Do You Have to Pay Back Your Health Insurance After a Personal Injury Settlement?

When you’re injured in a car wreck, slip and fall, or any other accident caused by someone else’s negligence, getting medical treatment is one of the first things on your mind. But after you settle your case, a new question pops up: Will you have to pay your health insurance back for the medical treatment they covered?

The answer is maybe.

It all comes down to a federal law called ERISA, which stands for the Employee Retirement Income Security Act. ERISA affects many things related to employment, but what we’re concerned with today is how it impacts self-funded health insurance plans.

Let’s walk through what you need to know about ERISA, self-funded plans, and how to figure out if you’ll owe money back to your health insurance after settling your personal injury case.

What Is an ERISA Self-Funded Plan?

When a company provides health insurance to its employees, they have two options:

1. Buy health insurance from a provider: The company purchases a plan from a provider like Blue Cross Blue Shield. The insurance company pays for the medical treatments, and both the employer and employee contribute to the premium.

2. Self-fund the health insurance plan: In this case, the company uses its own money to cover the medical bills instead of buying insurance from a provider. Why would a company do this? It’s cheaper for them in many cases.

Here’s where ERISA comes in: If your health insurance is part of an ERISA self-funded plan, the company can demand reimbursement if you get a settlement or verdict in your personal injury case. That means if your health insurance paid for your medical treatment, they can make you pay them back from the money you recover in your settlement.

ERISA Preempts State Laws

You might be thinking, “But wait, Georgia has laws that protect me from having to pay anyone back if I don’t get fully compensated by my settlement.” That’s true. Georgia follows something called the “Made-Whole Doctrine.” This rule says that if you’re not made whole by your settlement—meaning it doesn’t cover all your damages—you don’t have to repay any liens on your recovery.

However, ERISA is a federal law, and it preempts (or overrides) state laws. If your health insurance is an ERISA self-funded plan, they can ignore the Made-Whole Doctrine and demand reimbursement, even if your settlement doesn’t fully cover all your costs.

How to Figure Out if Your Plan is Self-Funded

Now that we know the difference ERISA makes, how do you figure out if your health insurance is an ERISA self-funded plan? Here’s the process:

1. Request Your Health Insurance Plan Documents

Ask your health insurance company for the plan document and the summary plan description. These documents will tell you how your plan is funded and whether it’s self-funded.

Look for a section that talks about “Plan Funding” or something similar. If the document says the benefits are paid through a trust established by the plan sponsor (your employer), that’s a sign your plan is self-funded.

2. Check for the Made-Whole Doctrine

The next step is to see if the plan mentions anything about the Made-Whole Doctrine. You’ll typically find this information in a section labeled “Subrogation, Third-party Recovery, and Reimbursement.” If it doesn’t say you must pay the insurance back for medical payments, then you won’t have to—even if the plan is self-funded. But if the language is there, then you will have to pay your health insurance back if the plan is self-funded.

3. Review the Form 5500

Another helpful tool is the Form 5500, which your employer files with the Department of Labor. You can search for it online at efast.dol.gov. Once you find your employer’s Form 5500, check out box 9a on page 2. This box shows how the employee benefit plan is funded.

If the box for “General Assets of the Sponsor” is checked, that means your company is using its own money to pay for the health insurance plan, confirming that it’s self-funded.

4. Watch for Red Herrings

One thing to keep in mind: Sometimes, the Form 5500 will also have the “Insurance” box checked. This can be confusing, but it doesn’t always mean the plan isn’t self-funded. It could be referring to other types of insurance, like dental or vision, which are typically true insurance plans.

Another reason the “Insurance” box might be checked is if the company has stop-loss insurance. Stop-loss insurance kicks in when the company’s health plan has paid a certain amount in claims, acting as a safety net for the company. But even with stop-loss insurance, the plan could still be considered self-funded.

What to Do if Your Plan Is Self-Funded

If you discover that your health plan is self-funded and subject to ERISA, it’s likely that you’ll need to repay your health insurance for the medical expenses they covered once you settle your case. However, this doesn’t mean you’re out of options. There may still be room to negotiate the amount you owe.

The key is making sure you understand your plan and know what you’re dealing with before the settlement is finalized.

Final Thoughts

Dealing with health insurance claims and liens after a personal injury settlement can be complicated. But by knowing what to look for in your health insurance documents and Form 5500, you can figure out if you’ll owe money back and prepare accordingly.

If you have any questions about this process or need more guidance, feel free to reach out! I’m happy to help you navigate these tricky issues and make sure you’re not caught off guard after settling your personal injury case.