AUTO INSURANCE: Florida No Fault Benefits — What Is PIP Coverage and Do We Even Need It?

The debate about auto insurance coverage in the State of Florida is about to get hot. Currently, Floridians are required to carry a minimum of $10,000 in Florida No Fault Benefits, otherwise known as Personal Injury Protection or PIP benefits.  At its inception, the idea behind the Florida No Fault law was simple: reduce lawsuits and help injured people with access to immediate medical benefits and lost wages. If everyone’s own auto insurance paid for their medical and wages, regardless of fault, then people injured in auto accidents would get immediate financial help and there would be no need for lawsuits. In practice, that’s not exactly how it has worked out.

If you are involved in a motor vehicle collision, the Personal Injury Protection (PIP) coverage of your policy pays 80% of your medical and/or 60% of your lost wages, up to the limit of coverage (usually $10,000), regardless of whose is at fault in the accident.

One of the reasons that PIP hasn’t done away with lawsuits is the 20% coinsurance. By only covering 80% of your medical up to $10,000 (unless you got suckered into having a PIP deductible, which means you pay more), you get stuck with the other 20%.  That means for every $100 in medical bills, you pay $20 out-of-pocket.  For those people who are carted off to the hospital, there is a pretty strong likelihood that $10,000 won’t be enough.  When that $10,000 in PIP benefits gets chewed up by your medical bills, you are left with $2,500 out of pocket. Guess how you get that money back? You sue! Well, you don’t have to sue if the at fault driver’s insurance carrier will willing pay you, but that doesn’t happen very often.  The bottom line here is: your PIP coverage still leaves you out-of-pocket.

Recently, the legislature has whittled away at the available PIP benefits.  First, they put all medical providers on a “fee schedule” that limits what they get paid for their services.  Then, they eliminated coverage for things like massage and acupuncture. They also restricted what the coverage extends to in two ways. First, if you are not seen by a healthcare provider within 14 days of your auto accident, then you will have no PIP coverage.  That’s right.  You paid for it, but you don’t get it.  In an effort to prevent fraud, they have unfairly penalized those who try so suck it up, but fail. In short, after an auto accident is no time to try to be the tough guy. Get to a doctor to preserve your PIP.

Secondly, they came up with this farcical term: Emergency Medical Condition (EMC).  If you don’t have one, then your $10,000 PIP benefit becomes a $2,500 PIP benefit. What is an EMC? Ask a doctor….oh wait, they don’t really know either.  The legislature just made it up. Sorry for the sarcasm, but it really is ridiculous. Physicians hate the term. When the term first came out, I would ask physicians if my clients had an EMC. Some would look at me like a deer looking into headlights.  A what? Forgive me. I digress.

Medical bills from an auto accident can exceed hundreds of thousands of dollars. If that happens to you, PIP is a drop in the bucket, and you better carry a lot of Uninsured Motorist coverage, or pray that the at fault driver that hurt you has very large limits to their Bodily Injury coverage (more on this later in this series). It is the more common type of everyday fender bender where PIP can help keep you out of financial trouble. If you have no health insurance and you have no short term disability coverage, PIP benefits can be a tremendous help for you, even if you are the at-fault driver. Since it is a “No Fault” benefit, your insurance pays you regardless of fault.

I don’t need to explain the benefit of having coverage for your medical bills, but no one expects to be out of work from an auto accident. It is sudden and can be financially devastating, even if you have health insurance.

Imagine that you have a physical job. You are in construction or lawn service or law enforcement. A minor knee injury or back injury or shoulder injury can knock you out of work for 6 to 8 weeks or more.  If you don’t have a pretty good cushion in your bank account, you are going to feel the financial squeeze. Even if you have “paid time off” at your job, you could blow through it all. This is where the disability, or “lost wages”, side of PIP comes into play. You can reserve your entire $10,000 to cover lost wages if you want to (although many medical providers make you sign something that says their bills take priority over lost wages on your PIP policy).  This is one of the primary arguments for keeping mandatory PIP.

When you are injured in a motor vehicle collision, your PIP policy is “primary”. That means that the medical providers will bill your PIP insurance first, and once that is exhausted, they will then bill your health insurance. This actually creates a pretty big headache for people who have a Primary Care Physician that they see regularly. If you aren’t so injured that you need to go the emergency room, who are you going to call?  Most of us would call our PCP. Chances are, you are going to hear this: “Sorry, we don’t treat auto accidents.” Why not? Usually because they don’t want the headache of dealing with (or don’t know how to bill) your PIP carrier. Now you are stuck trying to find a physician to treat you.

If you do have health insurance, short term disability and/or paid time off at your job (or you are retired, or unemployed for whatever reason), then, depending on your health insurance coverage, PIP may not be that much help. You probably won’t need the lost wages, and unless you have a tremendous deductible on your health insurance, you’ll most likely end up in the same financial position with respect to your medical bills. If that is the case, why even pay for PIP? That is one of the arguments against mandatory PIP coverage.

I hope this helps explain exactly what you PIP coverage does and what it is supposed to cover. Next week, I’ll discuss the politics behind the upcoming legislative battle over PIP versus BI.

If you have questions or comments about this blog topic, I would encourage you to leave it in the comments section below.  Questions and Comments are a great way to generate a discussion and facilitate understanding of the issues.