.
For personal injury victims in Fort Myers, Cape Coral, and throughout Southwest Florida, understanding how these liens work is an important part of understanding what you may actually take home after your case settles.
What Is a Health Insurance Lien in a Personal Injury Case?
A health insurance lien is essentially a claim by a health insurer seeking reimbursement for medical expenses it paid on behalf of an injured person.
For example, suppose you are injured in a car accident and require $50,000 in medical treatment. Your health insurance company may pay some or all of those medical expenses while your personal injury claim is pending.
If your attorney later negotiates a settlement with the at-fault party's insurance company, your health insurer may seek reimbursement for the medical expenses it paid.
That means your settlement is not necessarily yours to spend in its entirety.
Why Does the Health Insurer Want to Be Repaid?
The basic argument is that the health insurer should not ultimately have to pay medical expenses that another responsible party is legally obligated to cover.
Health insurers and their attorneys may therefore assert reimbursement or subrogation rights against a personal injury settlement.
The exact rights of an insurer can depend on the type of health plan involved, the applicable law, and the language of the insurance plan or agreement. This is why determining whether a lien is valid—and how much should actually be paid—is an important part of resolving a personal injury claim.
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Why Health Insurance Liens Can Be Frustrating for Accident Victims
From the perspective of an injured client, the situation can seem completely backwards.
You have been paying health insurance premiums. You are injured in an accident. Your health insurance pays your medical bills. Eventually, the personal injury case settles—and then the health insurance company wants part of the settlement.
It is understandable why clients ask:
"Didn't I pay for health insurance so my medical bills would be covered?"
That is a reasonable question.
Unfortunately, the answer is not always as simple as it seems.
The Personal Injury Settlement Is Not the Same as Your Health Insurance
A personal injury settlement is intended to compensate an injured person for losses resulting from an accident. Depending on the circumstances, those damages can include medical expenses, lost wages, pain and suffering, property damage, and other losses.
When a health insurer has already paid certain medical expenses, however, the insurer may have rights that affect how the settlement proceeds are distributed.
This is one reason you should not assume that the settlement amount negotiated with the opposing insurance company is the same amount you will ultimately receive.
A Personal Injury Attorney's Perspective on Health Insurance Liens
I was negotiating a Fort Myers/Cape Coral personal injury case when the insurance adjuster asked how my client was going to pay the rather large health insurance lien.
I laughed and told him that was my problem, not his.
I also told him that when I first started practicing personal injury law twenty-five years ago, health insurers did not seem to expect to be paid back from personal injury settlements in the same way they do today.
The adjuster could not believe it.
His response was essentially that the health insurer should be reimbursed for the money it paid toward my client's medical treatment. Otherwise, he argued, health insurance premiums could eventually become even more expensive.
That is certainly one way to look at it.
But What About Rising Health Insurance Premiums?
I told him that I had been a small business owner for approximately ten years and had paid health insurance premiums for my employees.
During those years, my health insurer never lowered our premiums because the insurer had successfully recovered money from personal injury settlements.
Instead, our premiums routinely increased—sometimes by 10% to 20%—regardless of whether the economy was doing well or poorly.
And this was happening while health insurers were also seeking reimbursement from personal injury settlements.
The adjuster did not have much of a comeback.
Perhaps the conversation would have been different if he had to pay for his own health insurance entirely out of his own pocket, suffer a serious accident, and then receive a letter from his health insurer saying:
"We want a portion of your settlement."
How Much of Your Settlement Can a Health Insurer Take?
There is no universal percentage that applies to every personal injury settlement.
The amount a health insurer may seek can depend on several factors, including:
- The amount the insurer actually paid for medical treatment
- The terms of the health insurance plan
- Whether the insurer has a valid reimbursement or subrogation right
- The applicable federal or state law
- Whether the medical expenses were related to the accident
- The total amount of the personal injury settlement
- Attorney's fees and litigation costs
- The circumstances surrounding the settlement
Can a Personal Injury Lawyer Negotiate a Health Insurance Lien?
In many cases, an attorney can negotiate with the health insurer or its recovery contractor to reduce the amount being claimed.
That negotiation can be extremely important.
A reduction in the lien can mean that more of the settlement ultimately goes to the injured client.
This is one reason that the headline settlement amount does not tell the entire story. A $100,000 settlement with substantial medical liens and expenses can have a very different net result from a $100,000 settlement with little or no reimbursement obligation.
Why You Should Address Medical Liens Before Your Case Settles
Health insurance liens should not be treated as an afterthought.
Before accepting a settlement, your personal injury attorney should determine what medical bills have been paid by health insurance and whether any insurer or other entity is asserting a claim against the settlement.
Don't Assume Your Settlement Belongs Entirely to You
If you receive a settlement check and later discover that a health insurer has a valid reimbursement claim, you could have a serious financial problem.
That is why your attorney should investigate outstanding liens and reimbursement claims as part of the settlement process.
The goal is to understand how much money you will actually receive after attorney's fees, case expenses, medical liens, and other obligations are resolved.
Get Help With Your Fort Myers or Cape Coral Personal Injury Claim
Health insurance liens are one of the more complicated—and frustrating—aspects of personal injury settlements.
You should not have to navigate them alone.
If you have been injured in a car accident, truck accident, slip and fall, or another type of accident in Fort Myers, Cape Coral, or Southwest Florida, an experienced personal injury attorney can help evaluate your claim, identify outstanding medical liens, and negotiate with insurers when appropriate.
Call Smith & Valentine Law if you have been injured in an accident so we can help you pursue the compensation and respect you deserve.