By: Cindy Merrell, Esq.
I remember when I graduated college, I was in the early stages of adulthood and my parents told me that I needed to get my own car insurance. Beyond knowing that my monthly bills were going up, I had little understanding about car insurance other than it was required and it provided protection in the event of an accident. After over a decade of practicing, law I have found that most adults (not just recent college graduates) do not actually know or understand their own auto coverage. Even fewer adults know how auto insurance and health benefits may intersect in the event of an auto collision.
Who pays medical expenses immediately after a car wreck?
The answer depends on many factors including applicable state law; the terms of the auto insurance; and terms of the health plan. The starting place is to review the injured party’s auto coverage policy. If someone else caused the wreck, many people are offended by the idea of their own auto carrier footing the medical bill. However, many states have mandatory coverages called personal injury protection (also known as PIP) coverage or medical payment coverage. These coverages require auto carriers to provide benefits (an amount usually $10,000.00 or less) that can be used to pay medical expenses regardless of fault. The public policy behind these laws is to provide access to medical treatment in a timely fashion because determining who is at-fault can take years. The auto carrier may even recoup these expenses from the at-fault party once fault has been determined.
Depending on the terms and funding status of a health plan, the health plan may coordinate health benefits with PIP or medical payment coverages. Each state has various coordination of benefits laws. Typically, the single most important deciding factor are the terms of the health plan document. Most health plans have coordination of benefits provisions that specify the order of benefits requiring the auto coverage to pay primary.
What if the plan member is not at-fault for the motor vehicle wreck?
The next layer of coverage we look to is the at-fault party’s auto coverage. Unfortunately, many states do not require the at-fault party’s insurance carrier to disclose policy limits until after a lawsuit has been filed. Typically, parties attempt to resolve their claims without litigation as it gives both parties more control of the outcome. Therefore, it is very common for injured parties to pursue claims against the at-fault party without knowing the policy limits. During this prelitigation period the injured party and the at-fault party are typically trying to determine who is at-fault (liability) and the extent of the injured party’s damages. It is important to remember the at-fault party’s auto coverage is intended to compensate the member for more than just medical expenses. The injured party may suffer other damages such as lost wages, pain and suffering, impaired ability to earn income in the future.
If the at-fault party policy limits are tendered, then we look to the injured party’s underinsured motorist coverage. This coverage is intended to provide another source of recovery. Each state has different laws governing underinsured motorist coverage. If the health plan is a self-funded ERISA plan and has the appropriate plan language, the health plan may also seek recovery from the injured party’s underinsured motorist coverage.
If the at-fault party does not have insurance, the injured party may make a claim against their own insurance for uninsured motorist coverage. This coverage is like underinsured motorist coverage as it provides coverage to the injured party for their damages, but without the requirement of settlement with the at-fault party.
Why does the health plan pursue a recovery from the auto coverages?
The simple answer is because the health plan is not responsible for medical expenses which resulted from the action(s) of the at-fault driver. However, the health plan may have advanced the benefits on behalf of the member immediately providing the member access to medical treatment without waiting years for litigation to resolve. In addition, subrogation and reimbursement keeps premiums lower as the health plan can recover funds from the auto coverages and keeps a self-funded health plan viable and healthy for all members.
When health plan benefits and auto insurance collide, it is important to look to plan language and state law to determine who is responsible for payment medical expenses. If the health plan has strong recovery and coordination of benefits plan language, the answers become much clearer. The Phia Group can assist plans ensuring they have the proper plan language to maximize recoveries.
Please note this article is not intended to be a comprehensive review of auto coverage benefits as state law could impact the applicability of the above statements. For a more detailed analysis of a specific matter please contact The Phia Group.