What is PIP and How Does it Work or How Does Insurance Pay My Medical Bills in a Car Accident?

Personal Injury Protection (PIP) refers to the section of an automobile insurance policy that provides for the payment of medical treatment for the named insured and others who may be covered under the named insured’s policy. Because New Jersey is a “no fault” state, medical bills for injuries sustained in an automobile accident are paid by the insured party’s own automobile insurance carrier under PIP.

If you get into an automobile accident, it is very important that you inform the hospital and/or treating doctors that you were in fact in an automobile accident, and that your medical bills should be submitted through PIP for payment. If medical expenses resulting from an automobile accident are paid through your health insurance, and you subsequently have a claim against the other driver, the proceeds from any settlement or verdict in that matter may be subject to a lien asserted on behalf of your health insurance carrier. This will depend on whether your health insurance policy qualifies as an ERISA based self-funded plan under federal law. To avoid this, all medical bills causally related to an automobile accident should be paid through PIP.

If you are injured in an automobile accident and do not own a car, there are several sources in which you may be entitled to receive PIP benefits. N.J.S.A 39:6A-4 provides that, every standard automobile policy in New Jersey must provide PIP coverage for the benefit of the named insured, resident family members, as well as occupants and permissive users of the insured’s vehicle. Thus, if you do not own a car, the first source in which you may be entitled to PIP benefits is through a resident relative’s automobile insurance. This means that if you are hurt in an automobile accident, you may be entitled to medical coverage through the insurance policy of your spouse, parent, child or sibling; assuming you both have the same primary residence. This is regardless of whether you were driving that family member’s automobile or not. If you do not have a resident family member in which to obtain PIP benefits, you would then be entitled to PIP benefits under the insurance policy of the automobile in which you were a driver or passenger.

Essentially the way PIP benefits work is your automobile insurance carrier provides for the payment of all causally related medical expenses incurred as a result of an automobile related accident subject to the following three exceptions: (1) most policies contain a $250 deductible (although a larger deductible may be selected); this initial amount must be paid by the individual receiving the benefits; (2) PIP is then responsible for 80% of your medical bills up to a total of $5,000; you are responsible for the remaining 20%. PIP will then pay 100% of all remaining medical expenses from $5,000 up to your elected coverage limit; and (3) All medical expenses billed to PIP must conform with the fee schedule as set forth by the New Jersey No Fault Insurance statute. Under this law, medical care providers are only allowed to charge up to a specific amount for your medical care incurred as a result of an automobile accident. These amounts are set forth in the statutory fee schedule. Should your medical care provider charge you an amount in excess of the statutory limit, neither you nor your PIP carrier is responsible for the payment of any amounts over the fee schedule.

When purchasing automobile insurance there are several elections that you can make regarding PIP benefits that you should be cautious of. First, you should purchase full $250,000 of PIP medical expense coverage. You may elect to purchase less coverage in the amounts of $15,000; $50,000; $ 75,000; or $150,000; however, if you do, you may not have enough insurance to obtain all of the medical treatment you need or to pay for all of your medical bills. Further, the savings is not generally significant in light of what you give up.

Next, the standard deductible amount for PIP benefits is generally $250. You may elect a higher deductible amount of $500; $750 or $1000. Keep in mind that the election of a higher deductible would apply to PIP benefits for a resident family member but not to a passenger or a permissive user receiving benefits under the policy of the automobile in which he or she was traveling.

Possibly the most costly mistake you can make when making your elections regarding PIP benefits is to elect healthcare primary. Electing health insurance primary means that your health insurance would be responsible for you medical bills and not your automobile insurance. There are several pitfalls to making this election, and it is strongly advised against. First, your health insurance plan may not provide coverage for automobile accidents at all, and may not cover all of your family members. Further, some of your bills may not be paid because of deductibles and fee schedules. Also, if your health insurance pays your medical bills and you obtain monetary damages in a civil lawsuit, your insurer may have a subrogation interest in which you would be responsible for reimbursement of medical expenses related to an automobile accident; this means that money that is for your injuries would have to go to pay medical bills that were already paid by insurance. Even though you may potentially have to pay back the medical bills to the insurer, you cannot recover those losses from the person who caused the accident. Therefore there is a significant risk in making health care primary. Since it requires an attorney or someone with familiarity with the law and access to all healthcare plan documents to determine the precise repercussions of making health care primary, we recommend against doing so in order to protect you.

Contact the New Jersey injury lawyers of Levinson Axelrod, P.A., today by calling 800-346-5529 to learn more about your legal options.

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