"Med-Pay" is often described as the forgotten insurance coverage. Nearly everyone's automobile coverage includes it, and yet it is rare that our clients know if they have such coverage. We often have to go directly to our client's insurance company to discover whether our client has this coverage. So this blog will be devoted to explaining the forgotten coverage, its usefulness, and a strategy to include your Med-Pay as part of a comprehensive plan to obtain needed medical treatment after an injury accident.
What Is Med-Pay?
Med-Pay is a shorthand term for "Medical Payments." It was formerly optional coverage, but since January 2009, your auto insurance company must offer this coverage as part of your auto insurance package. Its sole function is to pay for medical care following an auto accident both for the policyholder AND other occupants in that vehicle. Colorado requires every Colorado driver to be offered at least $5,000.00 of Med-Pay for all cars insured after January 1, 2009. Under Colorado law, policyholders can still reject this coverage by specifically signing documents waiving the coverage. But if the insurance company cannot produce this signed documentation proving the policyholder waived the coverage, the insurance company must provide the coverage regardless of whether they collected a premium or not. Though the mandatory minimum Med-Pay coverage is only $5,000.00, I would encourage any Colorado driver to consider purchasing optional additional Med-Pay up to at least $10,000.00 in coverage if you also have health insurance for yourself and your family. If you don't have health insurance, I would recommend that you purchase at least $25,000.00 in Med Pay coverage, if not more.
How Does Med-Pay Work?
The new Med-Pay law is very much geared toward assuring that emergency facilities and emergency transport companies get compensated following treatment of a person injured in an auto accident. Under the new law, the insurance company is required to hold in their possession $5,000.00 of the policyholder's Med-Pay coverage for a 30 day period from the day the insurance company receives notice of the injury accident. The insurance company is required to hold the subject $5,000.00 to specifically pay any hospital, ambulance or air-ambulance that might make a claim for medical bill reimbursement within that 30 time period. After the required 30 day freeze, the remaining balance of unclaimed medical proceeds can be used to pay any other injury-related medical expenses presented to the insurance company.
As an example, assume a policyholder involved in an injury accident informs his insurance company on the day of his accident. For the next 30 days, the only eligible healthcare provider that can gain access to the Med-Pay proceeds are emergency staff, hospitals, and other urgent care facilities. If no claims are made within that 30 days, then the proceeds become available to pay other medical treatment the policyholder incurs. If a policyholder purchases $25,000.00 of Med-Pay, then as long as the treatment charges are reasonable and related to the accident, the policyholder has at his disposal $20,000.00 worth of med pay immediately. After the 30 day window, the other $5,000, or any balance remaining, becomes usable for any type of auto-related injury treatment.
Use of Med Pay In Conjunction With Health Insurance:
Two things need to be understood in coordinating med pay and health insurance benefits. First, if a Med-Pay policyholder has substantial, long term, or even catastrophic injuries following an accident, health insurance will generally pick up all major charges with the exception of co-pays and deductibles. Depending on the insurance contract, however, those co-pays and deductibles can be thousands of dollars a year or more. In those cases, a good way to avoid substantial out-of-pocket expenses is to utilize Med-Pay as a secondary payer of co-pays and deductibles. In other words, a policyholder could first use health insurance to pay the medical bills and then simply seek reimbursement of copays and deductibles from Med-Pay. If, however, treatment is not for a substantial period of time and is limited to less than the amount of Med-Pay that the policyholder has purchased, a smart approach might be to use Med-Pay for all injury-related healthcare needs.
One reason you may choose to use Med-Pay for all injury-related medical care is because as of January 1, 2009, Med-Pay providers are not entitled to get their money back from any ultimate settlement you might receive from the insurance company for the at-fault driver. In contrast, traditional health insurance companies that pay anything toward auto accident medical expenses have contractual rights to receive their money back-sometimes superior to the injured person's right to be compensated. This right to be repaid is called subrogation, and Med-Pay providers cannot now legally subrogate. Accordingly, there needs to be careful consideration as to whether Med-Pay or health insurance, or both, should be utilized in coordinating medical care after an auto accident.
Is Med Pay Right For You?
From a legal/medical standpoint, obtaining higher levels of optional Med-Pay is prudent and recommended. From an economic standpoint, the general nationwide consensus seems to be that it is very affordable and often a cheaper alternative than health insurance. However, as detailed above, health insurance works differently and Med-Pay is not a suitable substitute for health insurance or vice versa. They both have their place. Ideally, you would be best to have both at your disposal in the event of an auto accident.
At Anderson, Hemmat & McQuinn, we are always willing to talk to you about your Med-Pay issues or any other matters pertaining to your auto-related injury accident. Your consultation is always free.