Will Obamacare Make PIP Car Insurance Obsolete?

In September of 2012, a Tampa man fed up with high auto insurance rates decided he had enough. On the petition website Change.org, Joe Gaston wrote he was tired of paying more than $1,200 for Personal Injury Protection (PIP) insurance he hadn't used and doesn't need.

He argued that the need for PIP is obsolete, as health care reform would soon cancel out one of the major reasons PIP was required by law: to counter the fact that many drivers didn't have health care coverage that would pay for their hospital care after a car accident.

"That excuse is no longer valid," Gaston wrote. "Since the [U.S.] Supreme Court has ruled that The Affordable Care Act is constitutional, everyone will be required by law to have health insurance … No one will need PIP."

But will the requirement for Americans to get health care coverage or pay a fine really make PIP obsolete?

If you judge the answer to that question by the response to Gaston's petition, the answer is no. Only 10 people signed the four petitions he filed.

And just as Gaston couldn't sell the case, others looking to do-away with PIP because of Obamacare will have an equally difficult time. If PIP is thrown out the window, it could mean slower processing of claims and gaps in coverage in the 10 states that require drivers to carry PIP, despite the introduction of the Affordable Care Act.

A Matter of Efficiency

At its core, PIP isn't just about providing medical coverage to people who don't have health care. It's also about trying to keep the states' court dockets from getting overcrowded with auto insurance cases.

The reason PIP helps keep court dockets less crowded is PIP pays for the policyholder's own injuries. That removes the need to sue the driver responsible for your injuries in order to get insurance to pay, which is the case in most states.

So PIP isn't just about coverage; it's also about speed. Payments in PIP states are often processed quickly. While that has made it a target for fraud in places like Florida, the coverage is more popular in places where rates are more reasonable, such as Oregon.

"The idea is that claims are paid out quickly, and we don't have to get involved," said Brad Schrock, a personal injury attorney in Oregon. "PIP usually doesn't require the attorneys. There are complaints when the insurance companies don't pay, but not about the insurance itself."

Meanwhile, health insurance payouts can take "months to years" longer, Schrock said.

Health Insurers Say Obamacare Won't Completely Fill the Gap

Another obstacle to anyone looking to get rid of PIP is the fact that health insurers think that even with Obamacare there will still be a large number of uninsured Americans, which means PIP will remain a necessity for a significant chunk of the population in PIP states.

According to Sam Miller, the executive vice president of the Florida Insurance Council, "studies show that about 40 percent of the patients visiting emergency rooms currently have no insurance other than PIP."

That percentage may shrink with Obamacare, but it likely won't be completely wiped out.

One reason the gap may remain is that there's a large portion of 18- to 34-year-olds who are expected to just pay a fine instead of buying a policy.

Another (more technical) reason has to do with the U.S. Supreme Court ruling that individual states don't have to expand their Medicaid pools if they choose not to. That was a key pillar of Obamacare to help cover lower-income citizens.

One of the states that has chosen not to expand Medicaid is Florida. Without the expansion, "more than a million low-income Floridians will continue to not have health insurance," Miller says.

Miller also notes that, at the same time, "The advent of Obamacare is likely to eliminate the low income pool ("LIP"), which is currently used to fund uncompensated care at hospitals. The low income persons ineligible for Medicaid are likely to remain uninsured for health care, and the elimination of PIP [would] mean the costs of automobile injuries will continue to be borne by hospitals."

With the LIP possibly up for elimination and Medicaid stagnating in most states, PIP still will likely be the only option for some Americans. So instead of making PIP obsolete in states like Florida, perhaps Obamacare will actually make it more valuable.