There is no question that subrogation and reimbursement cases can sometimes create tension between employees and employers, but the plan sponsor likely has a fiduciary duty to engage in activities that will ensure prudent management of plan assets, and ultimately, the financial viability of the plan. (Photo: Shutterstock)
Employers far and wide struggle with a very important decision; when offering a health benefit plan to its employees, should the plan engage in subrogation and reimbursement activities? Why would a plan/employer want to do, or not do, such a thing? Don't subrogation and reimbursement negatively impact the very plan participants the plan is designed to benefit? Perhaps of even more concern, will employees of the company view this as the employer taking money from the employees? Or is there some bigger force at play that would encourage, perhaps even require, that a benefit plan engage in subrogation and reimbursement?
Wait… what the heck is subrogation and reimbursement, anyway?
Subrogation
In a nutshell, subrogation and reimbursement are methods utilized by benefit plans to recover money against parties who may have caused, or in some way be responsible for, an injury or loss that resulted in payment by the benefit plan on behalf of a plan beneficiary. Subrogation and reimbursement, while inextricably related, operate in different, very important ways.
To illustrate, let's first consider a subrogation hypothetical. Subrogation is the right of a benefit plan to “step into the shoes” of a plan participant and seek to enforce any underlying right that participant may have had against some other party. Imagine that John Owner is driving a vehicle and because he was awestruck by lighting in the sky, he loses control and runs into an embankment. Assuming these are the only facts that lead to his accident, one can easily conclude that John's own lack of attention lead to the car accident. John goes to the hospital because he is experiencing neck pain, provides his health insurance card, and incurs $10,000 in medical expenses that are thereafter paid by his health plan.
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