New York’s General Obligations Law prohibits subrogation claim by health insurers. This means your private health insurance company cannot try to enforce a subrogation claim against your settlement money.

That’s the good news for you, but there are exceptions to every rule. Unfortunately, self-funded health plans are exempt from state law and that includes New York’s prohibition on subrogation claims. In contrast, fully insured plans are subject to state and federal law, including New York’s bar on subrogation claims. The crucial determination is whether your group health plan is “self-funded” or insured.

What is a “self-funded” health plan?

First, the basics about a “self-funded” health plan. Self-funded health care is a self-insurance agreement whereby your employer provides health or disability benefits to employees with its own funds. In a self-funded plan, your employer assumes the financial risk for providing health care benefits to the plan participants. Though the employer usually contracts with a third party administrator to help with the administration of the plan, the employer is responsible for claims under the plan of a self-funded plan.

This is different from fully insured plans where your employer contracts with an insurance company to cover the employees and dependents.

How can you tell if you have a self-funded health plan or an insured health plan?

The plan participant (“you”) are entitled to get a Summary Plan Description from your employer. Summary Plan Descriptions should have a section that refers to the type of plan administration. That section will usually state “contract administration” in the case of a self-funded plan and “insurance” in the case of a fully insured plan.

The plan participant (“you”) are also entitled to request the most recent Form 5500 under federal law (29 U.S.C. section 1024(b)(4)). This tax disclosure Form 5500 will have a section, Box 9, that indicates the plan funding arrangement. If Form 5500 states, “general assets of the employer” that suggests a self-funded plan. If Box 9 on Form 5500 states “insurance” that suggests a fully insured plan.

A little secret from the trenches about insurance subrogation claims

Regardless of whether you have a self-funded health plan or a fully insured plan, it’s a safe bet that your insurer will make a subrogation claim. The task of enforcing an insurance subrogation claim usually falls on a third party administrator, such as The Rawlins Company in Louisville, Kentucky. But here’s a little secret you need to know: companies like the Rawlins Company know nothing about New York’s anti-subrogation and they could care less whether New York law permits the enforcement of the subrogation claim.

Companies like the Rawlins Company will send you harassing letters seeking to enforce their subrogation claim and hope you don’t know about New York’s anti-subrogation law. If you didn’t before, you do know. But before you start the battle against the insurance subrogation claim, you should find out first whether your group health plan is self-funded or insured. This makes all of the difference in the world.

How you can get more information about subrogation health insurance claims?

If you have questions about subrogation claims or liens from your health insurance, I welcome your phone call me. You are always welcome to request a FREE copy of my book, The Seven Deadly Mistakes of Malpractice Victims, by sending us an email.