Tennessee Health Plan Reimbursement: Made-Whole and Common Fund

By the FigureMyTax Editorial Team · How we calculate

We did not find a Tennessee statute that governs a private health plan's reimbursement from your settlement. A compendium of subrogation law reports that Tennessee applies the made-whole and common fund rules, and that a plan cannot contractually waive made-whole.

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. Some states enact it by statute; others leave it to courts. For TennCare, Tennessee replaced it with a statutory formula (T.C.A. 71-5-117).

What a compendium reports

A law-firm compilation of Tennessee subrogation law reports that subrogation of medical benefits is allowed, that both made-whole and common fund apply, that the Supreme Court held in 1979 that the right to be made whole cannot be waived or modified by the policy, and that a plan's rights may survive if you settle without contractually required consent. We did not read the decisions, so treat these as leads.

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 you are not fully compensated, the plan recovers nothing. If you are fully compensated, the common fund rule has the plan bear about 36.3 percent of its claim, so it recovers about $5,730. The Tennessee medical lien calculator shows both.

The consent trap

If your plan's contract requires its permission before you settle, ask for it in writing before you sign, because a compendium says skipping a contractually required consent can preserve the plan's subrogation rights even if you are not made whole.

What to do

Ask for an itemized claim and the plan document, ask whether the plan is insured or self-funded, and ask it to share your fees and costs. A self-funded employer plan is governed by federal law. See how hospital liens work and the Medicare and TennCare post.

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