1/25/2012
By: Michael Adams
Insurance Journal
Most agree that Florida’s
automobile no-fault personal injury protection (PIP)
system needs to be reformed. But in the halls of the
state Capitol the struggle over just how to reform the
law has exposed how complicated it is to rein in what
has become a financial juggernaut, one that has even
left the insurance industry divided.
Florida Insurance Council
Vice President Sam Miller said at a recent press
conference said the industry is unanimous that the
current state of Florida’s PIP law is unacceptable. But
even he had to admit that what course to chart next is
proving to be a challenge for the industry.
“Some companies say get rid
of PIP,” Miller said. “But other companies are concerned
about what will take its place.”
With Florida’s legislature
in full swing, the question of what to do about PIP has
taken on a sense of urgency after months of
deliberations among lobbyists and lawmakers, insurance
company executives, and a host of consumer groups that
have emerged around the state.
While the problems appear
obvious, no one can say with any certainty just what
combination of law changes will have the most positive
impact on the system.
The Florida no-fault law
requires every driver to carry $10,000 of coverage to
pay for medical injuries, loss wages and funeral
benefits in the event of an accident. The no-fault
system is meant to ensure that all drivers have some
personal medical insurance to pay for small injury
claims without the need for litigation. Once that
$10,000 is breached, drivers and their attorneys are
free to sue other drivers and their insurance company.
Insurers, consumers and
many state officials, however, say that the system is
being abused by unscrupulous attorneys, medical clinics
and health care providers fraudulently collecting
benefits.
Florida has tried three
times over the past decade to reform the system
including 2001, 2003 and 2007, when lawmakers briefly
allowed the no-fault law to expire only to end up
quickly coming back to Tallahassee to re-enact law. Due
to the political power of all the groups involved
including, trial lawyers, medical doctors and hospitals,
those reforms were largely watered down in favor of
fraud proposals.
Now, there is a concern
among some onlookers that this year could be a replay of
those prior years’ efforts
Dollars and Sense
Perhaps no one has spent
more time studying the state’s PIP system over the
course of last several months than the state’s Insurance
Consumer Advocate Robin Westcott.
Almost from the first day
she took office following her appointment by state Chief
Financial Officer Jeff Atwater last October, she was put
in charge of a 30-plus member working group on PIP that
represented every side of the issue.
While some hoped the group
would develop specific legislative proposals, Westcott
said the group has more been conducting an intensive
fact finding mission. She said it was clear early on
that few members were willing to commit to any position.
“You were never going to
get a consensus out of that group of people,” Westcott
said. “They all have too great a financial interest.”
The working group’s 65-
page report contains many now well-recited facts such as
the National Insurance Crime Bureau’s finding that
Florida leads the way in the number of staged accidents
and questionable medical claims. It also points out
problems with litigation and medical costs.
But for Westcott, the
bottom line is how all these factors are affecting
Florida drivers.
For example, State Farm
Mutual Insurance Co. reported that an average family
with two teenage drivers living in Miami-Dade County
paid $2,450 in insurance premiums in 2008. Today, that
same family is paying more than $3,000. If the same
family lived in Central Tampa, they would have paid
$1,276 in premiums in 2008 as opposed to the $1,997 they
would be paying today.
That is why the working
group’s one specific recommendation is that if reforms
address the cost drivers, then insurers must reflect
those savings within 12 months of when they reforms are
enacted, and every six months after.
“I certainly believe that
companies are sustaining losses on this line of
business,” said Westcott. “But there has to be the
expectation that if there are substantial changes, then
there has to be rate reductions.”
The Art of the Deal
Florida Association of
Insurance Agents Jeff Grady said that what he is seeing
is less a split in the industry and more of a struggle
over the art of the deal. In an election year where
campaigns are fueled by the deep pockets of trial
lawmakers and the multiple factions within the medical
community, the question remains whether it is even
possible to get the kind of comprehensive reforms many
think are needed.
“Even if the reforms are
achievable, then to what extent?” Grady said. “Do you go
after fraud and utilization and leave the attorney fees
out of it?”
As is common with the
legislative process, lawmakers are trying to start where
there is some basis of agreement and there is nothing
more politically popular than waving the banner of
fraud. The last three attempts to reform PIP largely
turned into fraud bills after lawmakers could not agree
on how to institute other reforms.
This year’s fraud
provisions largely build on those bills by, among other
things, revising the information contained in accident
reports and beefing up the state’s Division of Insurance
Fraud,
But separate from the fraud
provisions are two far different approaches to try and
rein-in medical costs.
By far, the most
controversial bill is HB 119, sponsored by Rep. John
Boyd (R-Bradenton). In some respects the bill is a
bait-and-switch proposition since it ends the state’s
no-fault law, only to institute another insurance scheme
that all drivers must purchase that maintains the
$10,000 in medical coverage and provides loss wages and
funeral benefits.
But Boyd’s proposed
“Emergency Care Coverage” law then deviates from the
state’s current no-fault law by making an end run around
the medical clinics and directly funneling PIP cases to
hospital emergency rooms. It also limits the window for
seeking treatment following an accident to 72 hours and
doesn’t allow accident victims to be treated by their
primary doctors.
“To treat parties injured
in an accident quickly, promptly, professionally, and
efficiently, the best place to treat them comes down to
hospital emergency rooms and competent emergency room
staff,” said Boyd.
While Governor Rick Scott
has tentatively offered his support for the bill,
consumer groups and doctors are coming out strongly
against the plan.
Florida Consumer Action
Network Bill Newton said the bill would make Florida
drivers pay PIP prices while cutting benefits. He also
warned the bill with its mandatory emergency room
treatment and 72 hour treatment window will inevitably
place PIP costs on other forms of insurance.
“Consumers will be hurt by
rising health insurance premiums that will inevitably
occur when costs for accident-related health cares is
simply shifted from auto insurance policies to health
care premiums,” he said. “And our already overcrowded
emergency rooms cannot afford an influx of patients
trying to retain their PIP benefits.”
Even insurance executives
privately say the reforms may be too draconian, while
giving Boyd, a freshman lawmaker, points for at least
thinking outside box. But following the adage that while
the House passes bills, the Senate that makes law, the
prospects for the bill may be marginal.
So far, the Senate has
shown little of the urgency to address PIP compared to
the House. The Senate’s one blueprint for reform is much
more restrained and seeks to work within the current
no-fault law. SB 1860, sponsored by Sen. Joe Negron
(R-Palm City), is likewise anchored by fraud provisions,
but also addresses medical costs by going after PIP
clinics.
Following the contours of a
local ordinance adopted by Hillsborough County last
year, the bill would require medical clinics treating
accident victim to obtain a separate PIP license in
addition to a medical license. It would also exclude
some medical practitioners from filing PIP claims such
as massage therapist and acupuncturist.
Miller said that lawmakers
may end up adopting a number of reforms designed to both
satisfy the various factions in the industry and
substantially change the way PIP claims are handled.
“It is conceivable that
what finally passes are both approaches,” Miller said.
“A package of reforms with a sunset provision in four
years if those reforms don’t work out.”
As for Westcott and her
vantage point on the sidelines, she can only hope that
all the effort put in by the working group will be in
vain.
“I will be very
disappointed if nothing happens with PIP that is not
aggressive and comprehensive and gives the state’s
drivers the rate decreases they deserve,” Westcott said.