I am involved in the process of renewing our law firm’s health insurance coverage, and in that context our broker brought our attention to this “unique to New Jersey” auto insurance option. New Jersey is the most populous state in the union, with more cars and people per capita than any other state. Given these realities, it is not surprising that New Jersey’s auto insurance rates are among the highest in the nation. Elected officials – and those seeking to be elected – often seize on the subject of reducing auto insurance costs as a popular campaign promise.
Former Governor Jim Florio campaigned in 1992, in part, on a promise to lower auto insurance rates. Florio, who was the incumbent governor, instituted a change in New Jersey’s health insurance law which required health insurance carriers to pay for auto accidents and related medical expenses. These expenses were previously excluded from the scope of health coverage. The Florio changes allowed a New Jersey driver to elect “health care primary” coverage, making their health care insurer the primary payor for auto accident related medical expenses.
Ordinarily, these expenses are paid by the auto insurance company as part of P.I.P. (Personal Injury Protection) benefits. The cost of these PIP benefits was a major factor in the increases consumers were experiencing in their automobile insurance premiums. Florio’s “slight of hand” maneuver did nothing to reduce the amount of these costs, but it did succeed in shifting these costs from the auto insurance carrier to the healthcare carrier, offering a premium savings to the individual who elected to shift his or her auto insurance medical coverage to a health carrier.
Why is it a bad idea to select “healthcare primary” for your auto insurance? There are at least two reasons.
- First, PIP benefits under New Jersey law are quite expansive, and cover a wide range of expenses and services which are not payable by a health care carrier. Home alteration for a profoundly injured individual, vehicle modification, home health aides and durable medical equipment are just a few examples of expenses which are routinely paid by PIP carriers, and routinely denied by health care carriers. When you select “healthcare primary”, you deny yourself – and your family members – the opportunity to have these benefits funded by your auto carrier.
- Second, when you elect to use your health coverage as your primary auto accident related coverage, you are accepting all the limitations that come with that coverage, including, but not limited to high deductibles and co-pays, limitations on physicians and/or utilization limitations which would not apply if your auto insurance carrier was paying the bills. The net effect of making this selection is to incur a major loss in available benefits, for a relatively minor savings in premium dollars. For almost everyone, this is a bad deal, because the value of the services and expenses which are excluded from payment when you elect “healthcare primary” is much greater than any premium savings you might enjoy.
I have seen a number of situations where the election of “healthcare primary” created a major problem for my client, and I have never seen a situation where someone felt that the reduction in benefits they suffered was worth the cost savings they received. Don’t make the mistake of electing “healthcare primary” when you purchase auto insurance in New Jersey.
