While legislatures across the country have been grappling with many thorny issues this year such as tight budgets, jobs and the economy, education and transportation, several important insurance issues also have been on the table.
One of the key issues of importance to insurers in 2012 has been curbing the billions of dollars in costs that go to pay for auto accident fraud, abuse and inefficiencies in no-fault states. For several years the insurance industry has worked with law enforcement, elected officials, the business community and concerned citizens to transform no-fault laws in Florida, New York, New Jersey, Michigan and Minnesota.
In recent years, Florida has been hit by a “fraud tax” of nearly a billion dollars, which helped Florida earn the dubious distinction of being the nation's most fraud-riddled state. According to the National Insurance Crime Bureau (NICB), staged accidents and the activities of unscrupulous medical providers and unethical personal injury attorneys placed Tampa, Miami, Orlando and Hialeah among the U.S.'s top 10 for personal injury fraud.
This year the effort to transform Florida's no-fault system was championed by the Put the Brakes on Accident Fraud Coalition of law enforcement, consumers, businesses and insurers. The coalition worked to provide the Florida legislature with options to consider that would bring comprehensive, cost-saving auto insurance fraud solutions to address the state's escalating problem. At the center of transforming the state's no-fault system were these essential elements:
- Allowing reasonable investigations of suspected fraud
- Eliminating incentives for filing frivolous lawsuits
- Providing greater oversight of clinics
- Preventing fraudulent buildup of unnecessary medical treatment.
Early in the legislative session Fla. Gov. Rick Scott expressed strong support for addressing PIP fraud and played a key role in securing passage of H.B. 119. The bill contained a number of changes to state law that touch upon the elements identified by Put the Brakes coalition as essential to transforming Florida no fault.
While the new law does contain anti-competitive rate language, it positively addresses many of the cost drivers in the state's PIP system and hopefully arrests the escalating PIP fraud.
Meanwhile, Fraud Costs New York has worked for the past several years to raise the profile of no-fault reform in New York. The coalition stands more than 90 strong and consists of consumers, district attorneys, small businesses, elected officials and insurance trade associations committed to reform.
In February, the need for reform was punctuated when the U.S. Justice Dept. announced a $279 million no-fault insurance fraud bust, the largest single case ever charged. The case displayed how expansive fraud has become as it involved more than 100 clinics, thousands of patients, 10 doctors and three lawyers. The fraud problem is especially notable in New York City, where drivers pay from 74 percent to 335 percent more than the statewide average, largely due to fraud and abuse.
Although there has not been comprehensive legislative change, N.Y. Gov. Andrew Cuomo and Dept. of Financial Services (DFS) Superintendent Ben Lawsky announced a statewide initiative to stop deceptive doctors and shut down medical mills that plague New York's no-fault insurance payment system and cost New Yorkers hundreds of millions of dollars in insurance costs.
At the governor's direction, the DFS issued a new regulation that will enable it to ban doctors who engage in fraudulent and deceptive practices as part of the no-fault system. The regulation implements a 2005 law that gives DFS the power to regulate doctor participation in the no-fault system.
At the property-casualty insurance industry's legislative action day in Albany, Supt. Lawsky continued the Cuomo administration's aggressive program to end no-fault auto insurance fraud and made news by announcing regulatory reforms that close loopholes that allow lawbreakers to exploit the system. The new regulation:
- Ends requirements that mandate insurers pay for treatments that were never actually provided, or pay more than the established fee schedule for a given service
- Prevents healthcare providers from ignoring requests for evidence that the treatments they are providing are medically necessary by setting a 120-day deadline to provide requested information
- Closes the loophole that allows courts and arbitrators to force insurers to pay fraudulent claims simply because the insurer made minor paperwork errors when processing a claim.
Michigan, another state facing significant no-fault fraud challenges, also took action this year, passing SB 298 which criminalizes hiring so-called runners who recruit passengers in auto crashes to file bogus injury claims. Acting as a runner also would be a specific insurance crime. This legislation is part of an ongoing effort to overhaul cost drivers of Michigan's auto insurance system.
Clearly, no-fault transformation is a key issue in several states and the industry is working diligently to advance solutions and control premiums for consumers.
Other auto insurance issues
A wide range of other auto insurance issues such as auto body and glass repair, aftermarket parts, labor rates, steering and salvage have been addressed across the country. Some of the most noteworthy battles have involved auto body repair and glass issues. Arizona, Connecticut and South Carolina produced some of the toughest legislative battles on auto glass repair which addressed third party administrators and the ability to communicate with consumers.
Legislation in Arizona and Connecticut was defeated. In South Carolina compromise legislation passed with amendments to address many of the industry's concerns and anti-fraud protections for consumers. At this writing, the bill was awaiting action by the governor. Outcome of legislation in Rhode Island designed to increase body shop revenues by forcing more vehicles that are badly damaged to be repaired rather than totaled and provide an incentive for litigation is still pending.
PCI has been successful in opposing legislative efforts that restrict insurers' ability to make consumer recommendations on individual repair facilities or impede insurers' ability to manage the claim repair process and control costs on behalf of consumers. But these are perennial issues and the grassroots support of agents and other insurance professionals are essential to our success.
Workers' compensation sees activity
In addition to auto issues, election years produce many workers' compensation bills, although major legislation is seldom enacted. This year is no exception. So far only Louisiana, Maine, Mississippi and Tennessee have enacted significant reform. Additionally, legislatures have had to focus on budget shortfalls as employment struggles to make a comeback. In their search for revenue, legislatures in several states attempted to raid state funds.
In terms of the workers' compensation systems themselves, rising medical costs continue to be the major concern. In addition to traditional concerns about price and utilization, efforts to curb physician dispensing of drugs at above fee schedule prices has been a major legislative effort for both PCI and employers. However, well financed and entrenched interests have blunted our legislative efforts so regulatory approaches are becoming a major tool for our reform effort.
The over prescribing and over-use of narcotics continues to be a PCI focus. Approaches to addressing this issue are broadening as policymakers understand more about this societal issue. At the same time, PCI is watching for unintended consequences of proposed solutions. In California, some are turned off from using drug testing designed to monitor narcotic usage as a new revenue source.
While temporary total duration is leveling off as the country emerges from recession, PCI is closely monitoring the apparent leveling off, and in some states reversal, of the decline in claims frequency.
Coastal property issues are addressed
Coming on the heels of yet another active hurricane season, the 2012 legislative sessions brought numerous bills in states impacted by Hurricane Irene. Many called for changes in the use of hurricane deductibles, greater policy “transparency” and restrictions on the consideration of weather-related claims in the underwriting process. PCI and others in the industry worked to minimize any negative impact of these legislative and regulatory proposals on insurance operations.
In Alabama, several positive bills will aid consumers and the industry. Bills addressing catastrophe savings accounts, anti-fraud measures and premium tax credits for insurers writing coastal homeowners insurance policies were signed by the governor.
In the past few years there has been significant storm damage and insurers worked with lawmakers to advance legislation to help protect homeowners from contractor fraud and abuse. Alabama, Arizona, Colorado, Indiana, Iowa, Nebraska, Kentucky, South Dakota and Tennessee passed legislation this year that contains consumer protections and provides for notices and contract termination rights and prohibits rebating or other compensation to induce consumers to enter into contracts. These bills will be particularly useful after severe weather when crooked contractors enter neighborhoods and attempt to take advantage of unsuspecting homeowners.
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