Explaining Automobile Insurance: Part III – Medical Payments Coverage

In addition to liability and UM/UIM coverage, insurance companies often offer what’s called medical payments insurance. This coverage is very self-explanatory on its face, but tricky in its application. Medical payments coverage typically provides money to pay for medical bills incurred as a result of a motor vehicle collision regardless of who is at fault. That means that even if you are 100% at fault – you run into a tree because you were too busy texting – your insurance company will still provide money to help with your medical bills. A common limitation is that the medical bills must be 1) incurred within one year from the date of the collision and 2) reported to the insurance company within that same time period. Also, these benefits are only payable up to the limits you purchase. If you purchase $5,000 in “med pay” coverage, your insurance company will only pay the first $5,000 of your medical bills.

$5,000 in “med pay” coverage may seem like a lot, but it’s not. Even a short ambulance ride to a local emergency room typically costs around $750.00. Once you’re in the emergency room, note that the hospital and most of the doctors who see you will bill separately. The emergency room physician will probably bill around $500.00 to oversee your care. Radiologists who you never even see, but who interpret your x-rays and CT scans and report their findings to the emergency room physician will bill another $250.00. In addition to a standard charge for the hospital room, the hospital will bill for each medication dispensed and x-ray ($200-500 per scan) or CT scan ($1,500-2,500 per scan) undergone. While prices vary widely between various hospitals and based on the extensiveness of your treatment, one thing remains constant: before you know it, that $5,000 in medical payments insurance is gone.

So how do you get the most out of your medical payments coverage? The most important thing is to also have health insurance, whether private or government-funded (Medicare and Medicaid). Thanks to ObamaCare, starting January 1, 2014, the federal government will be incentivizing you to make a smart financial decision by purchasing health insurance (or paying a penalty for failing to do so). One of the many reasons that health insurance is so important to have is that your health insurance company acts as your agent in bargaining with your medical providers. When presented with the exact bills discussed in the previous paragraph, your health insurance will pay them for a fraction of the full bill. You can then use your medical payments coverage to pay any deductible or co-payment required in your health insurance plan. In contrast, if you just use your medical payments coverage to satisfy your medical bills, you will end up paying the full medical bill.

Health insurance companies typically enter into contracts with hospitals and doctors providing for a set fee schedule for each service you receive. The prices in these contracts are often well below the listed price which your medical provider will bill you. Automobile insurance companies don’t have these contracts with hospitals, so they must pay the full medical bill. By submitting your bills through your health insurance plan first, before using your medical payments coverage, you gain the benefit of the bargain.

For example, if you use your medical payments coverage to pay for the CT scan above, you will end up paying the full $1,500 – $2,500 charge, as if you were paying cash for the bill. However, if you first submit the bill to your health insurance, they may already have a contract in place where that same service is billed at $675. Even if you have a large deductible with your health insurance plan and end up paying $675 out of pocket for that charge, you can use your medical payments coverage to reimburse you that $675 charge. That way, you’ve only used $675 of your med pay benefits rather than $2,500. If you need follow up treatment, you now have $4,325 in med pay benefits left rather than only $2,500. Also, as you have to typically have to repay any insurance benefits you receive (whether from health insurance or med pay insurance) out of any settlement you receive from the at-fault driver’s insurance company, it’s in your interest to keep the amounts these providers pay out to satisfy your medical bills as low as possible. Submitting your medical bills to your health insurance first and then using your med pay benefits to reimburse yourself for deductibles and co-payments is the best way to keep repayment of your medical bills as low as possible.

Unfortunately, the medical industry is well aware of which insurance company will pay them what for each service, and may often tell you that “I’m sorry, we only take automobile insurance – We don’t take Blue Cross”, unless of course there’s no automobile insurance available, in which case they’ll gladly take Blue Cross. You may have to put up a stiff resistance to force the medical billers to take the insurance plan you want them to take, because they would much rather receive the full $1,500 to $2,500 than the $600 in the example above. However, it’s worth the struggle, as the wise allocation of your insurance benefits can play a very large role in your net recovery from any personal injury case.

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