Today, the Wall Street Journal has a great front page article about the effect of subrogation on accident victims. The company grabbing the money from the accident settlement happens to be Wal-Mart, but they are not the only ones who do this, every health carrier has some sort of subrogation clause in their policy so you won't come out ahead after an accident. Wal-Mart has won in court and I would be surprised if they lost if the Supreme Court took the case.
"Employers are trying to make sure these plans run as efficiently as possible," says Jay Kirschbaum, a senior vice president at global insurance broker Willis Group Holdings. "They also have a fiduciary duty to the plan and the entire group of employees that are covered by it."
Subrogation is a sensible idea. It merely says that any insurance carrier is able to step into the position of the injured if the insurer has initially paid for the costs of the injury. The problem arises when the liability coverage of the person causing the harm is not enough to pay for the harm done to the victim and pay back the health carrier as in the case covered by the Wall Street Journal:
It also sent Mr. Shank several notices that he was to inform Wal-Mart's health plan before he settled any suit. In 2002, the Shanks did sue and won a settlement from G.E.M. Transportation Inc., owner of the truck. The firm had only $1 million in liability coverage, though. For his own losses, Mr. Shank received $200,000, of which $119,000 remained after legal expenses. He says he spent most of it toward a one-story house fitted with ramps and wider doors, which is more accessible than the family's previous three-level home.
Mrs. Shank's own settlement was $700,000. After legal expenses and attorney fees, the remaining $417,477 was placed in a court-created special trust designed specifically for Mrs. Shank's future care. The Shanks' lawyer, Maurice Graham, wrote the Wal-Mart health plan informing them. Mrs. Shank had received no funds directly, he said, and therefore had nothing to pay Wal-Mart back.
The lifetime costs of this accident will be substantially in excess of the settlement amount.
And the world was piling on:
The ruling came six days before the Shanks' 18-year-old son, Jeremy, was killed in September last year in Iraq shortly after he arrived in the U.S. Army's 25th Infantry Division.
Yes, the plural of anecdote is not data, but this is an example of the kinds of injustice that are perfectly legal in this country. Single-payer universal health care coverage would not spend billions each year trying to determine responsibility for health care coverage and fewer sick people would fall through the cracks. By the way, really aggressive use of subrogation might save a plan $15 per year per member.