By: Michael Adams
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.