PIP Reform Backers Confident Motorists Will Save with New Law
Around the State
As the legislative session came to a close, one of the big victories touted by Gov. Rick Scott, Chief Financial Officer Jeff Atwater and others was a major overhaul of personal injury protection auto insurance.
The low-cost insurance option, many said, has become a racket for fraudsters that bloated the system and drove up costs.
In major urban pockets of the state, officials said crashes were being staged in order to quickly recoup the no-fault $10,000 coverage through scam massage and medical services.
The fraud had become so rife that premiums in Florida have grown by $1 billion, officials said, and unless dramatic and decisive action is quickly taken, the costs will continue to skyrocket.
On Sunday the overhaul that was House Bill 119 -- a legislative compromise that generally sided with a Senate version that lobbyists and insiders felt is more favorable to insurers than motorists -- goes into effect.
While rate declines aren’t expected until 2013, Atwater is confident that motorists will be paying less for coverage because of the law and that the Florida Office of Insurance Regulation, which regulates insurance businesses, will ensure that companies comply with the new law
“Those changes were so significant that any insurance company that wants market share in Florida is going to start to see their claims experience go down,” Atwater said.
“All the money that was being paid for all those services that were not emergency in nature, and were in fact probably fraudulently billed -- those claims are going to diminish. And when those diminish, OIR will have to look at the profit margins of those companies and have to close those rates.”
For this to happen, the number of staged crashes will have to come down.
The staged accidents won’t stop, but the incentive will be vastly lessened, argues Associated Industries of Florida, which supported the reform.
“Remember, there is an inordinate amount of fraud built into the system and that fraud will have to be bled out of the system over time as new and renewal policies encounter the benefits of the new PIP law,” Jose L. Gonzalez, AIF vice president of governmental affairs, responded in an email.
“In addition, once insurers gain claims experience under this new regime, they will be able to pass along those benefits to insureds. We are hopeful the changes to the law will, at a minimum, mitigate the upward trend in rates that all Floridians are seeing due to the fact insurers will now have access to several fraud-fighting tools.”
Atwater says the staged crashes will come down because the new law has targeted the means for fraud to propagate by having the coverage no longer pay for massage or acupuncture treatments.
“I believe that literally within 90 days the Highway Patrol, the sheriffs’ offices, the police departments are going to go -- in Miami, in Jacksonville it may not be as quick or dramatic here (in Tallahassee) -- they’re going to go 'wow, what happened.' There is not going to be the incentive to stage an accident for a massage clinic because they’re not going to get money anyway.”
The new law is also directed at reducing fraud by dropping the cap on the low-cost coverage from $10,000 in all cases to $2,500 for non-emergency treatment.
The law also gives insurers 90 days to pay claims and an organization within the Division of Insurance Fraud would be created to combat motor vehicle insurance fraud.
Health-care practitioners found guilty of insurance fraud would have their licenses revoked for five years and be banned from seeking PIP reimbursement for a decade.
Not everyone is so confident the law will help Joe the Driver.
Jeffrey Meldon, a lawyer who specializes in accident cases in Gainesville and Ocala, said that while the bill will make it less lucrative for those involved in fraud, the bill was written for the insurance industry.
“This is a boondoggle for the (insurance) industry,” Meldon responded in an email.
“The honest consumer gets shafted. The insurance (companies) can determine any premium reduction by cooking their books. And it is unlikely anyone will see any reduction of even 10 percent because the (insurance companies) can increase premiums on other parts of your coverage.”
He predicts the bill will help insurance companies grow profit by close to $1 billion.
Sam Miller, executive vice president of the Florida Insurance Council, the state's largest insurance company trade association, is more optimistic that the law will provide the benefit that proponents claim.
But he cautioned that the drop in rates won’t be overnight, the fraud must decrease and even the 10 percent that Atwater says will be reached by the Oct. 10 deadline for companies to submit lower rate proposals may not bring immediate wallet relief.
“It should reduce costs and rates if it stands up in the courts and the rings don’t learn how to totally circumvent it,” Miller responded in an email. “We expect some savings next year after the new PIP product hits the streets and more substantial savings by 2014. The consultant hired by OIR to estimate the savings issues a report Sept. 15.
“The new PIP insurance product tied to emergency care does not take effect until policies are issued or renewed on and after Jan. 1. It will be late next year before the new product is widely introduced. PIP rate increases are still being approved by OIR because of the losses and trends already in the pipeline.”
Companies must reduce rates by at least 10 percent Oct. 1 or demonstrate to OIR why they cannot. A second filing, where rates are expected to drop 25 percent, is Jan. 1, 2014, when the new law will have been implemented.
Lynne McChristian of the Insurance Information Institute -- created to improve public understanding of insurance -- believes the reform measures will work.
“It’s expected that the changes will have the intended effect, which is to pay the legitimate medical bills of people who are actually injured in car accidents, not pay criminals who fake accidents and report fake injuries,” McChristian responded in an email.
“Insurance premiums equal claims costs, so if the cost of claims goes down, then so will insurance rates.”
Bob Lotane, communications director for the National Association of Insurance and Financial Advisors in Florida, agrees that the law should reduce, but not completely stop, fraud.
But more importantly, the former OIR spokesman expects Florida’s insurance commissioners to hold them to the law.
“Companies will have to file lower rates and if they do not they will have some explaining to do to the insurance commissioner,” Lotane responded in an email. “Commissioner Kevin McCarty is a big supporter of this effort and will be reluctant to allow companies to not pass along expected savings.”
Reach Jim Turner at email@example.com or at (772) 215-9889.