How Does Texas Insurance Code Chapter 140 Cap Health Insurance Subrogation Paybacks at 1/3?
Direct Answer Under Texas Law
Enacted in 2014 to overturn harsh insurer-take-all clauses, Texas Insurance Code § 140.005(a) strictly caps how much a non-ERISA-preempted health insurance plan (or auto MedPay insurer) can take back from your personal injury settlement when you are represented by an attorney: the health plan's recovery is limited to the LESSER of: (1) one-half (50%) of the claimant's gross recovery LESS the insurer's 1/3 share of attorney's fees, OR (2) the total medical benefits paid by the plan LESS the insurer's 1/3 share of attorney's fees and pro-rata costs!
Critical Texas Procedural Trap to Watch Out For
Do the math on Option (1): 50% of your gross settlement minus 1/3 of that amount for attorney's fees equals exactly ONE-THIRD (33.33%) of your gross settlement! That means a health plan governed by Texas Insurance Code Chapter 140 can NEVER take more than 1/3 of a catastrophic injury settlement, guaranteeing you don't walk away empty-handed!
Recommended Action Plan for Texas Claimants
Demand the health plan's Summary Plan Description (SPD) and IRS Form 5500 to determine whether the plan is an insured plan governed by Texas Insurance Code Chapter 140 or a self-funded ERISA plan.
Detailed Texas Statutory & Case Law Breakdown
Under Tex. Ins. Code §§ 140.001–140.007 (Enacted via HB 1869, Effective Jan. 1, 2014) and controlling Texas appellate precedent in Replacement of Fortis Benefits v. Cantu Common-Law Rule With Statutory Formula, Texas trial and appellate courts apply strict statutory rules to this exact issue. Unlike generic multi-state legal summaries, Texas tort procedure under the Civil Practice and Remedies Code (CPRC), Insurance Code, Transportation Code, and Labor Code enforces specific statutory formulas—including the 51% proportionate responsibility bar (CPRC § 33.001), paid-or-incurred medical expense admissibility (CPRC § 41.0105 / Haygood), and mandatory statutory lien caps (Prop. Code Ch. 55 & Ins. Code Ch. 140).
Step-by-Step Texas Procedural Checklist
- Verify the exact statutory text of Tex. Ins. Code §§ 140.001–140.007 (Enacted via HB 1869, Effective Jan. 1, 2014) and how Texas courts apply Replacement of Fortis Benefits v. Cantu Common-Law Rule With Statutory Formula in your county's appellate district.
- Beware of the Texas Procedural Trap: Do the math on Option (1): 50% of your gross settlement minus 1/3 of that amount for attorney's fees equals exactly ONE-THIRD (33.33%) of your gross settlement! That means a health plan governed by Texas Insurance Code Chapter 140 can NEVER take more than 1/3 of a catastrophic injury settlement, guaranteeing you don't walk away empty-handed!
- Execute the Texas Action Plan: Demand the health plan's Summary Plan Description (SPD) and IRS Form 5500 to determine whether the plan is an insured plan governed by Texas Insurance Code Chapter 140 or a self-funded ERISA plan.
- Preserve all physical, electronic, and medical billing records early so your CPRC § 18.001 affidavits and TRCP 194.2 Initial Disclosures are complete.
Frequently Asked Questions Under Texas Law
How Does Texas Insurance Code Chapter 140 Cap Health Insurance Subrogation Paybacks at 1/3?
Enacted in 2014 to overturn harsh insurer-take-all clauses, Texas Insurance Code § 140.005(a) strictly caps how much a non-ERISA-preempted health insurance plan (or auto MedPay insurer) can take back from your personal injury settlement when you are represented by an attorney: the health plan's recovery is limited to the LESSER of: (1) one-half (50%) of the claimant's gross recovery LESS the insurer's 1/3 share of attorney's fees, OR (2) the total medical benefits paid by the plan LESS the insurer's 1/3 share of attorney's fees and pro-rata costs! Key Texas Trap to Avoid: Do the math on Option (1): 50% of your gross settlement minus 1/3 of that amount for attorney's fees equals exactly ONE-THIRD (33.33%) of your gross settlement! That means a health plan governed by Texas Insurance Code Chapter 140 can NEVER take more than 1/3 of a catastrophic injury settlement, guaranteeing you don't walk away empty-handed!
What Texas statute and Supreme Court / appellate precedent control texas ch. 140 health subrogation 1/3 cap?
This question is governed in Texas by Tex. Ins. Code §§ 140.001–140.007 (Enacted via HB 1869, Effective Jan. 1, 2014) and the legal standards articulated in Replacement of Fortis Benefits v. Cantu Common-Law Rule With Statutory Formula. Recommended step: Demand the health plan's Summary Plan Description (SPD) and IRS Form 5500 to determine whether the plan is an insured plan governed by Texas Insurance Code Chapter 140 or a self-funded ERISA plan.
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