Motor vehicle insurance policies usually include personal injury protection (PIP) coverage that will reimburse the insured and/or a family member for a limited amount of medical expenses regardless of who was at fault. Many current motor vehicle policies limit the PIP coverage to relatively small amounts if the injured person has other health coverage. The general idea of that approach is to provide greater PIP coverage, but to permit the auto insurer to have secondary liability if the injured person has other coverage.

Most health plans take what amounts to an always-secondary position to either no-fault motor vehicle coverage or PIP coverage of so-called fault policies.

The Supreme Judicial Court of Massachusetts recently sorted out the conflicting COB provisions of motor vehicle and health plans in those situations. The court ruled that the motor vehicle policy had to pay its maximum benefit before the health plan began paying its benefits.

The case is Metropolitan Property and Casualty Insurance Co. v. Blue Cross and Blue Shield of Massachusetts, Inc., 451 Mass. 389 (Sp. Ct. Mass., May 12, 2008).

Bernard Rice was insured under a Metropolitan Property and Casualty Insurance Co. (Met P&C) policy with a PIP providing only $2,000 of health coverage. However, Rice added an optional MedPay rider that modified the PIP provision to provide $10,000 of health coverage. It contained a provision stating, “[u]unless otherwise required by law, coverage under this contract will be secondary when another plan…provides you with coverage for health care services.”

Rice was also covered by a health policy through Blue Cross Blue Shield of Massachusetts (BCBSM). The court noted that BCBSM:

Argues that the language in its subscriber certificate providing that its coverage will be secondary when another insurance policy covers health care costs permits it to decline to pay medical bills submitted by an insured who has MedPay benefits available under his automobile insurance policy.

Rice was injured in an auto accident and incurred $5,266 of medical bills from a BCBSM provider. Met P&C paid the $2,000 and told him to pursue BCBSM for any balance. When BCBSM refused to pay any of the balance, Met P&C brought this action against BCBSM.

The court ruled in favor of BCBSM. It focused its opinion on the law and regulations applicable to auto insurance. In particular, it noted that the Massachusetts no-fault law originally had a “coordination of benefits” scheme that provided:

Personal injury protection provisions shall not provide for payment of more than two thousand dollars of expenses incurred within two years from the date of accident for [medical and funeral services], if, and to the extent that such expenses have been or will be compensated, paid or indemnified pursuant to any policy of health, sickness or disability insurance…No policy of health, sickness or disability insurance…shall deny coverage for said expenses because of the existence of personal injury protection benefits.” Mass. Gen. Laws, c. 90 §34A.

The court went on to say:

By its terms, the applicable provisions in §34-A only prohibits a health insurer from denying coverage because of the existence of PIP benefits; the provision contains no such prohibition with regard to MedPay benefits. As for the purpose of [§34A], the no-fault system enacted in 1970 was intended to control the costs of compulsory automobile insurance, and the requirement, added in 1988, that insureds access available health insurance before collecting more than $2,000 in PIP benefits furthers that goal. [citation omitted.] A health insurer’s deferral to its insured’s optional MedPay benefits does nothing to undermine the legislative goal of controlling the cost of compulsory insurance.

The court further referred to statements and regulations issued by the Division that supported the conclusion that health insurers are free to make their benefits secondary to PIP and MedPay benefits. These findings led the court to conclude:

Because we find nothing in the statutory language governing PIP or MedPay to prohibit health insurers from deferring coverage due to the existence of MedPay benefits, we affirm the order of the Superior Court judge granting summary judgment in favor of defendant Blue Cross.

While the Massachusetts plan may not have involved a group health plan, and certainly did not involve a self-insured ERISA plan, the Supreme Judicial Court had no difficulty finding legal justification that a health plan had a sufficient basis to withhold its benefits until the no-fault insurer’s liability was fully paid, even in the absence of very clear statutory language imposing primary liability on the no-fault insurer for MedPay benefits.

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This entry was posted by Adam V. Russo on Tuesday, November 11th, 2008 at 3:49 pm and is filed under Coordination of Benefits, Massachusetts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.