A Victory for the Status Quo

Looking back, it really comes as no surprise that no-fault will remain on the books. By nature, the legislature is conservative in that it is reticent to make changes that place an issue outside of its control. For all practical purposes, the end of no-fault cedes the issue to the courts and the legislature can do little but look on. As it is now, lawmakers still have the ability to alter the rules when and if they choose. But an even greater influence on the course of events surrounding the PIP debate was the absence of an outcry among consumers, which is traditionally needed to force lawmakers to act. With auto rates down and the market competitive, consumers had no real stake in the issue, despite a number of polls conducted by advocacy groups. And representatives of the insurance, trial bar, and health-care industries all admitted the lack of pressure from consumers softened the contours of the debate and blocked the implementation of many reforms.

"This was an unusual issue," said Paul Jess, general council for the Florida Justice Association, which successfully fought off attorneys' fees changes. "The average citizen didn't know the issues, didn't care about them, and paid no attention."

As for the industry, the lack of consumer involvement left it without the momentum it needed to repeal the no-fault law or institute major reforms. Now, resigned to the fact that the issue is dead for the foreseeable future, industry representatives can only shake their heads and move on to the next issue.

"This was our best chance to kill no-fault or make serious reforms, and the legislature was not willing to get either done," said William Stander, spokesperson for the Property Casualty Insurers Association. "It was a hard subject for consumers who didn't understand the issues, which are not as clear as property insurance or property taxes."

Problems and Perceptions

In many ways, the state's no-fault system borders on being an anachronism because it straddles two different approaches to insurance. On one hand, it is a mandatory program that all drivers must carry, and like workers' compensation, is designed to be self-executing. Drivers receive a set amount of benefits in exchange for not suing another driver regardless of who is at fault. At the same time, however, it is the last "fee for service," program that doesn't have a medical fee schedule or a detailed set of utilization guidelines. Under the state's no-fault law, all auto policyholders must carry at least $10,000 in PIP coverage, which has a 20 percent deductible. The coverage pays up to 80 percent of medical expenses, 60 percent of lost income, and a $5,000-per-person death benefit.

The arguments against the PIP system are well documented. PIP coverage limits were tailored to cover most physical injuries sustained in auto accidents. Insurers, however, have maintained that without medical fee schedules or utilization controls, the $10,000 limit has become a gratuity that supports a cottage industry of clinics, doctors, and attorneys that serve as a revolving door for PIP cases. That's not to mention the staged accident rings and other criminal schemes that have produced a Department of Financial Services' Division of Insurance Fraud crime blotter that rivals many cities.

When it came to the legislature's approach to PIP, there was a fundamental philosophical difference between the House and Senate. House Speaker Marco Rubio's (R-Miami) main priority was aimed at tort reform, which he believed was the number one reason for increasing PIP costs. Specifically, he wanted a formula that would rein in attorneys' fees, which would serve as a disincentive for them to take on PIP cases. While calling for tort reforms is a favorite card to play by many lawmakers, the truth is that in many cases, it is dead on arrival especially in the Senate. And Senate President Ken Pruitt (R- Port St. Lucie) made it clear that tort reforms were not going to be the Senate's answer to the PIP debate.

In fact, the reforms only contained two small tort changes. First, under the new law, a claimant attorney must consolidate all claims when suing an insurer for benefits provided by the same health-care provider to an accident victim. Second, the law extends the period of time for an insurer to respond to a demand letter from 15 days to 30 days. Claimants must provide insurers with a demand letter stating their intent to sue. If the insurer agrees to pay the claim within 30 days, the insurer is not liable for paying any attorneys' fees.

"The consolidation of claims will save some cost and trouble," said Mark Delegal, a State Farm representative. "And doubling the time to respond to the demand letter will give insurers more time to investigate claims."

On the Senate side, some senators were searching for options beyond a straight repeal of PIP. Senator J.D. Alexander (R-Winter Haven) pushed for a bill that would have required all automobile owners to carry bodily injury coverage, which is currently optional. BI coverage protects auto owners involved in accidents who are at fault and cause bodily injury to a third party. The coverage pays the medical bills, lost wages, and non-economic damages and provides the at-fault motorist with attorneys' fees. Under the state's current BI law, the policy has a minimum coverage limit of $10,000 in the event of injuries to one person, $20,000 when two people are involved, and $30,000 in combined bodily injury and property damage coverage. Alexander sought to mandate the coverage while increasing the coverage limits to $25,000, $50,000, and $100,000, respectively.

However, when it came to the legislature as a whole, neither the House nor Senate looked favorably upon replacing one mandated coverage (PIP) with another mandated coverage (bodily injury).

Shuffling the Cost Deck

As with all insurance debates, the paramount issue revolves around who pays. Nowhere was that more clear than in the PIP debate. Although insurers argue that too often the $10,000 benefit ends up in the wrong person's pocket, in many cases it does provide a much-needed form of financial protection for injured motorists. And it also guarantees that emergency rooms and other health-care providers will receive some compensation for their services. With nearly one-third of the state's citizens not having any form of private or public health insurance, that $10,000 looms large.

The Florida Hospital Association was a major force in convincing the legislature to retain the PIP system. Rich Rasmussen, vice president for state communications for the Florida Hospital Association, said the association calculated that if PIP were repealed, it would cost hospitals millions. "The hospitals would see $140 million in uncompensated care, which is a huge cost shift that would come off the backs of doctors, especially specialists," he said.

Rasmussen went on to add that the cost shift only includes direct medical treatment and not the litigation costs that health-care providers would incur to try and recover any payments. "If there is no insurer responsibility, then physicians and doctors would be left with no choice but to sue to get paid," he said.

The workers' compensation system has long been the model that auto insurers would like to emulate with the PIP system. Under the workers' compensation law, a three-member panel consisting of the insurance commissioner, an employee representative, and an employer representative is charged with setting fee schedules. Separate schedules are set out for physicians, hospitals, and ambulatory surgical centers.

The law also ties physicians' reimbursements to the federal Medicare fee schedules. Currently, general physicians received 110 percent of Medicare, while surgeons and specialists receive 140 percent. Hospitals also receive per diem amounts, except in cases where charges reach a certain level. Workers' compensation also has utilization guidelines that control the delivery of certain medical services. All of those things are currently absent in the PIP system.

In the PIP bill enacted by the legislature, lawmakers took the first step to try and introduce some price controls on medical services. For example, ambulance services and the treatment provided by emergency medical technicians will be reimbursed at 200 percent of Medicare. Emergency services provided by hospitals will receive 75 percent of the hospital's usual and customary charges. And emergency service and care rendered by a physician will receive the usual and customary charges in the community. The law also requires that of the $10,000 PIP benefit, $5,000 must be reserved for emergency room care. It doesn't take a rocket scientist, much less someone familiar with emergency room costs, to see that hospitals will see all $5,000 the minute an accident victim walks or is wheeled into an emergency room.

From the FHA's perspective, the $5,000 set aside is only fair. "Forty percent of all auto crash victims treated in emergency rooms and trauma centers have no other medical coverage besides PIP to pay for treatment," said Rasmussen.

The insurance industry supports many of the medical changes made in the bill, especially those that limit the kinds of clinics that may treat accident victims. However, they are less than impressed with the fee schedules and the inability to manage claim costs. "The fee schedules are generous, but what good are they without utilization controls?" asked Stander.

No bill is complete without the blessing of policymakers, and the PIP bill is no exception. Governor Charlie Crist noted, "Today is a great day for the people of Florida because the Florida legislature stepped in to provide protections for Florida's drivers," he said. "In so doing, they made a good law even better by helping reduce opportunities for fraud."

But for those in the industry who walked away resigned that their best shot at killing or changing PIP had come up short, they could only shake their heads at the legislature's decision to take the path of least resistance and preserve the status quo.