NU Online News Service, Aug. 2, 3:16 p.m. EDT
The New Jersey Department of Banking and Insurance (DOBI) is looking to revise personal-injury protection (PIP) regulations less than two years after prior reforms made their way out of legal wrangling.
It was only the end of 2009 when the state Supreme Court affirmed a decision by the state Superior Court's Appellate Division that the insurance department's new PIP medical fee schedule was not arbitrary, as doctors had challenged.
Fee schedules and the battles that follow have been a fixture in New Jersey for decades and now—based on new information DOBI has gathered regarding the cost of providing PIP coverage—about 3,000 additional codes may be added to the fee schedule.
Changes are needed "to close loopholes," says Marshall McKnight, spokesman for DOBI.
Richard Stokes, regional manager and counsel for the Property Casualty Insurers Association of America (PCI), says the proposal is "clearly reform that is needed—and needed now."
Insurance Commissioner Thomas B. Considine "sees that rising PIP costs are a growing concern for New Jersey drivers," Stokes says. "He is right to want to address the underlying problems that are causing the dramatic increase in costs in order to protect consumers."
The last fee schedule, used to reimburse medical providers after treating patients from auto accidents, was adopted in August 2007 before getting tied up in a legal battle. About 1,000 new codes were added to bring consistency, efficiency and predictability to the payment system. Less than 100 codes existed previously.
However, costs of providing PIP coverage continues to drive up private-passenger auto insurance rates, says DOBI. PIP coverage accounted for 97 percent of all rate requests last year and auto insurers pay out $1.23 for every $1 they collect, DOBI adds.
"We knew the last fee schedule was not a panacea," McKnight continues. "There were a few bad actors taking advantage—avoiding codes and using procedures that weren't coded."
Proposed PIP reforms from DOBI do not end at adding codes. The arbitration process could be changed if the new regulations are adopted.
McKnight says arbitration filings spiraled out of control in 2009. About 58,000 arbitration filings (made when healthcare providers and insurers have a dispute over a bill) were made and thousands were frivolous, he adds. Furthermore, DOBI says attorneys' fees were higher than the payment received by the healthcare service provider in 31 percent of arbitrated cases.
Even when the insurer wins the dispute, they still have to pay attorneys' fees. McKnight says one arbitration case was over $3,000. Less than $20 was awarded but the insurer still had to pay lawyers $1,500.
Reforms include provisions to align attorneys' fees with the amount awarded in arbitration and for insurers to submit disputes to their own internal appeals system before it heads to the state arbitration process, McKnight says.
Additionally, because medical providers claim some PIP vendors used by insurers are not qualified, DOBI will require that vendors are registered and copies of contracts with insurers are made available. Vendors are used to determine the medical necessity of procedures.
DOBI will field comments from the industries affected by the proposed regulations before the commissioner makes a determination to adopt the new rules.
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