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
- How Subrogation Works
- Common Challenges and Mistakes
- How to Get Subrogation Right
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.
Subrogation is now a strategic cost containment tool 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.
When it works well, everyone wins: the health plan recovers money, the employer saves on healthcare costs, and plan members are protected from increased premiums.
— Laura Hescock, CEO, Intellivo
What Effective Health Insurance Subrogation Can Achieve
Done right, subrogation delivers not only higher savings but also more consistent and predictable financial outcomes. That translates to measurable, real-world impact, as this Intellivo case study shows.
A large third-party administrator managing 250,000 member lives struggled with missed opportunities—and even lost a key client because of poor subrogation performance. After partnering with Intellivo, they were able to:
- Identify 800+ previously missed cases worth $9.2 million
- Double recoveries for a total of more than $2.5 million back to the bottom line
- Increase average recovery rate to 87% of total lien value
- Streamline case resolution to under 18 months
- Reduce administrative burden with automated referrals and ledgers
How to Measure Subrogation Recovery Success
Wondering how your subrogation results measure up? Here are some key metrics to track.
Common Misconceptions about Health Plan Subrogation
With so much opportunity to return dollars directly to the bottom line, it’s natural to ask why more health plans, insurance companies, and TPAs have not taken steps to modernize their approach to subrogation and maximize every possible reimbursement opportunity. It could be at least partly due to three common misconceptions.
- Subrogation is only worth pursuing on big-dollar claims. Not true. While a single minor claim may not seem impactful on its own, the cumulative effect of recovering hundreds—or even thousands—of lower-dollar claims can add up to substantial savings. For example, routine recoveries from minor car accidents or slip-and-fall injuries can meaningfully improve a plan’s financial performance when pursued consistently at scale.
- Subrogation opportunities are difficult to identify. Not true. With modern data analytics and automated workflows, reimbursement opportunities can be flagged quickly and accurately. The right vendor is able to surface recoverable claims at scale, making subrogation less about luck or legal intervention and more about consistent, proactive cost recovery.
- Subrogation is only relevant for large employers or certain industries. Not true. Any health plan with third-party liability exposure, whether self-funded, TPA-managed, or fully insured, can benefit from subrogation.
How Subrogation Works
Every subrogation opportunity starts with an accident or injury for which someone other than the health plan may be liable. The heart of the matter is knowing the cause and when another party should pay. If a member is injured in a car crash, hurt on the job, or affected by a faulty product, another party’s insurance may be responsible for some or all of the medical costs.
Although there are some ICD codes that can be used by medical providers to indicate the cause of the injury, such as a motor vehicle accident, most medical claims don’t arrive with a bright red flag saying, “This is subrogation-eligible.” This is where the subrogation process begins: identifying potential cases and the third party or parties who are responsible for payment.
The Subrogation Process: Step-by-Step
Once triggered by an injury-related medical claim, the subrogation process involves a gauntlet of administrative and legal steps, typically spanning about 18 months from the date of an injury or accident all the way to settlement of funds. The process starts with identification and proceeds all the way to settlement and recovery reconciliation.
Step 1. Identification: Find All Reimbursable Claims in Real Time
The first and most essential step is to identify all potential subrogation-eligible claims, ideally without relying on questionnaires asking members for more information about the cause of an injury.
Step 2. Investigation: Locate Alternative Policies with No Member Disruption
Once claims are flagged for potential subrogation, the next step is to identify all alternative insurance policies that can be tapped for reimbursement.
Step 3. Lien Notification: Notify Parties When Liens Are Issued
Next, the health plan must put the alternative policy on notice of the lien for repayment. Timely lien notification is critical, as delays can result in missed recoveries.
Step 4. Lien Monitoring: Compile Accurate and Full Lien Value
After the lien has been issued and the alternative policy has confirmed receipt and verified the availability of funds, it’s critical to continuously monitor and update the growing lien, which will account for all paid claims. This is important because an “episode of care” may span multiple treatments over a length of time.
Step 5. Third-party Communication: Coordinate with Attorneys and Insurers
Making sure cases and recoveries don’t fall through the cracks means staying on top of notices and communications from all parties, including attorneys and insurance companies, and to provide an immediate response to requests for information.
Step 6. Lien Settlement, Negotiation, and Recovery: Maximize Reimbursement Amounts
In many cases, the lien settlement and negotiation step involves dealing with attorneys representing the injured party or adjusters to reach a settlement regarding the division of available funds.
Step 7. Real-time Transparency and Visibility: Track Cases All the Way to Close
Transparency and visibility of individual case progress is an area where traditional subrogation has lagged, often leaving plan administrators in the dark without clear reporting and unaware of case statuses or outcomes.
Common Subrogation Challenges and Mistakes
When it comes to subrogation, what you don’t know can hurt you. See how modern, tech-enabled subrogation solves critical information gaps and other challenges.
How to Get Subrogation Right
One thing is clear: subrogation has evolved for the better. It no longer needs to be the “black box” of claims administration or relegated to a back-office function that only a few people understand. Today, plan administrators and benefits professionals have an array of techniques and technologies that were not available a decade ago.
Failure to take advantage of these new tools and adopt best practices can result in preserving the status quo—limiting recoveries and placing an unnecessary burden of difficulty and inefficiency on benefits operations.
When powered by the right data and technology, health plans and payers can pivot from the manual, administratively complex (and error-prone) subrogation processes of the past and adopt a more consistent, transparent, and effective approach. When health plan subrogation is done well, everyone benefits:
- Health plans recover costs and fulfill fiduciary obligations
- Employers reduce healthcare spend
- Members avoid unnecessary disruptions and frustration
Getting subrogation right requires integrated data, timely action, modern tools, and the right expertise, whether in-house or through a trusted partner.
Subrogation recoveries can increase by up to 75% through automation and best practices
— Intellivo data benchmarks
The Key to Modernization: Data and Automation
Established and proven technologies such as process automation and data engineering have been steadily remaking and replacing slow, manual, and error-prone processes.
Here’s how:
- Accurate and comprehensive case identification: Unlike traditional methods that rely heavily on member questionnaires, modern systems leverage multiple internal and external data sources to flag potential subrogation cases in real-time without burdening members.
- Data integration: A “connected intelligence” approach merges and synthesizes claims data with third-party data, including court records, clearing houses, P&C claims, and police reports, to uncover non-obvious indicators of third-party liability and catch claims that would otherwise be missed.
- Workflow automation: Intelligent workflows guide case managers through lien compilation, claim valuation, and negotiation steps, ensuring that all treatment episodes and claims are handled using consistent frameworks and best practices — no matter the caseload volume or experience level of the case manager.
- Transparency and case tracking: Real-time dashboards and reporting tools track case status, lien values, and recovery rates, giving benefits and claims professionals the kinds of insights and forecasting abilities they have traditionally lacked when it comes to subrogation.
- Predictable, faster recoveries: Automated processes ensure that nothing falls through the cracks. Automation shortens timelines by allowing for more rapid issuing of liens, meeting deadlines for information requests, and accelerating settlement negotiations.
- Scalability and consistency: By standardizing processes and embedding business rules, technology ensures consistent execution across teams and across all cases, delivering more predictable recovery performance.
In short, technology transforms subrogation from a fragmented, reactive function into a proactive, predictive, and precision-driven cost containment strategy—boosting recoveries, improving member experience, and reducing administrative burden.
Where Are You on the Subrogation Maturity Scale?
Subrogation maturity is a function of an organization’s ability to harness technology, data, and best practices to create an efficient flow of subrogation opportunities and achieve maximum reimbursements.
At the lower end of the maturity spectrum, payers and health plans endure more administrative headaches with fewer recoveries. As they move up the maturity scale, integrated data, automated workflows, and connected intelligence yield higher-value recoveries and do so more consistently.
Most subrogation processes fall into one of the four levels of maturity:
- Reactive: mostly manual, with basic rules, limited oversight, and minimal insights
- Structured: rules-driven logic creates some consistency, but data is still siloed
- Integrated: data unified across the ecosystem of accident-related injuries, giving you close to real-time insight
- Optimized: proactive alerts, automated workflows, and intelligent decision-making resulting in maximum recoveries
Graduating through these stages requires the right leadership and a commitment to achieving better outcomes. It’s not as difficult as you might think. More and more organizations are making the right moves to embrace better subrogation and strategic cost containment with a mix of internal and external resources. A lot of it comes down to cultivating the right team.
Building an Effective Subrogation Team
Successful subrogation teams serve as a center of gravity for the entire organization, collaborating across functions to ensure that every recoverable dollar is found and pursued.
See how the right structure, mindset, training, and tools can set your team up for success.
Ready for a more modern approach to subrogation?
These practical resources can help you get started.
- Building an Effective Subrogation Team
- Best Practices for Benefits Advisors and TPAs
- 7 Ways to Level Up Your Subrogation Approach
Choosing a Subrogation Partner
As healthcare costs continue to rise, you can no longer afford to treat subrogation as an administrative afterthought or back-office burden. A growing number of health plans are turning to modern subrogation vendors that use data intelligence and automation to:
- Identify more recoverable claims without burdening members
- Shorten the time between treatment and reimbursement
- Improve the accuracy and consistency of recoveries
- Reduce administrative overhead for internal teams
- Satisfy fiduciary responsibilities to the health plan
Choosing the right subrogation partner is a great first step.
Find Missing Opportunities with Intellivo’s Subrogation Assessment.
See what you’ve been missing and learn how you can maximize recoveries with Intellivo as your trusted subrogation partner.
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Subrogation doesn’t have to mean disruption. Intellivo delivers better results — for your plan, your team, and your members