Coordination of Benefits
Under the Michigan no-fault system, an insured person may purchase either an“uncoordinated benefits” or a “coordinated benefits” no-fault insurance policy. If the insured purchases an uncoordinated benefits policy, the no-fault insurance company is obligated to pay no-fault benefits even though similar benefits may be payable to the injured person under another health insurance policy.
On the contrary, if the insured person has purchased a coordinated benefits no-fault insurance policy, the no-fault insurer is only obligated to pay those expenses and benefits that are not paid by other applicable health or accident insurance coverage. In other words, a no-fault benefits policy that is coordinated is secondary to traditional health insurance plans such as Blue Cross Blue Shield, health coverage through health maintenance organizations (HMOs), and health coverage through preferred provider organizations (PPOs).
In light of the fact that the premium charged for a coordinated benefits policy is less than the premium for an uncoordinated policy, the majority of Michigan auto insurance consumers have purchased (either knowingly or unknowingly) coordinated no-fault coverages.
The statutory section that permits coordinated no-fault policies is Section 3109a, which states that a coordinated no-fault policy is coordinated only with respect to the person named in the policy, the spouse of the insured and any relative of either domiciled in the same household. Therefore, unless the injured person falls into one of those three categories, no-fault benefits payable under such a coordinated policy cannot be coordinated with other health coverages.
The Mechanics of No-Fault Coordination of Benefits
Conflicting Coordinated Policies
Sometimes an injured person will be insured under a coordinated no-fault policy and a health insurance policy that also has language that coordinates its coverages with other health and accident coverages, such as no-fault insurance. When that happens, the two policies are conflicting, with each attempting to make itself secondary to the other coverages.
The Michigan Supreme Court has held that where there are two conflicting coordination of benefits clauses, the conflict is resolved in favor of the auto no-fault insurance company, thus making the health insurance primary and the auto no-fault insurance secondary. See Federal Kemper Ins Co v Health Ins Admin, 424 Mich 537 (1986).
However, where the no-fault policy is uncoordinated and the health insurance policy is coordinated, the no-fault policy is primary and the health insurance policy is secondary. See Smith v Physicians Health Plan, Inc, 444 Mich 743 (1994).
Although it is not a common occurrence, sometimes an injured person has an uncoordinated no-fault policy and an uncoordinated health insurance policy. In that situation, neither of the two policies will be able to coordinate with any other coverages. Therefore, this creates a potential “double dip” situation where medical expenses are payable under both policies.
Michigan courts have held that where both the no-fault policy and the health insurance policy are uncoordinated, the injured person is indeed legally permitted to double recovery (payment under each policy) as a higher premium was theoretically paid to obtain two uncoordinated coverages. See Haefele v Meijer, Inc, 165 Mich App 485 (1987).
ERISA Health Plans — A Different Rule
Many individuals receive their health insurance through their employment, under an employer self-funded health plan established pursuant to a federal statute known as the Employee Retirement Insurance Security Act (ERISA). ERISA plans are different than traditional health insurance coverage such as Blue Cross Blue Shield.
If the injured person is insured under an ERISA plan and if the plan contains a coordination of benefits clause making it secondary to auto no-fault coverages, the courts have enforced such provisions even where the no-fault plan also has a coordinated benefits provision. In other words, where a no-fault policy is coordinated and an ERISA plan is coordinated, unlike the situation with health insurance, the auto no-fault plan will be primary and the ERISA plan will be secondary. See Auto Club Ins Ass’n v Frederick & Herrud, 443 Mich 358 (1993). The result may be different, however, if there is some ambiguity in the language of the ERISA plan. See Auto-Owners v Thorn Apple Valley, 31 F.3d 371 (6th Cir. 1994).
Special Concerns for Patients with Coordinated No-Fault Policies and Managed Care Health Plans
Consumers who are insured under a coordinated no-fault policy, and who are also members of HMOs, are confronted with special rules if they seek treatment outside of the HMO program. The Michigan Supreme Court has held that if the service or treatment is available within the HMO and the patient seeks the service or treatment outside of the HMO without following proper procedures to obtain HMO approval, the no-fault insurer is not obligated to pay for any of the cost of the service or treatment obtained outside of the HMO. See Tousignant v Allstate Ins Co, 444 Mich 301 (1993).
This rule, however, should only apply where the specific medical service is available within the HMO program. Where it is not, the no-fault insurer should not be released from its obligation to pay for treatment, if the treatment is otherwise “reasonably necessary” under Subsection 3107(1)(a). For example, if chiropractic treatment was deemed “reasonably necessary” under Subsection 3107(1)(a) and chiropractic services were not available through a patient’s HMO, the patient’s no-fault insurance company would be obligated to pay for that chiropractic treatment. See Sprague v Farmers Ins Exch, 251 Mich App 260 (2002).
The Tousignant decision dealt with patients who had health coverage through an HMO plan. Recently, however, some no-fault insurers have attempted to extend theTousignant holding to patients who have health insurance coverage with preferred provider plans (PPO’s). In other words, if a patient has health insurance that will pay the full cost of a particular service if rendered by a participating provider, a coordinated no-fault insurer may attempt to deny payment of all or some of the medical expenses that the patient incurs by treating with a non-participating provider.
As of the present date, no appellate court has specifically approved such an extension of the Tousignant holding to PPO’s. Nevertheless, great caution should be used in these situations.