Navigating the Golchin gulch

Issue January 2015 By Sam Segal

The Supreme Judicial Court (SJC) recently stated in its Golchin v. Liberty Mut. Ins. Co., 466 Mass. 156, 166 (2013) Golchin II decision that the optional Medical Payments (MedPay) coverage on auto insurance "may be approaching irrelevance in light of the recently enacted 'universal' health care mandate."

In an era where there is near-universe health insurance coverage in Massachusetts (and the nation through the Affordable Care Act), there has been a recent series of cases, Golchin I and Golchin II, that have attempted to untangle the knot of how Personal Injury Protection (PIP), MedPay and private health insurance interact where all three apply, in some cased simultaneously and, perhaps surprisingly, allowing for a double recovery for injured parties.

I break down how the medical payments are covered below.

The first $2,000 (PIP applicable): The statute and case law is clear that the first $2,000 in medical bills are to be paid by PIP.

Medical bills in excess of $8,000 (MedPay and health insurance applicable):
Once the total medical bills for an injured party in an incident exceeds $8,000, PIP no longer applies. This leaves MedPay and health insurance as potential payers of the excess bills (the following scenarios assume both could apply; e.g., $25,000 in MedPay coverage and valid health insurance).

It should be noted that all medical bills beyond PIP's initial $2,000 (for non-ERISA health insurance) and $8,000 (for ERISA health insurance plans, including MAHealth and Medicare) must be submitted to the health insurer before MedPay is required to consider them. This prevents plaintiffs from strategically avoiding health insurance liens where both MedPay and health insurance may apply as primary coverage.

Health insurance is secondary to MedPay:
If the health insurer rejects payment of the medical bills due to a "coordination of benefits provision" in their contract making them secondary to MedPay, then MedPay must pay for the medical bills up to their available limits.

Health insurance and MedPay are primary: Where both health insurance and MedPay are primary, an injured plaintiff may recover under both policies above the $8,000 PIP cap, even where that may result in a double recovery. This is the crux of the Golchin cases.

In Golchin, the plaintiff incurred over $100,000 in medical bills resulting from an auto incident. PIP had paid $8,000 and was exhausted. Golchin's health insurer had paid over $30,000 for the remaining bills. Golchin then submitted the health insurer's lien to MedPay for payment under the auto policy, which was denied.

The plaintiff brought an action in Superior Court, asking the court to declare MedPay coverage available to pay the lien; the insurer argued that the coverage would not apply, as the bills had already been paid by the health insurance. The court rejected the insurer's position, holding instead that "the unambiguous language of the auto policy provides MedPay coverage even where a health insurance provider has paid medical expenses resulting from injuries sustained by a claimant in an accident, and there is no nonduplication provision relating to health insurance. Golchin thus is entitled to recover the MedPay benefits available under the auto policy."

The SJC did consider the policy implications, stating that they "acknowledge it is possible that operation of the plain language of the auto policy, as we have construed it, could result in MedPay benefits duplicating payments made by a health insurer." However, the SJC stated the insurance company was not without remedy, since "it is always open to automobile insurers to petition the Division of Insurance to change the language of the policy so as to clarify that it does not require the result of which they complain."

Many insurance companies have since submitted requests to the Division of Insurance to make changes to their policy language to change the Golchin outcome going forward. Any such changes would only impact coverage for auto collisions that occur after they are implemented.

Golchin I & II may be seen as an attempt by the SJC to breathe new life into MedPay coverage, giving the statutorily-mandated offering some new purpose in light of universal health care (thus avoiding near-irrelevance). However, in doing so they are treating MedPay coverage, which is generally considered a form of indemnity, as "less a contract of indemnity than a form of investment [like life insurance]."

$2,000 - $7,999 in medical bills paid by PIP (PIP, MedPay and health insurance applicable):
In light of the result in the Golchin cases, the interaction of all three policies where PIP has paid between $2,000 and $7,999 in medical bills becomes more complicated.

Full $8,000 PIP coverage for medical bills:
Under G.L. c. 90, § 34A, PIP has mandatory limits of $8,000. PIP will pay up to the full $8,000 in medical bills where the insured has an ERISA health insurance plan, including MAHealth and Medicare. This avoids any potential conflicts with health insurance and MedPay coverage.

The Golchin gulch: PIP limited to $2,000 for medical bills not paid by a health plan

However, where the insured has non-ERISA Health Insurance, PIP coverage for medical bills is limited to $2,000. PIP will then pay "any medical expenses 'which will not be paid by a health plan,'" up to $8,000 (including deductibles, co-pays and lost wages).

MedPay coverage is secondary to PIP where PIP would apply. This is where things get tricky. Under Golchin I, the SJC reiterated the holding in Mejia, which found that "only after PIP benefits have been exhausted or where they are unavailable does the standard policy provide that MedPay benefits are due." (emphasis added). This sounds straightforward, but the SJC then went on to state that "the standard Massachusetts auto policy therefore contains language expressly precluding the simultaneous payment of health insurance and MedPay benefits at least until the $8,000 limit of PIP benefits has been reached." This is significant, because the SJC cites no specific authority limiting the simultaneous coverage of health insurance and MedPay within the $2,000-$7,999 range of PIP payments, as it would hold applied once PIP was exhausted at $8,000 in Golchin II.

The Massachusetts Division of Insurance Bulletin 2008-12, which deals with the coordination of benefits between PIP, MedPay and health insurance, states in its examples that these claims must first be submitted to the health insurer and, if they are denied, are then resubmitted to the auto carrier for payment under PIP or MedPay. There is no statement on the applicability of simultaneous coverage in light of the Golchin cases.

Insurance companies have cited the Golchin I language as a basis to deny MedPay coverage until PIP has paid $8,000. Plaintiffs have asserted that the holdings of Golchin I & II require MedPay coverage where PIP is "unavailable," i.e., where Health Insurance has paid.

Some insurance companies take a literal reading of the Golchin I language to mean that MedPay is not available until all $8,000 of PIP is exhausted. However, this would lead to the potentially absurd outcome where, if PIP has paid $7,999 (including deductibles, co-pays, and lost wages) and the medical bills total $20,000, there would be no MedPay coverage available. If PIP paid just $1 more (even in lost wages) and capped out at $8,000, there would be up to $12,000 in MedPay coverage available.

The plaintiff's interpretation of the Golchin cases avoids this Machiavellian outcome. Under the plaintiff's reading, MedPay would be owed whenever PIP is "unavailable" (i.e., when health insurance has paid for a bill), even if PIP is not totally exhausted at $8,000. The plaintiff would then be able to submit the bill or explanation of benefits (EOB) for payment under MedPay after submitting it to the health insurer. Plaintiffs have argued that the full bill is due under MedPay, while insurers have sought to limit coverage to the actual amount paid by the health insurer as stated in the EOB. This avoids the absurdity of significant MedPay coverage depending on deductibles, co-pays, and/or lost wages being paid by PIP to reach the $8,000 cap.

Unfortunately, the SJC has not yet made a final determination on the application of Golchin I & II to this area of coverage. For now the issue has been left to the lower courts, who have thus far sided with plaintiffs in their interpretation. However, expect a future decision to clarify just how MedPay and health insurance policies interact in light of Golchin I & II, where PIP has paid between $2,000 and $7,999 but is not yet completely exhausted at $8,000.

A special thanks to attorney Elliot Beresen of Manelis & Beresen for answering my questions.