Subrogation

Subrogation is the legal right of a health plan to recover medical expenses it paid from a third party who was legally responsible for causing the injury or illness. If your health plan pays $80,000 for treatment of injuries from a car accident caused by another driver, and you later receive a personal injury settlement from that driver's insurance, your health plan has a subrogation claim against your settlement — typically for the full amount it paid. The plan steps into your shoes to recover from the responsible party.

ERISA subrogation rights in self-funded plans are particularly strong — the Supreme Court ruled in Montanile v. Board of Trustees (2016) and Sereboff v. Mid Atlantic Medical Services (2006) that self-funded ERISA plans can enforce their subrogation rights against a specific fund of money (the settlement), and in many cases courts have allowed plans to recover even when it leaves the injured member with little or nothing from their settlement. This is in contrast to state law rules (like the "make whole" doctrine) that require the injured person to be fully compensated before the plan can recover — those state rules are preempted by ERISA for self-funded plans. Plan documents must contain specific subrogation language to be enforceable, and the plan must actively pursue subrogation recoveries to fulfill its fiduciary duty — failing to pursue recoveries is a fiduciary breach. For self-funded employers, contracting with a dedicated subrogation vendor is common practice; most TPAs offer subrogation services either in-house or through a partner, and a well-run subrogation program returns 1.5 to 3 percent of total claims spend to the plan annually.

The takeaway: if you're a self-funded employer, review your plan document for specific subrogation language and confirm your TPA has an active subrogation recovery program. Unpursued subrogation rights are a fiduciary issue and a missed revenue stream. If you're an employee with a personal injury claim, read your plan documents carefully — your health plan may have rights against your settlement proceeds.