Repaying the companies who paid for medical care which was caused by someone else's negligence is typical. In some cases it is possible to negotiate a repayment which is smaller than the amount that the company actually paid, but this depends entirely on the circumstances of the individual case.
Your car insurance policy likely has a provision providing for "medical payments" and this amount is often limited. The typical limit is $5,000.00 If you collect money from a third party (the liable party), you will be contractually obligated to pay back a portion of that to your own car insurance company, if they paid medical bills under the "med pay" portion of your policy. A good attorney can usually convince them to reduce the amount they are willing to accept.
So, yes, this is most likely the correct thing for your lawyer to have done.
As I am licensed in Florida and Vermont, I cannot comment specifically on Illinois state law. However, every medical payment insurance policy I have seen recently contains a subrogation clause, requiring you to reimburse your first-party insurance carrier.
However, generally there is a set off for a proportional share of the attorney fees and costs which you have had to expend to receive the settlement funds from which the lien is paid. So, if you paid a one third attorney fee and had $1000 in costs, the lien should be reduced by at least one third for the attorney fees and a proportional amount of the costs, comparing the amount of the lien to the amount of the total recovery. For example, if you recovered a total of $10,000 and the subrogation lien is $1000, a proportional share of the costs for the lien amount is 10%, or $100 of the total of $1000 in costs in my example above. The setoff would then be $333.33 plus $100 equaling a total setoff of $433.33. You then would owe the subrogation lienor a total of $566.67 on the payback and settlement of the lien.
There are some instances, when you have not been made whole because of totally inadequate insurance or assets of the 3rd party tortfeasor for example, when the lienholder may not be entitled to reimbursement at all. This entitlement varies according to the difference state laws or case law.
It is common, and it is required under your insurance contract in all likelihood.
Just make sure that your lawyer charged your insurance company a fee for collecting that money. He had a right to do so under Illinois law, and he should have passed that fee on to you.
In addition, he should have charged your insurance company a proportionate share of the costs of litigation. If he didn't, he failed to do his job properly. That money should have gone to you too.
While may lawyers do know about charging for recovering money for your insurance company, not many lawyers know about recovering for costs of litigation or investigation of a claim. And lots of lawyers put that money in their pockets. Those who do are actually double charging. That means they are charging the client and the insurance company. That's not fair. And in my opinion, it's illegal and unethical.