As part of my continuing, “If I had a nickel for every time” series, “If I had a nickel …” for every time I told a client that we had to pay back their auto insurance company on their medical payment lien, I would be rich.
Unfortunately, insurance companies do not explain the ramifications of medical payment coverage to their insureds. It sure sounds good on paper; we will pay 100% of your medical bills up to a certain limit if you are in a car crash rather than the usual 80%. In reality though, this coverage is illusory and many times, not needed at all.
In the state of Florida, the only coverage required to obtain a driver’s license is personal injury protection. Usually this coverage pays at 80% up to $10,000 of medical bills if someone is involved in a car crash. But, the insurance companies have come up with a clever way not only to get more of your money but, to get paid back for money they may have to pay out. How do they do it?
They offer something called “medical payments coverage” or “Med Pay” for short. This coverage, of course, costs more money but will pay 100% of an insured’s medical bills up to certain limits, usually $12,000 or $15,000. What the insurance companies may not explain to you is that this coverage comes with a huge “gotcha”. If the insured, i.e. you, recovers from a “third-party”, which is insurance speak for, “ if some idiot hits you, and it’s their fault, and you get money from them”, then you, the policyholder, have to pay your medical payment money back to the insurance company!
As Borot would say, “no lie!” So the reality is, the policyholder pays premiums for let’s say 5 to 10 years, they get in a crash that is not their fault, they receive medical payment money from their insurance company, and, if their lawyer gets them a settlement, they have to pay back the medical payment benefits to their own insurance company!
Now granted, most insurance companies will offer a discount when it comes to settling the lien since they realize that, but for the lawyer, they would not be getting a dime. But this is not always the case. Many insurance companies do not offer this type of discount and/or they insist on being completely in the loop regarding the insured’s (your) settlement amount and other outstanding liens.
Also, insurance companies do not tell prospective buyers that personal injury insurance is “primary” which is insurance speak for saying, “PIP pays medical bills first in a car crash.” But if you have health insurance, the remainder of your bill can and should be submitted to health insurance for payment. Granted, your health insurance company may have a lien but that is a subject for my next, “If I had a nickel …” article.
In conclusion, my suggestion is that you be very cautious about buying medical payment coverage. Please make sure to read the policy very carefully and ask questions about the insurance company’s “right of subrogation” which is lawyer speak meaning, “the right to be paid back.” Also, if you have health insurance, think about whether you need any supplemental insurance at all.