Why Medical Payments Coverage is a Bad Idea for Car Insurance
In previous articles I have discussed why the most important car insurance you can have is uninsured motorist coverage. I have strongly encouraged you to have the maximum amount that you can afford for U.M. coverage. I have also written an article entitled: 'Are You Spending Your Money Wisely On Car Insurance?' That article discussed higher deductibles for collision coverage or eliminating collision completely for older cars.
In this article, I will be discussing the optional coverage known as 'Medical Payments', sometimes abbreviated 'Med. Pay'. Medical Payments is a coverage that supplements your P.I.P. coverage. While P.I.P. is required in Florida, Med. Pay is not. P.I.P. pays for 80% of your medical bills from injuries from a car accident. The payment to the doctors is based on 80% of 200% of the Medicare allowance for the medical services. If you elect Medical Payments coverage, then the 20% balance is paid by your car insurance. For example, if the Medicare allowance for services totals $5,000.00, your P.I.P. will pay 80% or $4,000.00 and your Med. Pay will pay the other $1,000.00.
The Medical Payments coverage is relatively inexpensive in relation to your total premium; however, I strongly advise against electing this optional coverage.
Medical Payments coverage is like having a supplemental health insurance policy on your car insurance. The problem with it occurs if we obtain a settlement for you for your injuries due to someone else's negligence. Your own insurance company will demand to be paid back from your portion of that settlement. This is known as a subrogation lien, which is common with Medicare and private health insurance policies. However, until recently, it was not necessary to take into account your Medical Payments coverage as a subrogation lien on a settlement with another company. Lately, however, many of the largest insurance companies, including State Farm and Allstate, have been enforcing their legal right to claim a subrogation lien for Medical Payments coverage.
In a typical example, if you hired an attorney for a personal injury claim and you got a settlement of $15,000.00, the attorney's fee would be 33% or $5,000.00. After deducting costs of perhaps, $200.00, you would be left with $9,800.00, less any doctor's bills that were not paid by your P.I.P. Usually, your attorney can negotiate with your treating doctors to waive the balances, since they were paid 80% already by P.I.P. However, if you had Medical Payments coverage, and your insurance paid the treating doctors that 20% balance, then you will have to pay back your insurance company out of your portion of the settlement. So, to continue with the previous example, if your Medical Payments coverage paid the treating doctors $2,000.00, you are going to have to pay some or all of that $2,000.00 back to your own company from your settlement. If you did not have Medical Payments coverage, your attorney would be able to request that the doctors waive or significantly reduce that 20% balance. Therefore, whenever there is a personal injury settlement, having Medical Payments coverage actually works against you.
If you have Medicare or other health insurance, and your P.I.P. benefits are exhausted, you can always elect to ask your health insurance company to pay the balances of the doctors' bills However, in most instances, it is better to allow your attorney to negotiate with the doctors rather than having Medicare involved, which will then require a Medicare subrogation lien.
For more information regarding car insurance and how to get the most for your dollar, please feel free to contact me. I provide a free personal or phone consultation regarding any issue pertaining to personal injury claims and car insurance coverage. We also provide free consultations regarding Wills, Trusts and Estates.
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