Fla. Senators Consider Draft Plan to Swap PIP for BI System

florida state capitol buildingA new report from Florida’s insurance regulatory office shows that substituting the current personal injury protection (PIP) system for a mandatory bodily injury (BI) system would bring a broad reduction to car insurance premiums, though the size of reductions vary widely between regions of the state.

The latest figures were presented at Tuesday’s Committee on Banking and Insurance meeting, where state senators heard from supporters and detractors of reforms and reviewed the latest draft bill that would implement the swap from PIP to BI.

Regions with a long-standing history of grappling with PIP-related fraud would likely see the biggest reductions in premiums, according to Sandra Starnes, director of property and casualty product review at the Florida Office of Insurance Regulation (FOIR).

Reductions Range Between Central Miami and Tallahassee

Starnes told committee members that the regulatory office estimated the impact of replacing PIP with BI coverage on premiums. The sample profile used was of a married couple who were both 40 years old. Full coverage policies used in the estimates included:

  • Required types of coverage: PIP and property damage (PD)
  • Optional types of coverage: BI, medical payments (Medpay), uninsured motorists, comprehensive, collision

Starnes said that, in Central Miami:

  • Of non-standard companies, the reduction in rates that occurred when swapping out a PIP policy for a BI policy with minimum required limits ranged between 35 percent and 12 percent.
  • Of standard companies, the reduction in rates that occurred when swapping out a PIP policy for a BI policy with minimum required limits ranged between 21 percent and 17 percent.
  • Of non-standard companies, the reduction in rates that occurred when swapping out a full coverage policy in a no-fault system for a similar one in a tort system ranged between 4 percent and 12 percent.
  • Of standard companies, the reduction in rates that occurred when swapping out a full coverage policy in a no-fault system for a similar one in a tort system ranged between 7 percent and 10 percent.

In Tallahassee:

  • Of non-standard companies, the rate changes that occurred when swapping out a PIP policy for a BI policy with minimum required limits ranged between a 17 percent decrease to a 13 percent increase.
  • Of standard companies, the rate increases that occurred when swapping out a PIP policy for a BI policy with minimum required limits ranged between 8 percent and 41 percent.
  • Of non-standard companies, the reduction in rates that occurred when swapping out a full coverage policy in a no-fault system for a similar one in a tort system ranged between .2 percent and 7 percent.
  • Of standard companies, the reduction in rates that occurred when swapping out a full coverage policy in a no-fault system for a similar one in a tort system ranged between 3 percent and 4 percent increase.

By and large, going to BI would lower premiums in regions where PIP fraud is most prevalent, like Miami-Dade County, where Starnes said the city of Miami “experienced quite a bit of PIP fraud.”

The biggest decrease in premiums that FOIR identified was a 35 percent decrease, from $2,840 to $1,847, at a non-standard Florida car insurer when changing from a PIP/PD policy to a BI/PD policy with minimum required limits. That estimate originated from Central Miami, which Starnes said was “not surprising when you look at it” because of it’s notoriety as a center for fraudulent activity.

Larger premium reductions would also likely occur at nonstandard companies. For standard insurers, reductions from the PIP/BI substitution would be minimized because those carriers had “better types of customers or a better time controlling the types of fraud,” according to Starnes.

But market segmentation prevents the FOIR from making “a global estimate,” Starnes said.

“You really can’t do that,” she told committee members. “The impact of a PIP repeal will vary significantly.”

Currently, Miami-Dade County has the highest percentage of drivers with minimum PIP/PD coverage, at 5.6 percent. Miami-Dade also has the lowest percentage of any Florida county with full coverage, with just over 6 percent, according to the FOIR.

Starnes also said that a large majority of the state’s drivers already have BI coverage, with the highest percentage being in Okaloosa County at nearly 97 percent and the lowest in Osceola County at nearly 89 percent.

Swap Plan’s Author Asks if Court Ruling is ‘Roadmap’

Tuesday’s committee meeting was this legislative session’s first in which members officially revisited plans to repeal PIP that they last touched on in April.

Since then, Sen. David Simmons (R-Altamonte Springs), the committee chair, has spoken extensively with Online Auto Insurance News (OAIN) about his willingness to nix the entire PIP system, though he recently said that a recent court decision deflated the “urgency” for replacing the system.

The latest plan that would roll back the PIP system was presented today to the committee in an extensive draft bill that would introduce a mandatory BI system with 25/50/10 limits.

Simmons said that a recent state court decision about PIP seems to guide legislators toward an attempt to improve the state’s car insurance system. He also said that the decision ruled on the validity of plaintiffs who brought the case to court but left a larger question in the air of whether or not PIP reforms were constitutional.

The ruling presents “a clear roadmap that we better do something,” according to Simmons.

“Maybe it’s more tweaks to the PIP law, maybe it’s ‘get rid of it,’” he told committee members.

That roadmap will undoubtedly have some twists and turns as legislators take up efforts to reform the state’s PIP system yet again.

According to Simmons, PIP premiums in the previous year reached $3.4 billion. Piggybacking off of oft-cited figures that show a “$1 billion tax” on drivers, Simmons said the figures mean fraud and overutilization eats up 1 out of every 3 dollars in the PIP system.

“You gotta ask what kind of system that is,” he said. “[It] is a very, very hard problem to solve.”

Simmons also said that there have been “40 years of fixes” since the PIP system was founded.

“Every time, every two or three years, there’s another fix to try to solve this,” he said.

Attendees Question, Support Reforms

Also attending the meeting were representatives of legal, medical and insurance organizations.

Michael Carlson, executive director of the Personal Insurance Federation of Florida, said that his organization supports the reforms instituted in 2012 by a piece of legislation called HB 119. In light of the recent court decision, he said, those reforms should be allowed to roll out.

Carlson urged committee members to “stay in the lane we’re in.”

The Property Casualty Insurers Association of America (PCI) also said that it supported HB 119′s reforms. The national trade organization said in a statement that it was “cautiously optimistic” about the piece of legislation but added that it would take time “to work and be fully implemented.”

“As stakeholders continue to discuss whether the 2012 legislation may provide the sustainable auto insurance system consumers deserve, we encourage legislators and policymakers to allow the current law the opportunity to be implemented to ascertain its potential before making more dramatic changes,” the statement read.

But even with the latest court ruling, the target on those reforms could be revived.

Paul Jess, general counsel for the Florida Justice Association (FJA), told committee members that the FJA predicts “a lot of regular PIP cases” hitting trial courts along with constitutional challenges; the most recent decision came from the state’s First District Court of Appeal.

“We believe there will be cases brought forward where persons are injured in auto accidents [and are] denied PIP coverage all together because they waited 14 days [to report injuries] or they are getting $2,000 in nonemergency medical cases,” he said.

Adam Levine, an attorney with the Florida State Massage Therapy Association (FSMTA), said that the association challenged HB 119 in court because it “prohibits all Floridians from certain types of care … without any medical basis.”

Paul Lambert, a representative with the Florida Chiropractic Association (FCA), told committee members that HB 119 “hassled physicians” with “discriminatory reforms.”

The American Insurance Association (AIA) said at the meeting that it supported HB 119 because it addressed “abuse that has plagued Florida’s no-fault system.”

Going forward, however, the AIA said that “Florida’s consumers and the insurance marketplace would be best served by repealing no-fault and replacing it with a fault-based system,” Ron Jackson, southeast region vice president for the AIA, said in a statement.

Hospital, Healthcare Groups Want MedPay

Bill Bell, from the Florida Hospital Association, said that repealing the PIP system means Medpay coverage would be needed to fill in coverage gaps.

Paul Sanford, legislative council for Blue Cross and Blue Shield of Florida, echoed the sentiment, saying the Affordable Care Act doesn’t make PIP unnecessary and that MedPay coverage would still have to be required to supplement injured drivers who are ineligible for Medcaid.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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