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Insurance Carrier's Right to Reimbursement

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I was treated at Kaiser after a car accident. Will I have to pay Kaiser back after I settle with the other driver’s insurance company? If yes, will the other driver’s carrier handle that?

- HB, California


Every health insurance contract has a "subrogation" (i.e., reimbursement) clause that says: if an accident victim's health insurance carrier pays for accident-related medical treatment, and the accident victim receives a settlement for that accident, then the accident victim must reimburse the health insurance carrier. It is the obligation of the accident victim, not the other driver's insurance company, to reimburse the health insurance carrier.

Most health insurance carriers have a department whose sole job is to review medical bills and look for diagnostic codes that suggest the bill arose out of an accident, signaling to the health insurance carrier that they may be able to get their money back. Typical diagnostic codes they are looking for: whiplash, neck strain and back strain. If the health insurance carrier thinks the medical treatment could be accident-related, the carrier will send the member a questionnaire. The questionnaire will ask the member if the treatment was related to an accident, if the member is pursuing an injury claim, and if the member has an attorney. If the carrier receives an affirmative response, they will send you letter after letter reminding you of your obligation to reimburse them if you collect money from the at-fault party.

If you have an attorney, make sure to give the letter from your health insurance carrier to your attorney. When your case settles, your attorney will contact your insurance company and will negotiate a reduction of their reimbursement claim. Under California law, your health insurance carrier must reduce their reimbursement claim by a pro rata share of the attorney's fees and costs. For example, if your health insurance carrier paid for $3,000 in accident-related medical treatment, and attorney's fees are 33 1/3%, you would only have to reimburse the carrier approximately $2,000. If your attorney's fees are 40%, then the carrier has to reduce their reimbursement claim by 40%. Often, your attorney can negotiate an even larger reduction, and sometimes even get the health insurance carrier to waive their reimbursement claim entirely.

Some lawyers are more aggressive than others in negotiating reductions of health insurance carriers' subrogation claims. At McGee, Lerer & Associates, we want as much of the settlement as possible to go into our client's pocket, as opposed to being paid to the health insurance carrier. We are very aggressive in negotiating down health insurance reimbursement claims, and attempting to get the reimbursement claims waived.