If your health insurance or your auto insurance (PIP) pays your medical bills due to an injury that was someone else’s fault, and then you get a settlement from that person (or their insurance company), then your insurance company (that pays your medical bills) has the legal right to get back the money they paid for your medical treatment. They can do this by “lien” or by “subrogation.” Their legal right to do this is in ORS 742.534, 742.536, and 742.538.
Subrogation is defined as circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim.
Our definition is when your health insurer (or auto insurer, or Medicare, or other insurer) steals your money.
In our opinion, this is an outrage. You have been paying insurance premiums so they would pay your medical bills, not so they would give you a loan. But it’s the law, and you need to be aware of this flawed system because it can significantly affect your financial situation.
Often, the insurance companies will work out the payment among themselves without involving you. But sometimes they will force you to pay the lien.
Your best action is to first try to get them to work it out themselves. Encourage your own insurance company to get reimbursement from the insurance company of the person who hurt you.
If that doesn’t work, the next best option is to negotiate the amount of the lien. Insurers will often reduce the amount you owe them if you negotiate well. For example, if they paid out $130,000 in medical bills, you may be able to talk them into accepting $80,000 or even less in full satisfaction of that money. In this negotiation, ORS 742.536 can be helpful, because it states that the insurance company should automatically reduce its lien by the percentage of your attorney fees and costs, which means that they normally reduce their lien by about 35%.
Even if you don’t have a lawyer, they may still be willing to make this reduction, though they would not be legally obligated to. But be aware that many health insurers believe that because they operate nationwide, they do not have to abide by Oregon law. So those insurers may not be willing to automatically reduce the lien. But they may still be open to a good argument about why they should reduce the amount they are collecting.
When you are negotiating, just remember, vinegar works, but honey often works better. A strong argument about fairness is often surprisingly effective in getting them to reduce their lien. You may even want to remind them about some of the fine sentiments they probably have on their websites about how their mission is to help people in need.
In Washington State and California, if you’re not “made whole” by your settlement, then you don’t have to pay off the insurer. There’s no subrogation until after an accident victim has been fully compensated. Oregon doesn’t have that rule. In Oregon, the health insurer can take your premiums every month for decades, then take all your money from a settlement. They have the right to leave you without a penny if that’s what their subrogation “rights” allow them to do.
It’s a bad situation when you receive a settlement that is barely adequate, only to find out that you have to give a bunch of it to another insurance company. But with good negotiation skills, you can at least minimize the damage.