Unpopular no-fault auto insurance mandate hangs on in Florida

Apr 7, 2012

The following article was published in the Palm Beach Post on April 7, 2012:

Unpopular no-fault insurance mandate hangs on in Florida

By Charles Elmore

Dumping no-fault insurance saved Colorado drivers 35 percent on their auto premiums, but Florida motorists won’t get the chance to find out what that feels like this year.

Once he gets the bill, Florida Gov. Rick Scott is expected to approve an insurance law that would stiff massage therapists and acupuncturists but generally preserve a $2 billion-plus government-mandated coverage defended by hospital and insurance lobbyists.

“Instead of measures aimed at preventing true fraud, we’re left with a bill that pads the pockets of big insurance companies while stripping consumers of choice and benefits,” said Bill Newton, executive director of the Florida Consumer Action Network, after the bill’s passage in the waning hours of the 2012 legislative session.

A few legislators in both parties tried in vain to suggest an alternative – kill a mandate that effectively forces drivers to pay twice for medical insurance most already have.

One option: End personal injury protection (PIP) insurance and instead require bodily-injury liability insurance, which by one estimate is carried by 76 percent of Florida drivers.

Auto insurance premiums dropped by 35 percent after Colorado became the latest state to kill a no-fault system in 2003, according to a 2008 consultant’s report for Colorado’s governor . That’s a net result after a modest rise in rates for bodily-injury liability insurance, which Colorado requires.

Average yearly savings per vehicle: $322.

And rates have been stable since, said Robert Ferm, who admitted he was once skeptical about Colorado’s switch.

“I was pleasantly surprised it works,” said Ferm, who served as legislative counsel for the American Insurance Association, a trade group representing insurers in Colorado’s debate. “It was not really the catastrophe that was anticipated.”

Perennial complaints

By contrast, a state working group in December found Florida’s system produces “staggering” rate increases, with some families being forced to pay more than $3,000 in required annual PIP premiums for only $10,000 in coverage. Florida is one of 10 states remaining with a no-fault system.

PIP began in the 1970s in Florida as an attempt to cut down on lawsuits and get payments out quickly for injuries in minor car accidents. But it produced its own waves of lawsuits and for decades has been a perennial source of complaints about fraud and high premiums, despite many reform attempts.

The bill that passed on the session’s final day would weaken one of the original arguments for PIP – that it settles claims within 30 days. Auto insurers now can take three times longer to review claims that they suspect of fraud.

Insurers would be asked but not required to reduce PIP rates 10 percent by Oct. 1 and 25 percent by 2014. Carriers could make a case for why they should not have to reduce rates. They could cite, for example, increased legal costs for sorting out claims under the new law.

Policies vary, but for many drivers PIP represents about 20 percent of the total bill. So the overall reduction by 2014 on a Florida driver’s total car insurance bill might be closer to 5 percent – or less, if insurers persuade regulators cuts are not justified. In return, injured drivers would face lots of new restrictions:

  • No massage therapy or acupuncture.
  • Must get treatment within 14 days.
  • No full $10,000 benefit except for an “emergency medical condition.” Limit for other qualified treatment: $2,500.

Yet Florida drivers still would be required to pay for PIP, no matter how much health insurance they have through private insurers or government plans such as Medicare.

Scott defended his vigorous efforts to change PIP – as opposed to killing it – a day before the legislation passed.

“If you can fix PIP, that’d be great,” Scott said. “But if we can’t, the citizens are going to want us to get rid of it. My expectation is, we’re going to have something that’s a fix, and cracks down on people doing the wrong thing.”

Another argument for PIP – that some drivers have no other medical insurance – could be addressed by requiring it only for those who cannot show they have health insurance.

The Affordable Care Act is designed to make sure nearly everyone has health insurance. Last month, the U.S. Supreme Court heard oral arguments in its review of the federal law challenged by Florida and other states. Even if the court strikes down the individual mandate requiring almost everyone to obtain health insurance or face a penalty, it could still allow other provisions that would make it easier for millions more people to be covered. The states challenging it want the whole law struck down.

Squashing quash talk

Regardless of how that case comes out, legislators including Rep. Mike Horner, R-Kissimmee, have begun speaking out for requiring bodily-injury coverage instead.

“Let’s look at scrapping PIP,” Horner said.

“This is the way we really ought to go in this state,” agreed Rep. Rick Kriseman, D-St. Petersburg.

Industries that benefit from PIP – many of which are top contributors to the campaigns of legislators and the state’s political parties – formed a wall that quickly quashed talk of ending the insurance mandate. Hospitals, facing another round of state budget cuts, warned about the risk of treating more uninsured patients if PIP went away. Lawyers, doctors, pain clinics and many therapists also enlisted lobbyists to plead their case.

In the end, Scott hailed the bill as a major victory.

Such groups as the Florida Hospital Association played a key role in pushing to save PIP after sunset provisions threatened it in 2008.

This year’s bill would require payment to emergency-services providers at 200 percent of what Medicare pays.

“Medicare pays hospitals less than cost, so a rate that is more than Medicare is not unreasonable,” said FHA general counsel Bill Bell. “Also, if PIP went away, it would increase the cost of health insurance.”

Other concerns he cites: Waiting until cases are resolved under a bodily-injury liability system “may take months or potentially years.” At-fault drivers’ injuries might not be covered. And even if the Affordable Care Act survives, it still would leave some people uncovered, such as non-citizen immigrants.

Even some sharp critics of the insurance bill such as Newton stop short of endorsing the end of PIP before something like the Affordable Care Act can cover more uninsured people. “Our health care system needs the money PIP brings in,” said Newton, whose consumer group is supported by, among others, a health-care workers’ union .

Car insurers hope the bill they backed will produce “real reforms and real cost savings to the no-fault system and that consumers will benefit directly,” said Michael Carlson, executive director of the Personal Insurance Federation of Florida . His group’s charter members include State Farm, Allstate and Progressive.

Dropping PIP would come with pros and cons, Carlson said before the bill passed.

“There may be some shift in costs to private health insurers and to the Medicare and Medicaid programs, but this cost would be much better controlled through these managed-care systems,” Carlson said. “For Floridians who have no health insurance, hospitals may be forced to absorb the costs for treatment of emergency room patients who might otherwise have coverage through PIP. There may also be a ‘rush on the courthouse’ as trial lawyers litigate all auto accident claims under a ‘fault’ system.”

But lawsuits did not explode in Colorado after a tort system was reintroduced there, according to research by the Florida Senate’s banking and insurance committee staff in 2008. The number of lawsuits filed in Colorado district courts involving injuries in vehicles went up 5 percent in the three years after no-fault was dropped, staff found.

Most insurance suits: PIP

Meanwhile, 95 percent of the 36,509 lawsuits filed against insurers in Florida’s county courts in 2010 involved PIP, a state working group report estimated. Most involved health-care providers suing insurers to get paid. In just the first eight months of 2011, the report said, 46,842 suits were filed .

If PIP ended in Florida, about 16 percent of PIP expenses would be shifted to the health care system, with most of the rest covered by other parts of the auto insurance system, according to a consultant’s report cited by Florida Senate staff in 2008. At that point, four health insurers in the state were prepared to ask for rate increases ranging from 0.7 to 1.7 percent, staff found.

Emergency-care providers in Colorado also voiced concerns about getting paid, said Patrick Knepler, actuary for Colorado’s Division of Insurance. The state required auto insurers to offer medical payments coverage, though consumers are not mandated to buy it, he said.

Florida’s insurance consumer advocate, Robin Wescott, said she considers this year’s changes worth pursuing but they must have a “substantial” impact. If not, she said, “let’s look at doing away with this system.”

Florida drivers won’t get a chance to wave goodbye to PIP in 2012. But Coloradans such as Ferm say it hasn’t been missed.

“Consumers seem to be happy,” Ferm said.

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