NY Senator Introduces No-Fault Car Insurance Reform Bill

A New York lawmaker has recently submitted a bill to the state senate that includes a number of measures aimed at combatting the state’s large no-fault car insurance problems that are draining insurers’ funds and driving costs upward.

New York’s average no-fault claim size–$8,647–is currently the third highest in the nation, according to the Insurance Information Institute. The high average price tag is attributed by many organizations to an atmosphere of extreme abuse of the system.

The proposals at the heart of the legislation would set a fee schedule for medical services, require medical providers to present information showing that any treatments billed to the insurer were necessary, and extend the period in which auto insurance companies can contest claims as fraudulent.

Organizations like the Property Casualty Insurers Association of America (PCIAA) are strongly backing the legislation, introduced by Sen. James Seward.

“It’s a comprehensive package of measures that would enact necessary reforms to the system,” says the assistant vice president of the PCIAA, Kristina Baldwin.

Baldwin says a round of no-fault reforms were enacted back in 2002 that required medical providers to submit bills to insurers in a timely fashion. Similar reforms were put in place at that time in Florida, which also has serious abuse problems in its no-fault system. But both states only saw short-term benefits from the reforms.

Chart showing proportions of abuse in no-fault claims

Click graph to enlarge

The new bill would go much further than previous efforts.

Baldwin explained that one major problem with the current system is insurers are legally required to pay or deny a claim within 30 days of its filing, making it difficult to adequately investigate and assess the credibility of claims that raise red flags. If the insurer misses the deadline, it must pay the claim in addition to interest on the claim.

“It could be a completely bogus claim, and if the insurer has missed that 30-day time frame, they just have to pay,” Baldwin said.

The bill would limit the penalty for missing the 30-day deadline, allowing insurers the ability to still deny a claim but still requiring them to pay the interest if payment takes an extended period.

Another provision would address the issue of “cost buildup” that has been seen in New York and Florida. In this practice, medical providers administer unnecessary treatments in order to inflate costs that will be paid by insurers.

In order to combat this problem, Sen. Seward is calling for a fee schedule and treatment guidelines similar to those already in place for workers’ compensation claims. Seward is also proposing that health care providers be required to submit information showing that the treatments they have provided are necessary and billed according to the fee schedule.

Baldwin said this part of the legislation addresses problems seen mainly in metropolitan New York City, where 40 percent of no-fault claimants see a chiropractor and 49 percent see an acupuncturist, which gets paid through a no-fault claim. The proportion of drivers using these services in other parts of the state are much smaller.

Seward also is aiming to help curb the flood of no-fault claims cases that enter the state court system. According to the summary of the legislation, more than 400,000 no-fault cases are filed with the New York City courts alone every year, and it takes between one and a half years and three years to come to a conclusion in these cases.

Seward proposes that these disputed claims cases instead go through the arbitration system, where claims are settled in around four to six months, according to the bill summary.

These are just the main provisions of the bill.

Whether Seward’s legislation becomes law is a long way off. It has only been referred to the insurance committee, and a bill of its size and potential impact is likely to receive much deliberation.

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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