A) THE WAY IT WAS:
After 2 years of medical care, paid for largely from John's health insurance, finally the insurance company for the at-fault driver was prepared to talk settlement. His medical bills, paid by his health insurance, were about $25,000. The total insurance coverage for the at-fault driver was $100,000. A search of private assets of the driver turns up nothing. After much cajoling, the auto insurance company for the at-fault finally agrees to surrender their coverage limits. John had no applicable under-insured motorist coverage. John still has a need for future care and doctors have even suggested that a surgery could be necessary. John worries that at some point his very understanding boss is going to lose patience with this whole ordeal.
John goes to his health insurance to inquire how much he is expected to payback from the settlement. To his surprise, his health insurance wants all $25,000 back and they are NOT negotiable. John then talks to a supervisor at the health insurance hoping to get a compassionate soul to understand that he has a great deal of need for the settlement proceeds and is hoping that health insurance will give him a break. Unfortunately, at the close of that conversation, health insurance agrees to take back $24,000, and negotiations are over.
Up until August 11, 2010, any settlement or trial of an injury case generally thereafter meant a power struggle with health insurance issues regarding repayment of accident related medical expenses. First time car accident injury victims are often surprised to learn that their health insurance expects to be paid back for any injury related expense that they get a settlement for.
Though your health insurance will generally pay for injury related medical expenses, IF you collect a recovery for these injuries, then by the language of your health insurance policy, you MUST reimburse your health insurance company. The insurance word for this process of reimbursement is called subrogation. Usually, the insurance policy language says something like "upon a third party recovery the Company is entitled to return of all proceeds expended regarding said incident for which third party recovery was received from dollar one of recovery therein."
Before August 11, 2010, attorneys representing the rights of victims tried desperately and often in vain to get insurance companies to consider the particular financial circumstances of their clients. We would argue settlement had not made our client "whole". In fact, someone even coined the phrase "make whole doctrine." Simply stated, we argued that until the injured person was made whole, the health insurance should not be paid back. Candidly, while some Colorado cases touched on the issue of "Make Whole" no court had applied it to the health insurance arena and our efforts, though valiant, generally were met with marginal success.
B) CHANGE FOR THE BETTER:
Colorado's last legislative session passed very meaningful legislation supporting the notion of "Make Whole." In short, the change in law calls for a procedure whereby the health insurance receives notice of settlement followed by a 60 day time period for the insurance company to react. If they fail to react, then after the 60 day window from notice any obligation to payback anything to health insurance becomes legally relieved.
Alternatively, provided the health insurance does timely respond, its only available response is to, in writing, request arbitration. Arbitration will solely focus on whether the victim has been fully compensated (made whole) by the settlement such that the health insurance might seek some or all of their claimed right of subrogation.
This compassionate and rational process of resolving subrogation claims, with a clear mandate to subordinate health insurance claims behind fully compensating injury victims, is a "game changer" for the entire industry and will make for injury victims receiving more appropriate closure to their cases.
C) EXCEPTIONS TO CHECKMATE:
These laws are Colorado specific legislation and govern subrogation obligations for settlements or judgments occurring after August 11, 2010, for non-Federally qualified health insurance. Health plans qualified under ERISA, for example, do not have to comply with the new Colorado law. It is also, inapplicable to Medicare, Medicaid, or worker's compensation liens. It is also inapplicable to medical finance companies.
There is nothing honorable about flying solo on this endeavor. This new law makes it vitally important to consult with a well qualified attorney. If any step is short-cutted or missed, it will invariably comeback to bite you.
At Anderson, Hemmat & McQuinn, we understand that to our clients it is not what you settle for that matters, it is what you actually get to keep at the end of the day that matters most. With this in mind, we are vigilant in making sure that we completely understand and apply changes in Colorado law such as the "make whole doctrine". Please call us today, so that we can discuss with you how these recent changes in the law may help you.