What is the purpose of "subrogation" in health insurance?

Subrogation is a key principle in health insurance that allows insurers to recover the costs they have paid on behalf of a policyholder from a third party that is responsible for causing the loss. When an insured individual receives medical treatment due to an accident or injury caused by someone else's negligence, the insurer initially covers the medical expenses. However, if it is determined that a third party is liable for those expenses, the insurer has the right to seek reimbursement from that party.

This process not only protects the insurer's financial interests but also helps keep premium costs lower for policyholders. By recovering some of the costs from liable third parties, insurers can maintain a more balanced financial operation. Subrogation serves as a means for the insurance company to ensure that the responsible party ultimately bears the costs, rather than the policyholders themselves through increased premiums.

Understanding this concept is crucial for both policyholders and insurance professionals, as it highlights the importance of accountability in insurance claims and the overall management of insurance resources.