In Analysis, Florida Maps Out Impact of PIP Insurance Reform

Insurance regulators in Florida released a draft report Friday mapping out the possible impact of the state’s recent reform of no-fault coverage laws, adding that the report’s estimate of personal injury protection (PIP) premiums decreasing 12 to 20 percent is preliminary and may ultimately be too high.

As part of reforms finalized in May, the Office of Insurance Regulation (OIR) was required to commission an independent consultant to assemble a report on the new law’s possible impact for the Legislature by Sept. 15, but released a preliminary version because the office “got a lot of public documents requests,” spokesman Jack McDermott said.

In an OIR statement accompanying the report, officials said the projected savings figure was based on “premium indications” that are usually higher than what insurers actually ask for in rate requests to regulators.

“Therefore, the savings may not be as much as 12 to 20 percent as cited above,” according to the statement.

According to the report, the reforms’ financial impact on insurance rates would not be evident until January 2013 “at the earliest.” They also stressed that the potential savings being discussed apply only to the PIP portion of premiums, which accounts for about 20 percent of a standard policyholder’s bill.

McDermott said that there were “a lot of caveats” attached to the analysis because the final report will be released in the coming months, possibly before the Sept. 15 deadline. Requests from media for access to drafts of the report, however, drove the OIR to release preliminary findings.

“We didn’t believe that the information was exempt from public records laws and should be released under Florida’s Sunshine Law,” McDermott said.

The Property Casualty Insurers Association of America (PCI) also cautioned that the report’s findings were preliminary and should be seen as a prelude to evaluating PIP reforms.

“From the very beginning, [PCI has] warned of the current and long-term damages resulting from the rampant … abuse in the PIP system,” said Donovan Brown, PCI state government relations counsel, in a statement. “While the 2012 PIP legislation delivered the potential to begin fixing the runaway costs within the system, it is imperative that policymakers, regulators and Florida drivers understand that it must have adequate time to take effect.”

Basics of HB 119 Reform

Florida’s no-fault insurance system mandates that insurers compensate motorists for crash-related injuries under PIP coverage, regardless of who caused the collision.

HB 119 was billed as a major reform law and saw a rocky road through the state Legislature as lawmakers debated different provisions that included caps on reimbursements and the types of physicians that could receive PIP-related compensation.

The reform law’s final version included the following major changes:

–Medical treatment is required to occur within 14 days of a crash to be eligible for PIP compensation.
–Massage therapy and acupuncture were eliminated as types of treatment eligible for compensation.
– Medical expenses related to an “emergency medical condition” are covered up to $10,000 while nonemergency medical conditions are covered up to only $2,500.
–Medical professionals convicted of PIP-related crimes face a five-year license suspension and suspension from PIP-related reimbursements for 10 years.
–In rate filings, insurers will cut premiums by 10 percent by 2013 and 25 percent by 2014. Those who don’t are required to state why they couldn’t make the cuts.

Campaigning for the law, Gov. Rick Scott said it would reduce coverage costs by combating insurance-related crimes, including staged accidents and phony claims, which contributed to a 66 percent increase in PIP claim payments between 2006 and 2010.

All residents who buy Florida auto insurance suffer, Scott said, because of the rising costs.

“This legislation will benefit the pocketbooks of every Florida family who drives an automobile,” Scott said in a statement after he signed off on the reforms.

Most Projected Loss Cuts Come from Reduction in Coverage, Not Crime Crackdown

According to the OIR, the recently released report is only a draft and may be revised. The current report shows that most of the reduction in insurers’ losses would be from the significant limitations on coverage provided by insurance policies, not in anti-crime measures.

In the report’s current form, anti-abuse measures account for a projected maximum 1.5 percent reduction in insurers’ losses.

Meanwhile, limiting coverage to nonemergency treatment provided within the 14-day window and excluding coverage for massage therapy and acupuncture would cut losses by a projected maximum 22.5 percent.

Both of those figures may be revised by the time the final report is released, however.

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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