Texas Passes New Law on Subrogation Claims

Texas Passes New Law on Subrogation Claims

Many victims of personal injury are surprised to learn that, after achieving a settlement with the person who caused their injury, they must reimburse their health insurance for the medical expenses the health insurance company has paid out. This is because, somewhere in the contract between you and your health insurance company, there is a clause that says they have a right of “subrogation” - in other words, to get back what they have paid out for your medical bills. For example, if you are involved in a car accident with a drunk driver and use your health insurance when you go to a doctor, your health insurance company will have a “subrogation” right to be reimbursed for the cost of that doctor’s visit.

Until the last session of the Texas Legislature, it was unclear exactly what the health insurance company was entitled to if there was not enough money to go around. The typical response was that the injured person must be “made whole” before health insurance was entitled to any reimbursement, but no one knew exactly what that meant.

Then, during the last session of the Texas Legislature, House Bill 1869 was passed. H.B. 1869 changes the old rules with regard to private health insurance, and limits the amount of recovery health insurance may receive following a personal injury settlement. Specifically, private health insurance is limited to the lesser of: 1) one-half of the gross recovery less attorney’s fees and costs, or 2) the total cost of benefits paid, provided, or assumed by the health plan less attorneys fees and costs. It also restricts any health insurance subrogation in an injured person’s claim against their own accident insurance, unless neither the injured person nor their family paid the premiums for the accident insurance coverage.

The new law goes into effect January 1st, 2014.