Time for No-Fault Reform

Less than a decade later, New Jersey’s auto insurance landscape has become pockmarked with new challenges, especially the spiraling out-of-control cost of PIP benefits.

When the legislature enacted auto insurance reform, lawmakers put aside the issue of PIP reform. This has been an expensive decision. Recent research found that the PIP healthcare benefit in New Jersey has cost $1.23 for every premium dollar paid by policyholders since 2009, elevating the state to the second highest average PIP claim costs in the nation. This research also found that questionable claims increased 40 percent from 2007 to 2009.

In an effort to hold down costs, the state adopted a fee schedule limiting the amount insurers have to pay for common medical treatments associated with car accidents. The state’s medical society took issue with the change and sued to stop its implementation, but last November the state Supreme Court handed down its ruling against the medical society.

The New Jersey Dept. of Banking and Insurance has proposed a set of regulatory reforms aimed at addressing cost drivers in the auto insurance personal injury protection system. These proposed reforms include a revised and expanded medical fee schedule, reform of the arbitration system for disputed medical bills and PIP vendor requirements. The goals of expanding the fee schedule include reducing billing disputes, controlling costs and enhancing predictability for the auto insurance system. Under the revised schedule, rates would be higher than those paid by other medical bill payers such as Medicare, Medicaid and private health insurance. The arbitration proposal includes guidelines for the award of attorneys’ fees to bring them in line with the amount in dispute and the amount awarded.

New York

The situation in New York bears some similarity to that of neighboring New Jersey, as New Yorkers saw the average no-fault claim increase nearly 60 percent between 2004 and 2009, with nearly 36 percent of all no-fault claim costs in New York classified as fraud. According to the Insurance Information Institute and the Insurance Research Council, no-fault fraud and abuse in 2009 alone cost New Yorkers approximately $229 million.

New York lawmakers have worked on strengthening the rules governing no-fault, but getting needed reforms enacted has proven a challenge. Industry groups, including NAMIC, support a comprehensive approach along the lines of what has been proposed by Sen. James Seward, the chairman of the Senate Insurance Committee. Legislation he filed this year (S-2816) would enact provisions such as mandatory arbitration, streamlined decertification of medical providers that commit fraud, modification of the 30-day claim preclusion rule and establishment of medical treatment guidelines. Superintendent of Insurance James Wrynn joined in the fight for reform by proposing that people who file PIP claims be required to prove their treatments were medically necessary. On Wrynn’s wish list for reform is to make it easier for insurers to stop payments to clinics that are being investigated.

Florida

Florida’s legislators have been meeting in committee since September, a prelude to the 2012 legislative session that begins in January. While no-fault reform has long been on the legislative radar in Florida, legislator interest was heightened with the release this past April of a report from the Office of Insurance Regulation showing that the costs of the PIP system are rapidly rising.