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Why Do I Have to Pay Back My Insurance Company for Medical Bills?

If your insurance company has contacted you or suggested that it will need to be reimbursed when your accident claim settles, you are getting your first taste of a concept known as subrogation. Of all the legal doctrines and theories that we have to explain, none is more counterintuitive or confusing that subrogation, also known as your insurers right of reimbursement.

Whenever you get injured in a car accident, you will have medical bills, sometimes very large bills depending on your treatment. Most of the time these bills are paid by your insurance company, either under your PIP coverage through your auto policy or through your own private health insurer. All insurance policies are written in a way that contractually obligates you to reimburse your insurance company if it pays for treatment that you pursue for accident-related injuries. This does not seem right, does it? You paid your premiums and now that you use the insurance the insurance companies has its hand out? I get these questions almost daily from clients.

While we always suggest that you contact an attorney and pursue your rights to compensation for your injuries, let’s assume for argument’s sake that you decide not to do anything. If you never pursue a claim, your insurance company will pursue it for you solely to get reimbursed for the costs it paid toward your medical treatment. For example – if you get into a rear-end accident and hurt your neck, you likely went to the emergency room, then followed up with your primary care doctor, and then went to physical therapy. If your PIP coverage pays your bills through your car insurance with GEICO or Farmers or State Farm, your own insurance company will turn around and collect what it paid from the at-fault driver’s insurance company, be it Allstate, USAA or PEMCO.

When you hire a lawyer, however, your own insurance company will require your lawyer to collect this reimbursement on behalf of the insurance company. Washington law, however, requires that your insurance company reduce its reimbursement by the amount of your attorney fees and costs – meaning that you usually end up only having to pay about 60-65% of the total amount back. Having a lawyer also means that we can help negotiate this amount with the insurance company.

If your private health insurer or government assisted insurer (Medicaid, Medicare, Community Health) pays the bills, these insurers also require a reimbursement of amounts paid toward your treatment. If you thought that this right of reimbursement sounded ridiculous, the US Supreme Court made it even worse in a decision called US Airways v. McCutchen. In that decision, the court decided that certain self-insured employers (usually big employers like Microsoft who self-insure their health plans) must be reimbursed dollar-for-dollar for everything paid toward your accident-related treatment without any right to reduce the amount for your attorney fees or for the sake of basic fairness (equity as we call it in the law). This case has had terrible effects for injured people. If you happen to work for Microsoft, Microsoft ends up being paid back 100% of whatever it pays toward your accident-related injuries.

If you are having trouble navigating the world of subrogation and insurance claims, call us. We can help reduce the stress in your life by dealing with the insurance companies for you while you concentrate on your health and family.

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