Metropolitan Property & Casualty Insurance v. Blue Cross & Blue Shield of Massachusetts, Inc.

Citations: 451 Mass. 389; 885 N.E.2d 825; 2008 Mass. LEXIS 244

Court: Massachusetts Supreme Judicial Court; May 12, 2008; Massachusetts; State Supreme Court

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A dispute arose between Metropolitan Property and Casualty Insurance Company (Metropolitan) and Blue Cross and Blue Shield of Massachusetts, Inc. (Blue Cross) regarding the responsibility for medical expenses incurred by Bernard Rice after an automobile accident. Both insurers agreed that the initial $2,000 of medical costs would be covered under the personal injury protection (PIP) benefits mandated by the automobile insurance policy. The contention lies in whether Blue Cross can defer coverage for expenses exceeding $2,000 due to Rice’s optional medical payment (Med-Pay) benefits included in his auto policy. The court found no statutory prohibition against Blue Cross deferring coverage, leading to the affirmation of the Superior Court’s summary judgment favoring Blue Cross.

The case background reveals that Rice submitted medical bills totaling $5,266 to Metropolitan after receiving treatment. Metropolitan paid the first $2,000 but directed Rice to seek payment for the remaining balance from Blue Cross. Blue Cross denied coverage based on a clause in its subscriber certificate that indicated its coverage would be secondary when another plan provided healthcare services, specifically referencing the Med-Pay coverage in Rice’s auto policy. Subsequently, Metropolitan filed a lawsuit seeking a declaration of non-obligation beyond the initial $2,000. The Superior Court ruled in favor of Blue Cross, prompting Metropolitan to appeal, which was subsequently transferred to a higher court.

The statutory framework underscores Massachusetts' “no-fault” insurance system, which instituted PIP benefits to replace tort recovery for medical expenses below $500. Amendments in 1988 adjusted the PIP coverage to $8,000 but stipulated that PIP would only cover the first $2,000 in instances where the insured had health insurance for additional expenses.

The "coordination of benefits" scheme outlined in the final paragraph of 34A limits personal injury protection (PIP) benefits to $2,000 for medical and funeral expenses incurred within two years of an accident, contingent upon these expenses not being covered by health, sickness, or disability insurance. Health insurers cannot deny coverage for these expenses solely due to the availability of PIP benefits. PIP covers expenses beyond $2,000 only if they are not covered by health insurance and does not cover claims denied by health insurers due to contractual non-compliance, such as out-of-network care. 

MedPay benefits, which provide optional medical coverage up to at least $5,000, are distinct from PIP benefits and are mandated by G. L. c. 175, 113C for automobile insurers. Blue Cross contends that its certificate allows it to decline payment for medical bills when MedPay is available, while Metropolitan argues this contradicts the coordination of benefits provision. The court agrees with Blue Cross, concluding that the provision in 34A does not prevent health insurers from deferring to MedPay benefits. The no-fault system aims to manage compulsory automobile insurance costs, and requiring the use of available health insurance before exceeding $2,000 in PIP benefits supports this goal. Metropolitan claims that if Blue Cross denies coverage due to MedPay, it would cover those expenses under its PIP benefits instead.

Health insurers are effectively bypassing the coordination of benefits provisions of statute 34A by deferring to Personal Injury Protection (PIP) benefits, but this outcome is not mandated by the statute. According to 34A, PIP does not cover medical expenses exceeding $2,000 if health insurance is available. However, it does not require PIP to cover expenses that health insurance denies, particularly in situations where MedPay coverage is present. Paying medical costs from PIP when health insurance denies coverage due to MedPay is contrary to the legislative intent of 34A, which aims to lower the cost of compulsory motor vehicle insurance.

In this context, when a health insurer denies coverage based on a contract clause that allows it to defer to MedPay, the automobile insurer should utilize MedPay to cover those expenses, not PIP. Metropolitan Insurance argues that its policy language prohibits using MedPay for expenses deferred by Blue Cross. Specifically, Metropolitan points to clauses in its policy stating that it will not pay expenses covered by PIP or other auto policies and that PIP benefits are prioritized for payment. However, these clauses do not apply if the expenses are not payable under PIP due to 34A’s coordination of benefits provision.

Although the policy states that PIP covers medical expenses over $2,000 not paid by a health plan, this is not an absolute guarantee. Insurers can petition the Division of Insurance to amend policy language if necessary. Metropolitan also claims Blue Cross has not provided a statute allowing it to defer to MedPay, but it has not shown any statute that prohibits such deferral. Consequently, Blue Cross's practice of denying coverage due to MedPay availability is deemed permissible.

The Division of Insurance has previously supported this interpretation. A 1990 bulletin clarified that when health insurance is available, PIP does not pay for expenses over $2,000, allowing MedPay to cover them. Moreover, unless the health insurance contract allows deferral to MedPay after the initial $2,000 in medical expenses, claimants may submit further bills to either MedPay or the health insurer. This position was reiterated in a 2003 communication from the Division’s counsel.

Health providers with deferring language in their contracts typically follow a payment sequence where Personal Injury Protection (PIP) covers the first $2,000 in medical bills, followed by Medical Payments (MedPay) up to its limit, and then the health provider pays remaining expenses as per contract terms. Uncovered bills may be addressed by any remaining PIP funds. This payment hierarchy is seen as standard practice among PIP, MedPay, and health insurance providers. Although the statements from the Division have less deference than official agency actions and are not to be taken if they misapply the law, they help interpret ambiguous statutory provisions.

Regulations (211 Code Mass. Regs. 38.00) indicate that MedPay is primary, with Blue Cross’s health insurance as secondary. The term 'plan' encompasses medical benefits from auto policies, identifying a 'primary plan' as one without order of benefit determination rules, which MedPay lacks. Conversely, Blue Cross has such rules, making it a 'secondary plan.' Regulation 38.05 stipulates that primary plans must provide benefits as if secondary plans do not exist, allowing Blue Cross to defer coverage when MedPay benefits are available.

The Superior Court’s summary judgment in favor of Blue Cross is affirmed since there are no statutory prohibitions against health insurers deferring coverage based on the presence of MedPay benefits. The document acknowledges amicus curiae briefs but notes that neither Bernard Rice nor his healthcare provider participated in the action. Historical context indicates that as of 1959, automobile insurers offered optional medical coverage under the law, with legislative amendments clarifying the mandate for medical payments coverage. The parties dispute which legislative sections regulate MedPay—Blue Cross cites G. L. c. 175, 111C, while Metropolitan refers to G. L. c. 175, 113C. Ultimately, both sections are determined applicable without substantive impact on the case. Metropolitan argues MedPay covers expenses outside health plans or PIP, while Blue Cross contends it allows insureds to claim medical expenses and seek tort damages without health insurance subrogation.

No legislative history supports the positions regarding MedPay's purpose, which likely was to cover medical expenses for those without health insurance. As universal health care becomes more prevalent, the relevance of MedPay may diminish. Both parties assert that a ruling favoring their interpretation is necessary to fulfill MedPay's legislative intent and benefit purchasers. However, the lack of clarity on consumer motivations and legislative purpose necessitates a focus on the statute's plain language.

The law prohibits health insurance policies from denying coverage for medical expenses based on the existence of personal injury protection (PIP) benefits. The court in Dominguez v. Liberty Mutual Insurance recognized that there are situations, such as out-of-network care, where PIP does not cover certain health care costs. In Mejia v. American Casualty, the Appeals Court ruled that injured insureds must first submit medical bills exceeding $2,000 to their health insurer before seeking payment from the automobile insurer, reinforcing that MedPay applies only if PIP is unavailable.

The division's interpretation, which suggests MedPay begins paying after $2,000 in medical expenses, is relevant due to the Commissioner of Insurance's regulation of MedPay premiums, implying rates reflect this interpretation. The court's ruling in Allstate Insurance Co. v. Bearce confirms that MedPay constitutes primary coverage, requiring automobile insurers to cover medical expenses even if the insured has received compensation from other sources.

Metropolitan contends that Blue Cross's deferral clause is invalid because an 'other insurance' clause should only apply if the referenced insurance covers the same risk. Metropolitan argues that MedPay covers a different risk since it activates only after medical expenses exceed $8,000 without health insurance. This view is rejected; MedPay is broadly viewed as insurance against medical expenses from automobile accidents, similar to health insurance. Consequently, Blue Cross's 'other insurance' clause is valid. While this ruling may disincentivize MedPay purchases, it follows the statute's language, and any legislative changes to encourage MedPay uptake would require amendments.