Health Plan Subrogation 101: What It Is, Why It Matters, and How to Get It Right

The term “subrogation” may be unfamiliar, but the fundamental principle is straightforward: the party responsible for an injury or health issue should be the one paying the medical bills. It’s also an issue of simple fairness: Whoever is responsible for an injury or health issue should also be responsible for paying the bill.

Figuring out who is responsible and actually securing reimbursement, however, is far more complex. That complexity is why many HR leaders, TPA administrators, and even plan executives don’t fully understand subrogation. The result? Each year, billions of dollars in recoverable costs are left unclaimed—dollars that could have gone back into protecting plan assets and reducing overall costs.

Whatever your role, this guide will help you understand everything from the basics to best practices, including:

• What Subrogation Is
• Why Subrogation Matters
• How to Measure Recovery Success

What Is Health Plan Subrogation?

If a health plan pays for a plan member’s medical care after an accident when additional insurance policies are in play, such as auto or workers’ compensation coverage, the health plan could have the right to be reimbursed.

In simple terms, health plan subrogation is based on the legal principle that a health plan insurer can stand in the shoes of the plan member to collect from the at-fault party.

The most common example is a car accident caused by someone else. In that case, the at-fault driver’s auto insurance is responsible. While auto insurers may handle property damage like a totaled car, your health plan uses subrogation to get reimbursed for the medical bills it paid on accident-related injuries.

Health plan subrogation isn’t just about car accidents, however. It can also come into play due to a workers compensation claim, a medical malpractice suit, a “slip-and-fall” injury, or even a dog bite. In short, anytime an injury is caused by another party, there may well be an opportunity for subrogation.

Plan Types and How They Differ

The general concept of subrogation is the same regardless of the type of claim, but the process differs depending on the type of plan.

Self-Funded Plans

• Governed by the Employee Retirement Income Security Act of 1974 (ERISA)
• Allows for more robust subrogation rights
• Offers stronger contractual rights to reimbursement from third parties

Fully Insured Plans

• Subject to variable state insurance regulations
• May include anti-subrogation laws or “make whole” doctrines
• Subrogation reimbursements go to the insurer, not the employer

Government Health Plans

• Includes federal programs like Medicare and Medicaid, as well as state health plans
• Funded by taxpayers and managed by government agencies or contractors
• Legally required to pursue reimbursement from liable third parties

Taft-Hartley / Multi-Employer Plans

• Jointly managed by unions and employers
• Typically self-funded and subject to ERISA, but may have unique trust fund provisions
• Subrogation recoveries protect plan assets for all participating employers and members

Federal Employees Health Benefits Program (FEHBP) Plans

• Covers federal government employees
• Administered by private insurers but backed by federal law
• Federal statute generally preempts state anti-subrogation laws

Military & Veterans’ Health Plans (e.g., TRICARE, VA)

• Governed by federal law with mandatory recovery rights
• Managed through the Department of Defense or Department of Veterans Affairs
• Subrogation is enforced directly against third parties or their insurers

Why Health Plan Subrogation Matters

Subrogation has often been viewed as a narrow, legal function within claims management. Today, that’s changing. Rising healthcare costs, tighter fiduciary oversight, and higher expectations for member-friendly service are pushing health plans to see subrogation as more than a back-office process. It’s now a strategic cost containment tool — one that helps protect plan assets, fulfill fiduciary duties, and reduce member disruption.

The Hidden Cost of Missed Subrogation Reimbursements

Accident-related medical claims account for roughly 5% to 6% of all paid health plan claims—and every one of those cases has the potential for recovery if another party is responsible. Unfortunately, health plans and benefits administrators fail to identify a significant portion of reimbursable claims, directly driving up costs for the plan and its members.

Impact of Subrogation on Member Experience

Traditional subrogation methods often depend on sending questionnaires to members to determine how an injury and accident occurred and who may be responsible. This old-school approach is not only ineffective — less than 15% of questionnaires are ever returned — but also disruptive for health plan members, who are frequently confused or frustrated by repeated attempts to gather their sensitive health information for a process they don’t understand.

Subrogation as Part of a Cost-Containment Strategy

Subrogation isn’t a minor back-office function—it’s a proven way to protect plan assets and reduce costs without raising premiums or cutting benefits. Every dollar recovered from an at-fault party is a dollar that stays in the plan, directly improving financial performance and helping safeguard member affordability.

Even though subrogation recoveries may represent less than 1% of total plan spend, the impact is outsized: those recoveries flow straight to the bottom line. For a self-funded plan paying $10 million in claims, recovering just $500,000 through subrogation reduces net losses by 5%. That’s the kind of leverage that makes subrogation a cornerstone of any sound cost-containment strategy.

Fulfilling ERISA Fiduciary Obligations

For ERISA-covered plans, effective subrogation isn’t optional. Among other legal obligations, administrators have a fiduciary duty to minimize unnecessary plan expenses and maximize the value of plan assets. Failing to identify and pursue valid subrogation claims can be seen as neglecting these duties.