New SJC Decision Holds Medpay Provides Coverage Before Health Insurance

Mike Tracy at Rudolph Friedman, http://www.rflawyers.com/, has forwarded to me a decision handed down on May 12, 2008 by the Supreme Judicial Court of Massachusetts, upholding a clause of a health insurance contract that requires Medpay to be exhausted before the health insurer is required to pay. Metropolitan Property and Casualty Ins. Co. v. Blue Cross and Blue Shield of Mass., Inc. (I should note that Mike, who is on top of everything relating to insurance coverage issues, actually forwarded this decision to me on the 12th.)

MedPay is an optional coverage of motor vehicle insurance. It is not part of the PIP scheme, but provides medical coverage to an insured after PIP payments have been exhausted. I haven't run into MedPay issues very often. I think the main reason is that most people who have health insurance don't bother to purchase it, even though it can cover health insurance copayments or other gaps in medical insurance coverage. People who don't have health insurance, I imagine, tend not to purchase any optional coverages as they raise the price of their auto insurance.

In Metropolitan, Rice was injured in a motor vehicle accident. He had PIP and Medpay coverage under a Metropolitan auto policy and had health insurance with Blue Cross. Met paid the first $2,000 of his medical bills under PIP coverage. Rice submitted the remaining bills to Blue Cross.

Blue Cross denied coverage on the grounds that its subscriber certificate stated, "Unless required by law, coverage under this contract will be secondary when another plan [defined elsewhere to include MedPay coverage] provides you with coverage for health care services." Metropolitan brought a declaratory judgment action, seeking a declaration that it was not obligated to provide medical benefits to Rice after his PIP coverage was exhausted.

The SJC noted that by statute a health insurer may not deny coverage because of the existence of PIP benefits, but that no statute prohibits a health insurer from denying coverage because of the existence of MedPay benefits.

The SJC rejected Met's argument that if health insurance would not cover the additional medical bills, Met would cover it under PIP, not MedPay. The SJC stated that such an action would be illogical and contrary to the intent of the PIP statute of keeping the costs of compulsory PIP insurance low. The SJC went further and stated that when a health insurer denies coverage because of the existence of MedPay benefits, the motor vehicle insurer must cover those medical costs under MedPay, not PIP.