The Overhaul

To address rising fraud, rising claims, and rising premiums, legislators passed HB-119—a PIP overhaul. The big question: Will it work? The straight answer: Wait and see.

For more than four decades, almost since the day Florida initially enacted PIP in 1971, the state has wrestled with balancing good PIP intentions with the unfortunate bad behaviors that make PIP benefits an attractive way for fraudsters to make a living. No-fault is intended to compensate injured people promptly, without regard to pinning blame for a car crash. PIP is supposed to reduce lawsuits and lead to lower insurance premiums. But it has not, despite numerous past attempts to fix what ails it. In fact, some past PIP modifications and judicial interpretations actually disabled fraud-prevention tools, making illegal actions easier to perpetrate. HB-119 may, in fact, be the last, best hope to get PIP right. 

Immediate changes from PIP reform will likely be unnoticed by policyholders. Once Gov. Scott signs the bill, which he is expected to do, its effective date is July 1, 2012 for reforms directed at strengthening licensing requirements for medical clinics that receive PIP reimbursement—and those changes are not much different from what currently exists. 

New for medical providers are stiffer penalties for those who defraud. Health care providers conducting fraudulent activities can have their licenses revoked for five years and be ineligible to receive PIP payments for 10 years. Additionally, starting in July, law enforcement officials investigating car crashes will list all passengers on the crash report. This will stop “jump-in passengers” from trying to claim injury from a car crash in which they were present only in spirit. 

Impending Uptick in Litigation?
For Florida drivers, PIP reform becomes visible in January 2013 with the introduction of a new acronym—EMC, which stands for Emergency Medical Condition. It is defined as being injured in a car accident and experiencing symptoms severe enough that failure to seek immediate medical treatment could result in serious jeopardy or impairment. “Immediate” is defined as needing to seek treatment within 14 days. 

Critics of this change already predict an increase in lawsuits as interpretations of immediacy and severity of injuries are debated. However, let's focus on the intent of EMC; it is supposed to separate the truly injured from the slightly discomforted. Injured drivers and their passengers who have severe symptoms are eligible for the full $10,000 PIP benefit. Those with injuries of a lesser nature have a PIP benefit limited to $2,500. And, if you have a serious injury, aka medical emergency, you cannot visit your neighborhood pain clinic for medical care. 

Only certain types of medical providers will be allowed to treat PIP claimants once the law takes effect. For medical emergencies, injured drivers and their passengers may be treated by ambulance, at a hospital, or from a physician, osteopathic or chiropractic physician, or dentist, including one's own personal medical provider providing they are among these professionals. Non-emergency treatment can be obtained from any medical provider, except a massage therapist or acupuncturist.

If follow-up care is needed, a referral is necessary from a physician, osteopath, chiropractor, or dentist. Why exclude massage therapy and acupuncture treatments from PIP reimbursement? It's about overutilization and establishing protocols similar to those in managed care settings. PIP was the only coverage lacking in such protocols. 

While all types of medical care costs under PIP in Florida exceed the medical inflation rate, the greatest increase was for massage therapy. Treatment by massage therapists represented 21 percent of the total PIP costs in 2010, and PIP fee schedules adopted in 2007 only caused the number of treatments to rise. In 2005, the average charge per claimant for massage therapy was $2,887, according to an analysis done by Mitchell International with U.S. Bureau of Labor Statistics data. By 2010, the average claimant charge for massages under PIP was $4,350, a 51 percent increase after adjusting for medical inflation. For acupuncture, 2005 average costs per claimant were $2,754; by 2010, it was $3,674. 

Examinations Under Oath
PIP reform also clarifies that an insurer can ask a policyholder to take an examination under oath (EUO) and have an independent medical examination (IME). If the policyholder fails to show up for two IMEs or to reasonably cooperate with a EUO, it can lead to a denial of the claim. While these changes are not new, they may help to clear up fog from a Florida Supreme Court decision in 2010 (Custer Medical Center vs. United Auto) that some interpreted to make EUOs impermissible, hampering the effectiveness of this fraud-fighting tactic.

Claims will continue to be paid within 30 days; however, if fraud is suspected, the new law extends the timeframe for paying claims to 90 days so a more thorough investigation can be conducted. If an investigation determines no fraud exists, insurers pay the original claim amount plus interest. The law also provides an additional $5,000 death benefit; current law made the death benefit part of the $10,000 PIP limit, and it was often depleted by medical expenses.

Attorney fees get attention with PIP reforms. An increasing number of PIP claims have attorney involvement. The Florida Department of Financial Services estimated that for 2011 there were 39 lawsuits filed for every 100 crashes—more than four times the ratio in 2006. The new law states that attorney fees must comply with prevailing professional standards, without overstatement or inflation of the number of hours spent on the suit. Additionally, the law prohibits the use of a contingency fee multiplier, which further added to the overall cost of claims payments. 

Again, will the PIP reforms work, and will they bring auto insurance rates down? Ordinarily, the answer to that question would be time will tell, but there's not a lot of time. Legislators want proof they made the right PIP decisions, and they want it fast.

The bill's effective date for a few of the changes is July 1, and within three months—by October 1, 2012—auto insurers must submit a rate filing to regulators showing at least a 10 percent rate reduction or document why they cannot. It's very possible some insurers may see claim costs rise toward the end of this year, as those who live off current PIP flaws try to cash in before the money train leaves the station. By October 1, 2014, PIP insurers are expected to submit another rate reduction of at least 25 percent from 2011 premium levels, an additional 15 percent from the reductions anticipated this year. 

Florida politicians have a history of mandating rate decreases for property insurance, and that hasn't worked out very well. Can it work for auto insurance? Anything is possible, as evidenced by the brazen approach of a Tampa, Fla.-based medical staffing company already trying to sidestep the new PIP law before it even takes effect. They sent an advertising flier offering to have doctors make house calls to clinics to certify injuries as serious in order to qualify for the full $10,000 PIP benefit, rather than the $2,500 non-emergency amount. The ad headline: “Chiropractors. Don't miss out on your $7,500.” 

Let's hope this mandate doesn't miss out on delivering on its promises, and that it hits the right root causes of Florida's PIP problems.