Kentucky Health Plan Reimbursement: The Modified Made-Whole Rule

By the FigureMyTax Editorial Team · How we calculate

We did not find a Kentucky statute that governs a health plan's reimbursement from your settlement. Secondary sources report that Kentucky applies a modified made-whole rule that clear contract language can override, and that the plan's claim is reduced by a pro rata share of your fees and costs.

What the made-whole rule is

The made-whole doctrine says an insurer that paid your bills cannot be repaid from your recovery until you have been fully compensated for your losses. Some states enact it by statute; others leave it to courts or to the insurer's contract. We found no Kentucky statute for a health plan.

What a secondary source reports

A law-firm compilation of Kentucky subrogation law reports that the made-whole and common fund doctrines apply to health insurance subrogation, that the Kentucky Supreme Court has held subrogation rights may be modified by contract only if violence is not done to established equitable principles, that an insurer was allowed to be repaid without the insured being made whole where the language was clear, both sides had counsel and the losses were already known, and that a lien is reduced by a pro rata share of the plaintiff's attorney fees and costs. We did not read the cases, so treat these as leads.

Notice and intervention

Kentucky requires the plaintiff, at the start of an action, to notify by certified mail those believed to hold subrogation rights, and to file a certified list with the clerk; the notice must say that a failure to assert subrogation rights by intervention will lose them as to the final award (KRS 411.188).

A worked example

Say a health plan paid $9,000 and you settle for $100,000 with a one-third fee and $3,000 in costs. If the plan has a valid claim and you are fully compensated, it bears about 36.3 percent of its claim for fees and costs and recovers about $5,730. If you are not fully compensated and the plan has no clear override, it may recover nothing. The Kentucky medical lien calculator offers those positions and a full-claim upper bound.

What to do

Ask for an itemized claim and the plan document, ask whether it is insured or self-funded, and ask the plan to reduce its claim for your fees and costs. A self-funded employer plan is governed by federal law. See how provider bills and no-fault claims differ and how Medicaid and Medicare recover.

This is general information, not legal advice, and the state comparisons above are illustrative, not an exhaustive survey. Confirm how Kentucky's rules apply to your specific case with a licensed Kentucky attorney.