What is subrogation in health insurance?

Friday, February 28, 2025

What is subrogation in health insurance?

Written by Malman Law, reviewed by Steve J. Malman.

When dealing with a personal injury case, you might come across the term “what is subrogation in health insurance.” Subrogation is a legal doctrine that allows a health insurer to recover costs from a liable party for a member’s injury or illness-related medical expenses. If you’ve been hurt due to someone else’s negligence, your insurer may pay for your medical bills upfront but later seek reimbursement from the at-fault party’s insurance.

At Malman Law, we help Chicago residents navigate these complexities, ensuring their rights and settlements are protected.

Looking For A Personal Injury Lawyer in Rockford?

Free consultation.

Contact us now Call us now

Contact us now Call us now

What is subrogation in health insurance?

Subrogation guarantees that the responsible party or their insurer covers the expenses resulting from the accident. It is one of the fundamental principles of insurance law in which an injured party cannot recover twice, but the financial responsibility is shifted upon the proper person. If you file a claim for medical expenses, then that is the case when your health insurer pays these bills on an interim basis. However, they do not just absorb that cost but have the right to seek it from the liable party. That means, if your injuries are legally another party’s fault, your insurer will try to recover the money lost to lessen their losses.

For example, if you were in a car accident and another person was at fault, your health insurance would cover your treatment at the hospital. However, through subrogation, they can pursue the at-fault driver’s auto insurance for reimbursement. 

In Illinois, understanding subrogation is crucial because it directly impacts your financial recovery after an accident. Many people don’t realize their health insurer might claim a portion of their settlement. Understanding how subrogation works can help you prepare for potential deductions from your compensation and avoid unexpected financial setbacks, which is why working with an experienced personal injury attorney is essential.

How does subrogation in health insurance work?

When your health insurance carrier invokes its right to subrogation, here is how the process typically goes:

Your insurer pays for your medical expenses. 

If an accident occurs, for example, your health insurance carrier will pay for treatments, surgeries, or rehabilitation due to your injuries.

A Subrogation claim is filed.

In which your insurance investigates the accident to ascertain whether another party is at fault for the incident and if they can recover their cost. This may include a review of the police report of the incident, eyewitness statements, and medical reports necessary for establishing fault. They will also involve lawyers in preparing the best case for recoupment.

Your insurer seeks reimbursement

If another party is found liable, your insurance company will attempt to recover the amount they paid on your behalf. They might negotiate with the responsible party’s insurer or even litigate against them in court to get repayment.

Settlement distribution

If the subrogation claim is successful, the recovered amount may be deducted from your final personal injury settlement. However, depending on the specifics of your case, your lawyer may be able to negotiate a reduction in the insurer’s subrogation claim, allowing you to retain more of your compensation. Legal representation can be crucial in ensuring you get the best possible financial outcome.

Malman Law’s founder Attorney Steven Malman has over 30 years of experience handling personal injury, nursing home, medical malpractice, premises liability, construction and workers’ compensation cases.

STEVE J. MALMAN

Founding Attorney

Why is it important?

It is important to understand subrogation as it will affect your recovery in a personal injury settlement. It is important to consult with an experienced personal injury attorney who can protect your rights. Most people think that once they get paid by the at-fault party’s insurance, they can have all that money for recovery. However, if your health insurer has paid for your medical expenses, they may claim a portion of that settlement to recoup their costs.

Illinois follows the “Made Whole Doctrine,” meaning your insurer can only recover costs if you have been fully compensated for your losses. However, insurance companies may still attempt to claim a significant portion of your settlement.

For example, some insurers insert subrogation clauses in policies that limit a victim’s ability to claim full damages. This will be particularly troubling in cases where future medical treatments, wages lost, and pain and suffering are not properly considered under the initial settlement. In the absence of counsel, many victims may have lost valuable monetary support. In addition, the policies issued by the insurers are in language so complex that policyholders cannot understand their rights and obligations.

How does it affect me?

If subrogation by your insurance company is successful, the recoveries can be applied to your deductible. This is a plus if you have already gone out-of-pocket for medical treatments. However, subrogation can also reduce the final amount you take home from your personal injury settlement.

For example:

• If your settlement is $50,000 but your health insurance covered $20,000 in medical bills, they may claim that portion back.
• You could receive far less compensation than you expected without proper legal guidance.

Illinois law also allows for equitable distribution, meaning that subrogation claims should not unfairly diminish a plaintiff’s financial recovery. However, without a knowledgeable attorney, you might unknowingly agree to reimbursement with less than you need for ongoing medical expenses and other damages.

The Federal Employees’ Compensation Act (FECA) subrogation process is set out in 5 U.S.C. 8131 and 8132. Under these statutes, the claimant must pursue recovery of damages against a third party by filing a suit or contacting an insurance carrier. This requirement also extends to beneficiaries in death cases. However, claimants may be excused from this requirement in a few limited circumstances. 

In cases where long medical treatment or rehabilitation ensues, long-term financial planning may also be affected by subrogation. Some victims of personal injury cases sometimes find themselves caught between paying their insurer and continuing with additional treatment that their physician may have ordered, which places them in severe financial burdens.

Protect Your Settlement—Work With Malman Law

Subrogation may affect your injury settlement, and the right legal support is necessary. Malman Law assists its Chicago clients in handling subrogation claims and safeguarding their compensation.

Our attorneys negotiate with insurers, challenge unfair claims, and fight aggressive insurance tactics to maximize your recovery.

Review your policy for subrogation clauses. Need help? Contact Malman Law at 1 888 625 6265 for a free consultation.