Subrogation 101: What It Means for Your Health Insurance and Medical Bills

By Your Health Magazine

Your Health Magazine

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Subrogation 101: What It Means for Your Health Insurance and Medical Bills

When it comes to your health insurance, there is a lot to wrap your head around.

Premiums. Deductibles. Co-pays. Authorizations. Just those “basic” concepts can give a policyholder a headache. 

However, what most plan members don’t realize is that their insurance policy is a contract with their provider. When you experience a covered injury, your insurer is contractually bound to make you whole.

But what happens when your covered injury occurs due to someone else’s negligence?

That’s where subrogation comes in.

Keep reading as we explore subrogation from all angles and how it impacts your health insurance and medical bills. 

What Is Subrogation?

Subrogation sounds like a scary insurance term. 

You know, the kind that appears dozens of times in your policy’s fine print, and you hope beyond hope that you never have to find out what it means.

Although it is an insurance term, the answer to “how does subrogation work?” is not nearly as complicated as it sounds. 

Simply put, it is the legal right and process by which an insurer recovers claim disbursements from a liable third party. 

Here’s a simple hypothetical of how subrogation may come into play for your health insurance policy:

• A driver runs a red light and t-bones your car. You are ambulanced to the hospital and treated for a concussion, multiple broken ribs, and other minor injuries. 
• After paying your deductible, your health insurance covers the remainder of your medical bills for the ambulance ride, hospital stay, and subsequent treatment.
• Your insurer then opens up a subrogation claim against the at-fault driver. Typically, their insurance carrier will be responsible for reimbursing your insurer. If they are uninsured or underinsured, the driver may be personally liable for repaying the cost of your medical bills.

Again, this is a rather straightforward hypothetical of how subrogation works. It can often be quite layered. For example, if your own auto insurance has medical payments benefits that aren’t adequately paid out, your health insurance may subrogate to recover. Worker’s comp vs. personal health insurance can also add an additional layer of fault identification for injuries that occur during work functions. 

Subrogation’s Role in Insurance 

The cost of insurance just keeps going up. Each year, policyholders are greeted with the unwelcome news that their premiums and deductibles are rising, all while seeing a reduction in their benefits.

However, it’s not just plan members feeling the crunch. The number of mega claims of over $3 million has skyrocketed in recent years, leaving insurers at a loss for how to remain solvent without putting their members under even more financial stress.

Hope lies with subrogation. 

It is estimated that some 15% of all insurance claims are closed without properly identifying subrogation opportunities. This represents a whopping $15 billion of leakage within the insurance industry each year. By efficiently identifying and pursuing subrogation cases, insurers can improve their bottom line simply by reclaiming what is rightfully theirs. 

Innovations in Subrogation

Inefficiency has been the bane of subrogation throughout the decades.

It has commonly been a back-office task for overworked insurance companies. The process is traditionally slow, involving a series of questionnaires mailed to injured members and a bunch of finger pointing with other insurance companies. This results in missed deadlines, poor response rates, and gross inaccuracy when it comes to carrying out subrogation claims.

Modern subrogation services take a much more data-driven approach. By using the latest technology and machine learning to predict and properly identify subrogation opportunities, the best subrogation companies take the administrative burden off of busy insurers to help guarantee that no subrogation cases miss deadlines or fly under the radar. 

How Does Subrogation Benefit Consumers?

It is clear that subrogation has numerous benefits for your insurer.

But how does all of this insurance legalese benefit you as a plan member?

Well, the cost recovery that your insurer receives will be passed on to you as a policyholder. This means that you will not see a premium hike to help your insurer cover the costs of paying for your injuries. If you paid a deductible before your health benefits kicked in, successful subrogation may also help you get reimbursed for these funds. Furthermore, in cases of gross negligence by the third party, subrogation may give you a major leg up in civil proceedings to help make you whole above and beyond what is paid back from the insurance claim. 

More than the dollars and cents, however, is the peace of mind that subrogation provides. If your insurer is backed by a strong subrogation company, they can promptly pay out benefits and rest assured that liability will be successfully identified post-payment. After all, no one wants to have to delay medical care while waiting for insurance providers to establish liability before treatment is rendered. 

Subrogation: The Underrated Weapon for Controlling Insurance Costs

Subrogation: your insurer’s right to receive reimbursement from a liable third party. Via this underutilized cost recovery process, your provider can help to keep costs under control in a time when insurance hikes are putting many Americans’ budgets to the test. For more of the latest trends in wellness and personal healthcare, explore the content at Your Health Magazine for the leading insights in the industry!

Author Bio:

Ben Anderson is a writer with a deep curiosity for how people, systems, and technology intersect. Originally from the Pacific Northwest, he grew up with a love of storytelling and a fascination for how things work, that interest naturally evolved into a career of writing. Ben holds a background in communications and has spent over a decade crafting insightful articles and thought leadership pieces for both industry professionals and everyday readers. Outside of work, he’s a devoted husband and father of two, usually spending his free time with his family, traveling, or catching up with friends.