Update on Florida No-Fault Auto Insurance Reforms

Another jurisdiction to experience serious auto insurance fraud problems is Florida.  In March of this year HB 119 passed in the State Senate and House after some heavy duty lobbying by Gov. Rick Scott.

The new Florida personal injury protection (PIP) law was adopted in 1972 to make sure anyone injured in an auto accident would quickly get money to treat their injuries. The legislation provided that a driver’s insurance company pay up to $10,000 to cover medical bills and lost wages after an accident, no matter who is at fault.

PIP costs have risen by $1.4 billion since 2008, largely because of the runaway fraud that threatens the system, most notably in the metropolitan Miami and Tampa areas. Florida ranks first nationally in staged accidents.

 The legislation requires an accident victim to obtain treatment within 14 days in an ambulance or hospital, or from a physician, osteopathic physician, chiropractic physician, or dentist. The full $10,000 PIP medical benefit is available only if a physician, osteopathic physician, dentist, or a supervised physician’s assistant or advanced registered nurse practitioner determines that the insured has an “emergency medical condition.” Otherwise, the PIP medical benefit is limited to $2,500.

Follow-up services and care requires a referral from a physician, osteopath, chiropractor or dentist. Massage therapists and acupuncture was eliminated from eligibility for PIP benefits.

Another provision in the bill requires the Office of Insurance Regulation to hire an independent consultant by September to calculate the savings expected from the Act.

The bill includes a 10 percent rate reduction on PIP that’s not guaranteed. If insurers who offer PIP do not provide their customers a minimum 10 percent rate reduction by October 1, 2012, they must explain in detail why not. A second rate filing required on Jan. 1, 2013, proposes insurers have a 25 percent premium reduction for policyholders unless they can show why they’re unable to provide the cut.

Of the 44 rate filings that were approved by the state's Office of Insurance Regulation by mid-November, the average PIP savings has been 2.5 percent. That reflects about a fourth of the 141 filings from companies selling all types of car insurance, with the rest still under review.  As of December 13, 2012, there were 98 filings approved.

Florida regulators are optimistic that the state’s no-fault auto reforms are having a positive effect on the market and will eventually cut premiums for drivers. But for now they are telling the public that the recent law changes will likely only temper the size of insurers’ PIP rate requests as opposed to actually decreasing drivers’ premiums.

Regulators expect that the January 1, 2013 filings will represent a fuller picture of the influence of the reforms on the market.

Insurers have been reluctant to make deep cuts in their PIP rates because they want to see whether the law can withstand legal challenges. A group of health care providers filed suit in Leon County Circuit Court arguing the law is unconstitutional. The case centers on a decision by lawmakers to eliminate licensed massage therapists and acupuncturists from the list of approved PIP providers while setting a medical fee schedule based on Medicaid. In addition, the $2,500 benefit limit for non-emergency services will result substantially decrease chiropractor fees.  Those three categories of providers represented the three highest average medical fees per PIP patient.

 The first challenge of Florida’s reform to its personal injury protection system has failed with a denial of an injunction last week that would have stopped the law’s implementation.  This is just a short-term procedural victory and the case will now proceed to trial.