Efforts to combat auto insurance fraud in Florida took a positive step forward with the personal injury protection reform bill which recently passed through the state legislature and is now awaiting Gov. Rick Scott’s signature. Auto fraud has been a nagging problem for Florida consumers and insurance companies, as staged accident and unscrupulous doctors and medical clinics have led to skyrocketing claims costs under Florida’s no-fault system. Before the new bill, insurers were required to cover medical damages up to a limit of $10,000. The new reforms attempt to close many of the loopholes currently being exploited by fraudsters, including limiting claims for non-emergency injuries and new tighter requirements designed to rein in medical clinics that facilitate fraudulent claims.
Despite these efforts, and with the ink still dry on the new legislation that has yet to be signed by the governor, some medical providers in the state are already beginning to work on finding loopholes in the law.
In an article published in the Miami Herald, Steve Pociask of the American Consumer Institute discusses efforts by a Tampa medical provider to bypass the new caps on PIP coverage by sending staff to help chiropractic offices declare a patient’s injury as being under emergency conditions. This would allow the patient to claim PIP benefits at the former cap of $10,000 instead of $2,500 for non-emergency conditions.
“This kind of behavior, which appears to be an attempt to game the reform, could blow a gigantic hole into one of the key cost-saving provisions in the new PIP bill,” Pociask wrote.
Fraudulent claims lead to higher costs for insurers and higher premiums for policyholders. It is in the best interest of all parties involved to fight auto insurance fraud. Pociask argues that the new bill does take several positive steps toward achieving reductions in auto insurance fraud.
The bill has several good provisions to rein in bogus medical clinics, eliminate incentives for trial lawyers to sue and provide insurers and law enforcement officials with new fraud-fighting tools.
It actually requires auto insurers to reduce rates 10 percent by Oct. 1 and 25 percent by 2014 or provide a detailed explanation why they can’t. Insurers’ rates are driven by losses they sustain, and at this point, no one really knows yet whether the PIP reform bill will achieve its goal.
Pociask does, however, identify several issues with the legislation that could create problems in the future. The first issue is the loopholes in the law, some of which are already being discovered and exploited. Second, Pociask cautions legislators against expecting immediate rate reductions without giving the anti-fraud measures time to be effective.
As we’ve seen in the case of the Tampa medical staffing firm, the PIP cottage industry will undoubtedly seek loopholes in the reform bill to keep medical billings high.
Trial lawyers may be undeterred by a part of the bill that prevents them from increasing their fees by 250 percent. And many of the bill’s key provisions don’t kick in until 2013 – months after the Legislature’s first deadline for insurers to lower rates.
If PIP reform is a success, medical and litigation costs should come down and consumers should receive the full benefit of lower rates. But elected leaders and regulators must be careful not to expect lower rates without clear evidence that the bill is reducing costs from fraud. In fact, prematurely pressuring rates could destabilize the auto insurance market that policymakers are trying to fix and ultimately harm the consumers they are trying to help.