When it comes to workers’ compensation claims, the question of who pays an injured employee’s medical expenses is not always clear, especially when a company’s health plan and workers’ compensation coverage are both self-funded. 

Win Rawson

Which policy is ultimately responsible? The workers’ comp policy or the health plan? 

What often happens is that the health plan covers the claim because it’s assumed that one pocket is as good as another. In other words, “It’s all coming from the same place, anyway.” 

The problem is that it isn’t true, and it creates issues for the health plan and the plan sponsor, or employer. 

The lack of awareness of the risks in commingling payment of claims and overlooking the fact that the plan should be reimbursed by the workers’ comp policy erodes fiduciary integrity, inflates member costs and quietly drains health plan assets that are meant for all participants. 

This isn’t just on the employer to manage. Third-party administrators that support self-funded plans must also have a solid grasp on how health plan subrogation works for work comp injuries. This way, they can help minimize claim costs and ensure fairness for all plan members. 

Understanding subrogation and the impact on work comp 

Subrogation is the process that identifies all parties responsible for claim reimbursement in the event of injury to a plan member. The critical first step in subrogation is identifying who is responsible to pay and acting quickly to secure reimbursement. This is where benefits administrators and TPAs play an important role. 

The problem is that work comp claims often develop and progress independently of the health plan. They're time-consuming and take upwards of 18 months or more to settle. In most cases, a work comp claim is resolved through disputed settlements with a lump sum sent to the employee after treatment has already been paid by the health plan. 

Since health plans are typically not involved in the work comp adjustment process, administrators are often unaware that their health plan paid thousands or tens of thousands of dollars for claims that should have come from the workers’ comp policy. At least, they won’t know until those claims are fully settled. 

When a work comp case resolves, risk management teams or their hired vendors generally hope that the health plan has no awareness of the work comp claim and its resolution. If the claim is still active, they aim to convince their corporate colleagues that the health plan needs to waive or significantly reduce the potential recovery so they can close the case. 

Here's the uncomfortable truth: Internal risk management teams, work comp defense counsel, work comp adjusters and even the injured employee's attorney sometimes bank on what is known as "no timely representation" from the health plan. Essentially, they are hoping the health plan does not get involved to recover what it is rightfully owed. 

They are all working from the belief that it's easiest for everyone to resolve the work comp case without engaging the health plan. To the extent engagement happens, they often unify in the position that the health plan should greatly reduce or waive its lien. The truth is that health plan administrators and their TPAs are legally obligated to pursue maximum reimbursement from work comp coverage. 

Why subrogating work comp claims matters 

Subrogation falls under ERISA, and ERISA’s fiduciary duty requirements clearly outline the importance of protecting plan assets and enforcing plan terms. That fiduciary duty requires pursuing all subrogation recovery opportunities, including recovery from the plan administrator's own self-funded work comp coverage. 

To fulfill this obligation, benefits professionals need to know when work comp recovery opportunities exist and must ensure that they and their recovery vendors fully pursue those opportunities whenever possible. 

Identifying claims and stopping claim drift 

The central challenge for self-funded health plans is reliably and consistently identifying opportunities for reimbursement. Without accurate case identification at the start, everything downstream becomes messy and inefficient, leading to missed reimbursements. 

In work comp cases involving severe injuries requiring rehabilitation and repeat visits, claims commonly drift away from workers' comp coding and into health plan processing. The longer treatment extends beyond the initial injury, the more likely this drift becomes. This creates a silent drain on the health plan that traditional audits rarely catch.  

Recognizing that funds are slipping through the cracks has led to more sophisticated and automated approaches to subrogation as a cost management strategy. By eliminating paper-based forms and instantly identifying responsible third parties, the automated process is streamlined to maximize financial recoveries while ensuring compliance requirements are met. 

Protecting workers and health plans 

Effective subrogation isn't about finger-pointing between the health plan and workers' comp program. It's about protecting the integrity of the employer's total benefits ecosystem. 

Self-funded health plans maximize the value of subrogation by recognizing it as more than a back-office process. It's a strategic opportunity to lower costs, improve outcomes and ensure fairness. When managed proactively, it protects resources and shifts liability to the appropriate policy, preserving health plan assets and fulfilling the fiduciary duty to safeguard them across both health and workers' compensation programs.

Win Rawson is chief legal officer for Intellivo, which works with health plans and insurers on subrogation and third-party liability recovery. Prior to joining Intellivo, Rawson was a partner at Lawrence & Russell, where he focused on ERISA litigation, ERISA and HIPAA compliance, and employment law. Before practicing law, Win spent eight years at Sedgwick in the wholesale brokerage/property casualty underwriting industry.