Car Insurance Requires Medical “Option”

Jun 12th, 2008 | By Hot News Reporter | Category: Insurance Today

Colorado motorists who are unfortunate enough to be injured in a crash will have one less thing to worry about thanks to a bill signed by Gov. Bill Ritter late last week.Or they’ll have one more thing to worry about. It depends on your perspective.Ritter signed a bill, Senate Bill 11, that will require every auto insurance policy issued in Colorado to have $5,000 of medical payments coverage, known as “med pay.” It has an opt-out clause, too, so people who determine they don’t need the extra coverage don’t have to get it if they don’t want it. But now they will have to have the option.

The law will help motorists, especially those who don’t have health insurance, by offering enough money to cover the cost of a typical ambulance ride, for instance. Those who do have health insurance could use the med pay to cover their deductible or out-of-pocket expenses.

But the new system is also likely to increase the cost of insuring your car.

Colorado ended its long-standing no-fault auto insurance program in 2003 and switched to an at-fault system. Under the old system, a driver injured in a crash would have his medical expenses covered by his own insurance, even if it wasn’t the driver’s fault. Under the newer system, the at-fault driver is responsible for payment, and before payment can be made, someone has to determine whose fault it was.

Medical payments coverage became optional under the new system, and many motorists either thought they didn’t need it or decided to save money on premiums by going without it.

But some drivers who don’t know about that or don’t buy enough coverage can’t afford their medical bills. They can sue the at-fault driver, but that might not matter if the person at fault doesn’t have much money.

That has meant trauma care providers are often unpaid because the injured motorist can’t afford to pay.

The Trauma Care Preservation Coalition, a group of ambulance companies, hospitals and other emergency services providers that formed to address the problem, said the system has cost hospitals and ambulance companies millions of dollars in unpaid bills, and that translates to higher costs for patients who can afford to pay.

In 2002, under the old system, hospitals were reimbursed for about 60 percent of the care they provided to motor vehicle accident patients, according to a report commissioned by Ritter’s office in February. By 2006, that number had dropped to 36 percent, the report found.

Reverting back to a mandatory med-pay system will ensure that more of those expenses are covered—$5,000 worth, at least.

Ritter said the bill would help consumers and emergency services providers.

“Almost everyone has out-of-pocket medical expenses, such as co-pays and deductibles, which could be paid for by medical coverage in the event of an accident,” he said in a statement. “Senate Bill 11 will help ensure that every Coloradan has the coverage that he or she needs and that ambulances, physicians and hospitals are paid for the critical care that they provide.”

But that comes at a price.

Mandatory extra coverage will likely drive up insurance premiums, said Alan Miller, assistant public affairs manager for State Farm Insurance based in Greeley.

“We were opposed to SB11 from the standpoint of, as much as we are happy to sell people our products, we don’t feel people should be forced to buy additional insurance that they may not need, want or, frankly, be able to afford,” he said. “This bill will require people to buy additional insurance.”

Though they can opt out, Miller said many people don’t, not only because they think they have no choice but because that option requires a written declination of the coverage. That will result in higher costs for everyone, as insurers are forced to carry more policies.

Since the at-fault system went in place, auto insurance premiums decreased throughout the state, up to 35 percent, he noted.

“That’s really what moving away from no-fault was designed to do. With no-fault, it was so out of control; there were so many things that had been added on that, that it was becoming so expensive. It was just skyrocketing,” he said.

Industry representatives said things like massages and even aquariums were covered under the old system, because they were considered rehabilitative. While SB11 won’t reintroduce those kinds of problems, rates will likely creep skyward, Miller said.

“I think we’ve hit the bottom, and because of these legislative mandates, we’re going to be seeing rates go up,” he said.

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