People who like to discover loopholes in new legislationtypically wait for the ink to dry on the governor's signaturebefore wrangling through the holes. But there is no such decorum inFlorida when it comes to pending no-fault auto insurance reforms

|

Florida Gov. Rick Scott had not even received HB-119 when an“enterprising” medical staffing company already began advertisingways to circumvent the intent of the bill's provisions. Is this thefirst clue that reform of no-fault—also known as personal injuryprotection (PIP)—is doomed? Hopefully not. Yet, it is certainly nota clean launch to reforms intended to stem the PIP abuse that isblamed for deteriorating loss trends and rising insurancepremiums.

|

On the last day of the legislative session, Florida lawmakerspassed a bill to make changes to PIP to fight the fraud associatedwith staged accidents and abuses of the $10,000 mandated PIPbenefit, a pot of gold being dipped into through illegal orimproper medical billing and an ever-rising number oflawsuits. 

|

Unscrupulous PIP dippers caused the average cost of each claimto rise by more than 60 percent over the past four years. Claimspayouts averaged $5,812 in 2008 and soared to $9,478 in 2011,according to the Insurance Information Institute (I.I.I.). A reportby Florida's insurance consumer advocate clearly noted that costsexceeded premiums, with Florida auto insurers paying out $1.15 inlosses for every premium dollar collected. 

|

The Overhaul

|

To address rising fraud, rising claims, and rising premiums,legislators passed HB-119—a PIP overhaul. The big question: Will itwork? The straight answer: Wait and see.

|

For more than four decades, almost since the day Floridainitially enacted PIP in 1971, the state has wrestled withbalancing good PIP intentions with the unfortunate bad behaviorsthat make PIP benefits an attractive way for fraudsters to make aliving. No-fault is intended to compensate injured people promptly,without regard to pinning blame for a car crash. PIP is supposed toreduce lawsuits and lead to lower insurance premiums. But it hasnot, despite numerous past attempts to fix what ails it. In fact,some past PIP modifications and judicial interpretations actuallydisabled fraud-prevention tools, making illegal actions easier toperpetrate. HB-119 may, in fact, be the last, best hope to get PIPright. 

|

Immediate changes from PIP reform will likely be unnoticed bypolicyholders. Once Gov. Scott signs the bill, which he is expectedto do, its effective date is July 1, 2012 for reforms directed atstrengthening licensing requirements for medical clinics thatreceive PIP reimbursement—and those changes are not much differentfrom what currently exists. 

|

New for medical providers are stiffer penalties for those whodefraud. Health care providers conducting fraudulent activities canhave their licenses revoked for five years and be ineligible toreceive PIP payments for 10 years. Additionally, starting in July,law enforcement officials investigating car crashes will list allpassengers on the crash report. This will stop “jump-in passengers”from trying to claim injury from a car crash in which they werepresent only in spirit. 

|

Impending Uptick in Litigation?
ForFlorida drivers, PIP reform becomes visible in January 2013 withthe introduction of a new acronym—EMC, which stands for EmergencyMedical Condition. It is defined as being injured in a car accidentand experiencing symptoms severe enough that failure to seekimmediate medical treatment could result in serious jeopardy orimpairment. “Immediate” is defined as needing to seek treatmentwithin 14 days. 

|

Critics of this change already predict an increase in lawsuitsas interpretations of immediacy and severity of injuries aredebated. However, let's focus on the intent of EMC; it is supposedto separate the truly injured from the slightly discomforted.Injured drivers and their passengers who have severe symptoms areeligible for the full $10,000 PIP benefit. Those with injuries of alesser nature have a PIP benefit limited to $2,500. And, if youhave a serious injury, aka medical emergency, you cannot visit yourneighborhood pain clinic for medical care. 

|

Only certain types of medical providers willbe allowed to treat PIP claimants once the law takes effect. Formedical emergencies, injured drivers and their passengers may betreated by ambulance, at a hospital, or from a physician,osteopathic or chiropractic physician, or dentist, including one'sown personal medical provider providing they are among theseprofessionals. Non-emergency treatment can be obtained from anymedical provider, except a massage therapist or acupuncturist.

|

If follow-up care is needed, a referral is necessary from aphysician, osteopath, chiropractor, or dentist. Why exclude massagetherapy and acupuncture treatments from PIP reimbursement? It'sabout overutilization and establishing protocols similar to thosein managed care settings. PIP was the only coverage lacking in suchprotocols. 

|

While all types of medical care costs under PIP in Floridaexceed the medical inflation rate, the greatest increase was formassage therapy. Treatment by massage therapists represented 21percent of the total PIP costs in 2010, and PIP fee schedulesadopted in 2007 only caused the number of treatments to rise. In2005, the average charge per claimant for massage therapy was$2,887, according to an analysis done by Mitchell Internationalwith U.S. Bureau of Labor Statistics data. By 2010, the averageclaimant charge for massages under PIP was $4,350, a 51 percentincrease after adjusting for medical inflation. For acupuncture,2005 average costs per claimant were $2,754; by 2010, it was$3,674. 

|

Examinations Under Oath
PIP reform alsoclarifies that an insurer can ask a policyholder to take anexamination under oath (EUO) and have an independent medicalexamination (IME). If the policyholder fails to show up for twoIMEs or to reasonably cooperate with a EUO, it can lead to a denialof the claim. While these changes are not new, they may help toclear up fog from a Florida Supreme Court decision in 2010(Custer Medical Center vs. United Auto) that someinterpreted to make EUOs impermissible, hampering the effectivenessof this fraud-fighting tactic.

|

Claims will continue to be paid within 30 days; however, iffraud is suspected, the new law extends the timeframe for payingclaims to 90 days so a more thorough investigation can beconducted. If an investigation determines no fraud exists, insurerspay the original claim amount plus interest. The law also providesan additional $5,000 death benefit; current law made the deathbenefit part of the $10,000 PIP limit, and it was often depleted bymedical expenses.

|

|

Attorney fees get attention with PIP reforms. An increasingnumber of PIP claims have attorney involvement. The FloridaDepartment of Financial Services estimated that for 2011 there were39 lawsuits filed for every 100 crashes—more than four times theratio in 2006. The new law states that attorney fees must complywith prevailing professional standards, without overstatement orinflation of the number of hours spent on the suit. Additionally,the law prohibits the use of a contingency fee multiplier, whichfurther added to the overall cost of claims payments. 

|

Again, will the PIP reforms work, and will they bring autoinsurance rates down? Ordinarily, the answer to that question wouldbe time will tell, but there's not a lot of time. Legislators wantproof they made the right PIP decisions, and they want it fast.

|

|

The bill's effective date for a few of the changes is July 1,and within three months—by October 1, 2012—auto insurers mustsubmit a rate filing to regulators showing at least a 10 percentrate reduction or document why they cannot. It's very possible someinsurers may see claim costs rise toward the end of this year, asthose who live off current PIP flaws try to cash in before themoney train leaves the station. By October 1, 2014, PIP insurersare expected to submit another rate reduction of at least 25percent from 2011 premium levels, an additional 15 percent from thereductions anticipated this year. 

|

Florida politicians have a history of mandating rate decreasesfor property insurance, and that hasn't worked out very well. Canit work for auto insurance? Anything is possible, as evidenced bythe brazen approach of a Tampa, Fla.-based medical staffing companyalready trying to sidestep the new PIP law before it even takeseffect. They sent an advertising flier offering to have doctorsmake house calls to clinics to certify injuries as serious in orderto qualify for the full $10,000 PIP benefit, rather than the $2,500non-emergency amount. The ad headline: “Chiropractors. Don't missout on your $7,500.” 

|

Let's hope this mandate doesn't miss out on delivering on itspromises, and that it hits the right root causes of Florida's PIPproblems. 

Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader

  • All PropertyCasualty360.com news coverage, best practices, and in-depth analysis.
  • Educational webcasts, resources from industry leaders, and informative newsletters.
  • Other award-winning websites including BenefitsPRO.com and ThinkAdvisor.com.
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.