In July’s Florida Underwriter, I detailed the lead-up to the next fight on reforming Personal Injury Protection (PIP) and the no-fault system. With the 2012 session now upon us, that battle is well underway, along with others about many of the same issues from the 2011 session. Depopulating Citizens Property Insurance Corp. and shrinking the Florida Hurricane Catastrophe Fund, plugging the repackaged drug leak in the workers’ compensation system, and making some progress on bad faith reform all rank high on the agenda. An article on page 18 discusses the property issues, so let’s take a look here at how the PIP battle and the other issues are shaping up for the session ahead.
PIP Reform
The various state and national trade associations have worked together diligently since that July column to gather the simple facts of the problems with PIP, and present them to both policymakers and the public at large in every available forum. One of those forums was Insurance Consumer Advocate Robin Westcott’s PIP Working Group. Under the leadership of CFO Jeff Atwater, Westcott led a series of hearings over the course of the early fall that resulted in her presentation of the report to the governor and Cabinet on Nov. 1, 2011. There, she described the PIP system as being riddled with fraud, to the estimated tune of $900 million. Westcott also described a system of rising premiums driven by staged accidents, unlicensed clinics, lawsuits, and higher average medical charges and procedures. The working group of auto insurers, health insurers, hospitals, medical and osteopathic doctors, chiropractors, lawyers, and consumers failed to produce any recommendations, though, because according to Westcott, “nobody agreed on anything.”
Nonetheless, Gov. Rick Scott, CFO Atwater, Attorney General Pam Bondi, and Agriculture & Consumer Services Commissioner Adam Putnam all expressed disgust at this “fraud tax” on consumers, and called on the legislature to address the issue decisively. CFO Atwater also chided insurers for failing to produce the data for a strong enough case after repeated requests. Consumer Advocate Westcott followed with an open letter to all auto insurers pleading for the industry to provide more and better data, specifically in regard to attorneys’ fees, and stating that it would be “unreasonable to ask policymakers to approve any measure that would restrict an individual’s access to the court system without sound data ....”
Scott and Atwater took a bigger step forward two weeks later when they held a press conference to denounce a system being “taken over by a circling school of piranha” that encourages “scammers who get a payday while innocent citizens get stuck with skyrocketing insurance costs.” The governor and CFO then laid out a framework for reform composed of “four pillars:” fraud prevention, litigation reform, medical utilization and provider reform, and insurer accountability.
November continued to be a busy month as Rep. Jim Boyd, R-Bradenton, the quarterback of the reform efforts in the House, had his HB 119 workshopped by Chairman Bryan Nelson, R-Apopka, and the House Insurance & Business Subcommittee. The version he offered at the workshop reflects the governor and CFO’s “four-pillars” plan, including: specific caps on legal fees and chiropractor and massage therapy visits; better licensing of clinics; a requirement that medical benefits are only due when prescribed by a doctor, dentist, or chiropractor; more certainty for medical charges; and another sunset repeal of the no-fault system, this time on July 1, 2015. To meet the governor’s goal of accountability, the bill also requires insurers to either decrease rates through a “use and file” filing or make a full annual base rate filing with the Office of Insurance Regulation (OIR) within 18 months of the bill’s effective date. The bill also directs the OIR to perform a data call and gather information on the bill’s effects.
Overall, that workshop, and a similar hearing at the Senate Banking & Insurance Committee led by Chairman Garrett Richter, R-Naples, and PIP point man in the Senate, Sen. Joe Negron, R-Port St. Lucie, set the stage for what the industry can expect as the reform effort progresses during the 2012 session. While subcommittee members praised Rep. Boyd for his willingness to tackle this seemingly intractable problem, members of both parties engaged in some tough questioning not unlike what was heard from the medical and legal interests on the Consumer Advocate’s Working Group.
Still, the main difference between this year’s effort and everything in the past is the very vocal and engaged support of Scott and Atwater. They have even gone so far as to publicly criticize the attorney referral services that advertise seemingly everywhere. Rep. Rick Kriseman, D-St. Petersburg, and Sen. Gwen Margolis, D-Miami, have legislation (HB 485 and SB 134, respectively) to regulate and restrict those referral activities and put an end to what appear to be quid pro quo relationships between certain medical and legal providers.
Will this finally be the year for real PIP reform? That’s hard to say, but it is definitely the best chance since 2007, and the people of Florida should not have to wait any longer.
Drug Repackaging
A coalition of business and insurance groups led by Associated Industries of Florida and the Florida Chamber of Commerce is again pressing to rein in the spiraling costs of repackaged drugs in the workers’ compensation system. In 2010, the legislature passed a bill that would have addressed the problem by affirmatively capping the reimbursement fee at the same amount allowed for non-repackaged drugs, but then-Gov. Charlie Crist vetoed the bill. The legislature tried and failed to pass similar legislation considered during the 2011 session.
Already filed for the 2012 session are HB 511 by Rep. Matt Hudson, R-Naples, and SB 668 by Sen. Alan Hays, R-Umatilla. Again, these measures restrict payment for repackaged drugs to no more than the currently allowed wholesale price plus a $4.18 dispensing fee, regardless of location or provider.
The National Council on Compensation Insurance (NCCI) has stated that should such legislation pass, it would make a rate filing of -2.5 percent in response. Previously, at the rate hearing for NCCI’s annual filing, Insurance Commissioner Kevin McCarty expressed his concern “about the increased costs associated with physician-dispensed repackaged drugs,” and he called on the legislature to address the issue.
A November meeting of the Division of Workers’ Compensation’s Three-Member Panel saw the first volley from the drug repackaging vendors. The panel is charged with setting maximum medical reimbursement rates and collecting other data on medical costs in the workers’ compensation system, and providing recommendations to the legislature. One vendor’s representative took issue with NCCI’s calculations and, in a bit of farcical misdirection, said the solution was, “if [insurers] don’t like paying these prices, don’t do it.”
Luckily for the coalition, the simple facts are again on its side. A loophole like this—that gives injured employees nothing but costs employers $62 million a year—can’t withstand the bright glare of the sun for long.
Bad Faith
Expectations for a successful bad faith reform campaign ran hot and high during the 2011 session only to run into a ferocious lobbying offensive by a wing of the trial bar. A valiant effort led by the U.S. Chamber’s Institute for Legal Reform to advance an ambitious bill that would have prohibited direct third-party claims and established multiple safe harbors for insurers to affirmatively avoid bad faith never seemed to get off the ground. Despite support from Associated Industries and the Florida Chamber, not all business groups were on board. One business association executive, expressing concern to me about how that bill might have affected his members as potential first parties in litigation with their insurers, described the proposal as “draconian.”
For 2012, Rep. Kathleen Passidomo, R-Naples, has filed HB 427, a more limited measure that brings common law and third-party claims under the 60-day civil remedy notice and right-to-cure provisions currently applicable to first-party claims under section 624.155(3), Florida Statutes. The bill also specifies that tendering the amount demanded or policy limits “constitutes correction of the circumstances giving rise to the violation.” As of this writing, the bill does not have a filed Senate companion.
Also of interest are SB 4 by Sen. Lizbeth Benacquisto, R-West Palm Beach, and HB 445 by Rep. James Grant, R-Tampa, which would attempt to compensate Eric Brody for injuries caused by a speeding Broward County Sheriff. Last year’s proposed bill that failed to pass awarded Brody $31 million, but directed the Sheriff’s Office to assign its bad faith claim to the Brody’s and essentially made a legislative finding of bad faith against the Sheriff Office’s insurer. As approved by the Senate Rules Committee, SB 4 reduces the award to $15.75 million and no longer contains references to bad faith. Nonetheless, even the possibility of such an unprecedented legislative interposition has the entire tort reform community on guard, ensuring that these otherwise innocuous claims’ bills will receive plenty of attention.
While the legislature will consider other insurance topics in 2012—including jobs and operational-related issues such as expanding Florida’s captive and alien insurer industries and the Model Holding Company Act and its companion public records exemption for trade secrets—the loudest, most contentious arguments will continue to fall around the persistent public policy problems of PIP, property, drug repackaging, and bad faith reform.
The best chances for success on these high visibility issues will come if the industry can maintain a focused agenda and consistent message, backed up by a coordinated and forceful lobbying and public affairs campaign. The only challenge ahead is to go out there and do it.
