The requirement to have an insurance claim subrogated is rare but can happen in the case of an accident involving two or more people where one of the individuals involved is at fault. The definition of subrogate is to substitute one for another. The legal definition of subrogate is to substitute or replace one individual with another individual in respect to a claim for loss or damage. Subrogation of a health insurance claim only happens when a third party is responsible for the loss incurred by the insured member.
In the case of a medical insurance claim being subrogated, the insured member (Person A) suffered a loss as the result of another person (Person B), and Person A's insurance company pays the claims according to the policy. Person A's insurance company will subrogate the claim by assuming the rights of Person A to collect the loss from Person B's insurance carrier.
An insurance carrier will typically subrogate a claim when loss is incurred. If the insured member pays medical services in order to meet deductible, the insurance carrier will not subrogate these claims because no loss has been incurred by the insurance carrier. However, once claims exceed deductible and the insurance carrier begins to incur loss, the claims will be subject to subrogation.
For example, a dependent on a family health insurance policy is riding her bicycle and is hit by a car driven by an insured motorist. The child is insured under a $1,500 deductible policy with 80%/20% coinsurance. The child suffers a strained knee, a minor concussion, scrapes and bruises. The child is examined by an orthopedic specialist who orders an MRI to confirm no permanent damage to the knee. For precautionary reasons, a CAT scan is conducted to confirm that the concussion was minor. All services provided total $3,000. The first $1,500 will be applied to deductible, and the carrier will not subrogate these claims. Each dollar above $1,500 will be subject to coinsurance with the health insurance carrier paying 80% or $1,200 and the policy holder paying $300. The insurance company will subrogate $1,200 in order to recover the claims loss. The insured member will need to contact the driver's automobile insurance carrier to recover the loss of $1,500 paid as deductible and the $300 coinsurance paid.
Any loss incurred by the insured member up to the deductible will be the responsibility of the insured, and the carrier will have no participation in recovery. Also, if deductible has been exceeded and claims are subject to coinsurance, the insurance carrier's subrogation of the claim will only apply to its portion of the coinsurance. Again, the amount paid by the insured member according to the coinsurance rate will need to be collected by the individual insured member.
The difference between the listed rate for a medical service or procedure and the PPO discounted rate is not subject to subrogation and neither the insured member nor the carrier can collect the difference because the amount was not an actual loss.
When a health insurance claim involving a third party is filed and may be subject to subrogation in the future, the insurance company should be made aware of the circumstance immediately. Most health insurance carriers maintain a subrogation department for the sole purpose of managing the collection of claims from a third party's insurance carrier.
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