If you have ever been injured in a car crash, you may have used your medical payments (“med pay”), also known as PIP coverage, to pay for your medical bills. But you probably didn’t really understand what this coverage was or how it worked.
Let’s dive into the world of med pay.
Med pay coverage is commonly called PIP, which stands for Personal Injury Protection. Part of your auto insurance, it covers your medical bills incurred as a result of an accident.
There is typically a dollar amount limitation on how much will be covered. The limits can be as low as $1,000 or as high as $50,000 or more.
It really is as simple as you get hurt, you incur bills, and your insurer pays for those bills, up to the limit you opted for in your coverage.
Health insurance is usually the preferred, or first option, for paying for medical bills incurred after an accident. First of all, health insurers pay bills at a reduced, negotiated rate. Second, the subrogation amount is often negotiable (more on that later).
So, if health insurance is the preferred method, why do you need med pay? Why wouldn’t you use health insurance?
Unfortunately, most insurers have clauses that state it will not pay if the bills are incurred as a result of a third party’s negligence (aka – if someone else caused your accident). Many hospitals refuse to bill health insurance of accident victims for this reason.
Another reason is that some health insurance plans are fully-funded ERISA plans that require the injured person to repay the subrogation amount in full with no discount (again, more on this later).
Finally, even if health insurance pays for a portion of your bill, many times there is still a copay or a residual amount left over, leaving you to foot the remainder of the bill.
Let’s say you incurred a $2,500 emergency room bill after you were rear-ended. You submitted your bill to your med pay insurer but found out you only had $1,000 in med pay coverage. In this case, you would still be responsible for the remaining $1,500.
But what if instead, you were able to submit that bill to your health insurer. Your health insurer then paid 70% of the bill based on your plan. This leaves you with a balance of only $750. You could simply submit that to your med pay carrier, and they would pay it in full under your $1000 coverage.
Of course, if your health insurance only covers 50 or 60% or your ER bill was much higher, then you could still be left with a decent sized bill to cover even with med pay. That’s why it is so important to have very high limits on all your coverage, including med pay. $1,000 is not nearly enough! Aim for at least $10,000 or more.
Finally, as promised, let’s get to the subject of Subrogation. Here is where I make your head hurt or bring out your inner nerd.
When you are injured due to another party’s negligence, your insurers (both health and med pay) are legally and contractually entitled to recover at least a portion of what they paid out for your medical expenses.
So if your health insurer paid $1,750, you would have to pay them back out of your settlement. How much of that amount you have to pay back depends. It gets very complicated, as not all plans have the same reimbursement rights (the fully-funded ERISA plan, for example, is not required to reduce its amount one penny). Typically, unless your plan is one of those dreaded ERISA types, your attorney can reduce the subrogation amount by a significant percentage, often as much as a one-third reduction or more.
Auto insurance med pay coverage works slightly differently, in that this subrogation right is created both contractually and statutorily. Keep in mind, your med pay will pay your bills at the full, non-negotiated rate, so the overall subrogation amount will be higher than the health insurance for the same bill.
However, due to something known as the common fund doctrine, your carrier will routinely reduce the subrogation amount by one-third. This is based upon the legal maxim that because your lawyer created a “fund” from which all this money is coming, the carrier essentially “retains” him to do this, and in return reduces its amount by the percentage of his fee, usually one-third.
Complicated and kind of mind-numbing, right?
As in all cases involving injury and potential liability, if you have been in an auto accident or hit by a vehicle immediately get medical treatment, report the crash to police and your own insurance company, and contact a lawyer with expertise in your type of case, such as bicycle accidents or pedestrians hit by cars.
If you've been in an accident and have questions, contact Chicago personal injury attorney Stephen L. Hoffman for a free consultation at (773) 944-9737. Stephen has nearly 30 years of legal experience and has collected millions of dollars for his clients. He is listed as a SuperLawyer, has a 10.0 rating on Avvo, and is BBB A+ accredited. He is also an Executive Level Member of the Lincoln Square Ravenswood Chamber of Commerce.
Stephen handles personal injury claims on a contingency fee basis, which means you don’t pay anything upfront and he only gets paid if you do. Don’t wait another day, contact Stephen now.