Florida House Passes Auto Insurance Reform

Florida lawmakers made significant headway in the fight to reform the state’s no-fault auto insurance system on Friday when the House voted 85-30 to approve a bill that makes big changes to what would be covered under state-mandated car insurance coverage.

florida state capitol buildingA long road still lies ahead for the bill, however.

For it to be signed into law, it may have to be reconciled with a Senate personal injury protection (PIP) reform measure that has yet to pass the Senate and differs considerably from the House’s effort.

The Current Situation

Most car accident victims in the state are currently compensated for their medical care through PIP coverage, which pays for the policyholder’s own medical bills after a crash.

Each driver in the state is required to carry at least $10,000 worth of PIP, but the consensus in the industry is that unscrupulous medical providers and some members of the public are staging accidents, filing for fake injury benefits and inflating the actual cost of care in order to squeeze every penny out of that $10,000 limit.

After an accident, PIP covers the policyholder’s bills in the following proportions:

  • 80 percent of reasonable medical expenses
  • 60 percent of loss of income
  • $5,000 or the remainder of PIP benefits (whichever is less) for a death benefit

Policyholders are also required to purchase at least $10,000 worth of coverage to pay for damage to other people’s property.

This law has been in place since 1971. But members of the industry say abuse of the system has skyrocketed in recent years. Insurers’ bottom lines have been hurt by the increase in fraudulent and inflated claims, and it has translated into higher premiums for the average Florida driver.

Lawmakers hope current reform measures would buck that trend, even though the opposition says that cutting things like acupuncture and massage therapy will not significantly reduce costs and will only reduce access to types of alternate medicine that many find effective.

The Now-Passed House Proposal

Rep. Jim Boyd’s HB 119 deals with the no-fault coverage problem by totally doing away with PIP and replacing it with a somewhat similar but new type of policy called “medical care coverage” (MCC).

MCC differs from PIP in that it would significantly reduce the window during which policyholders could file a claim and would limit their choice of who provides the care.

As long as the cost doesn’t exceed the policy limits, MCC would cover up to 80 percent of expenses for the following:

  • Emergency transport provided by an ambulance service within 24 hours of an accident
  • Services and care provided to an insured admitted to a hospital within seven days of an accident
  • Emergency services and care provided by a licensed physician beyond that seven-day window for an emergency medical condition that was deemed related to the car accident

MCC would also provide up to $2,500 to cover 80 percent of reasonable expenses for further treatment from a licensed physician for non-emergency medical conditions.

There would also be a $5,000 death benefit and coverage for 60 percent of the policyholder’s loss of income.

Most of the savings come from reducing the window during which insured drivers can seek medical treatment and making only licensed practitioners eligible for reimbursement.

The original version of Rep. Boyd’s bill initially went much further.

Originally, HB 119 only provided for treatment provided in an emergency room for emergency conditions when the policyholder is admitted within 72 hours of an accident.

The bill also makes other, smaller changes to state law. It caps attorney fees, requires police to fill out long-form crash reports more often in order to reduce the possibility of fraud and makes it so that insured drivers may have to submit to an examination under oath if they are suspected of fraudulent activity in relation to a claim.

While the scope of coverage outlined in HB 119 has been broadened by amendments tacked on in committee and on the House floor, it could still prove to be too drastic for the Senate.

The Pending Senate Legislation

A separate reform measure has been moving through Senate committees and should soon come up for a vote from the full Senate.

Instead of flat-out scrapping the state’s current no-fault structure, SB 1860 would just limit the types of treatments that are covered by PIP and set stricter standards for medical care providers that are eligible for reimbursement.

If both the Senate and the House proposals are passed, they could prove hard to reconcile.

The Senate may not react favorably to the 7-day window at the heart of the House proposal. When a 14-day window was proposed in the last Senate Budget Committee meeting on the bill, some committee members recoiled, calling the proposal “anti-consumer.” The bill’s author ultimately withdrew the amendment in light of the strong opposition.

The following are the main changes SB 1860 would make:

  • PIP benefits for massage and acupuncture therapy would be eliminated.
  • Insurers would be required to repay medicaid within 30 days of being notified that the insurer owed the state system money.
  • Police would be required to provide long-form crash reports more frequently to reduce the occurrence of “jump-ins.”
  • All entities eligible for receiving PIP benefits would need to be licensed or owned by a licensed practitioner.
  • A nonprofit organization would be established to fund state offices with programs aimed at preventing, investigating and prosecuting automobile insurance fraud. The organization would be financed by private entities.

The fate of these two proposals will be borne out in the coming weeks.

Effects for Consumers

The general wisdom behind the bill is that lowering claims costs will lower the cost of insurance for the average Floridian. But neither insurers nor regulators have been able to quantify how big those savings would be.

“It is impossible for us at this point to quantify a specific number of savings that would be associated with this bill,” said Monte Stevens, of the Office of Insurance Regulation, in a January committee meeting about HB 119. The reason is that “this is pretty much creating a new type of coverage that has never been priced either in Florida or, that I’m aware of, in another state.”

But even though consumers may seem lower rates when they make auto insurance comparisons in search of coverage, they may be be surprised when they visit the doctor after an accident.

In debate over the bill on Friday, Rep. Mike Horner, who said he love’s HB 119, still noted that “the main reason rates get reduced is it’s less coverage than we have now,” not that it cuts out fraud.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

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