In my last column, I explained the differences between the Standard Policy and Basic Policy that you must know when choosing auto insurance, as well as the importance of setting the PIP compensation amount at $250,000. Additionally, I discussed the clause regarding the Primary Health Insurer for PIP Option that you must understand and select when purchasing auto insurance. Many customers ask me if I recommend choosing this clause, and my answer is always "no." The reason is simple: the purpose of auto insurance is to cover unexpected accident injuries and the resulting medical expenses within the limits of the insurance I have chosen, which the auto insurance company pays. In other words, it is meaningful to have my PIP Option as Primary. So, why is this option included in auto insurance settings?

What is the Health Insurance Primary Option?

When purchasing auto insurance, after selecting the basic terms, including the Standard Policy and its details (which includes $250,000 PIP Coverage), you must choose the Health Insurer for PIP Option clause. This clause allows the subscriber's health insurance (rather than the auto insurance) to pay for medical expenses related to traffic accident injuries. If you choose this option, the health insurance will pay for the medical expenses first, and only the portion not covered by health insurance will be paid by the auto insurance. This option was implemented to help subscribers who find auto insurance premiums too high, as it can lower the auto insurance premium and reduce the financial burden on the subscriber. However, this advantage is only valid when no car accidents occur. In the event of an actual traffic accident, the limitations on hospital/doctor choices and the reduced final compensation amount due to this clause can negate the benefits of lower auto insurance.

What happens if you choose the Health Insurer for PIP Option (Auto Insurance)?

First, there are restrictions on the choice of hospitals/doctors for treating traffic accident injuries.

There are hospitals and doctors who specialize in treating traffic accident injuries. These facilities primarily receive payments from auto insurance, specifically PIP Coverage. Most health insurance plans have much broader and more diverse coverage than auto insurance, which can limit the choice of hospitals/doctors for treating traffic accident injuries or may not cover such treatments at all. Given the nature of traffic accident injuries, it is essential to have a wide range of options for hospitals and doctors. For example, if a long-term physical therapy is required, the proximity to home or work must be considered, and for victims who need consultations in Korean, hospitals/doctors that provide Korean language services should be chosen. This range of choices is relatively limited if Health Insurance Coverage is selected as Primary.

Second, the subscriber's out-of-pocket expenses (Deductible, Co-Insurance, and Max Out of Pocket) may be higher than those of PIP Coverage.

When purchasing auto insurance, you set a deductible. If you set the deductible at $250, your co-payment will be $950. This means that after you pay a total of $1,200 in medical expenses, the insurance company will cover the remaining costs within the chosen compensation limit. If you set the deductible at $1,000, your co-payment will be $800, resulting in a total payment of $1,800. Unlike the limited deductible set for PIP, most health insurance plans have varying deductibles based on tiers. Choosing Health Insurance Coverage as Primary is likely to lead to a higher deductible.

Third, if your health insurance does not cover traffic accident injuries, you will incur a $750 penalty and must switch from Health Insurance Coverage Primary to PIP Primary.

Many people do not accurately know whether their health insurance includes coverage for traffic accident injuries when selecting the Health Insurance Coverage Primary Option. In such cases, if an accident occurs and medical expenses are claimed through health insurance, the health insurance will not pay because it does not cover traffic accident injury costs. Consequently, the auto insurance will charge the subscriber, who has benefited from lower premiums by selecting Health Insurance Coverage Primary, a legally mandated $750 penalty fee. This means that PIP coverage will become Primary, and medical expenses will be processed within the insurance limit.

Finally, the most important reason I do not recommend choosing Health Insurance Coverage Primary is due to the subrogation and reimbursement clauses.

The effectiveness of these clauses requires further explanation, but if they are valid, it means that when receiving compensation for accident injuries, the amount paid by the health insurance for medical expenses can be claimed and reimbursed. For example, if medical expenses of $100,000 arise from a car accident, A's auto insurance PIP Coverage pays, while B's health insurance pays. Both A and B receive compensation of $150,000 for accident injuries. Assuming there are no additional costs, A receives the full $150,000 in compensation, while B's health insurance has the legal right to claim $100,000 first. Ultimately, A receives the entire compensation, while B is likely to receive only $50,000 after the health insurance takes its $100,000.

The advantages of lower auto insurance premiums are clear. However, as emphasized in my previous column, you must fully understand the legal rights and benefits you may be giving up for the sake of lower auto insurance premiums.

Written by Attorney Hwang Eun-mi

Accident Injury Specialist, New York and New Jersey Attorney

Associate Attorney

Maggiano DiGirolamo & Lizzi

201 Avenue Fort Lee,

New Jersey 07024

T: 201-585-9111

E: ehwang@mdltriallawyers.com