Do We Need New Laws to Prevent Personal Injury Protection (PIP) Fraud?

The new Personal Injury Protection (PIP) legislation being trumpeted by Rick Scott and Kevin McCarty (insurance commissioner) is simply a series of methods to attack a problem by saddling honest consumers with more regulation and less benefit. The claim is that the PIP system is so filled with fraud that more laws must be passed to combat it.

Let me say that I am opposed to fraud of any kind.

I believe that someone who actually commits a fraud should be prosecuted and punished.

I believe that people actually do stage accidents with the intent of profiting from it. Those people should be found and punished.

I suspect that, much like other professions, there are unscrupulous lawyers and doctors who may be involved in these types of fraudulent activities. Those professionals should be found and punished.

I do not believe that passing legislation that may have a chance to limit fraud, but also acts to limit innocent consumer rights while further increasing bottom line profits of insurance companies is the best way to fight fraud.

We do not need new laws on the books to police fraud in the insurance industry. What we need is aggressive enforcement of the already existing laws and an active investment in that enforcement by the industry that profits most – the insurance industry.

Florida’s politicians have done little to alter a fundamental problem with Florida’s regulation of insurance companies, which we have been writing about for years. Insurance companies in Florida have developed a strategy for tricking the system and limiting insurance coverage while maintaining high premium rates. The industry was successful in last year’s legislature by removing certain coverage from homeowner’s policies; while consumers received no corresponding consideration on the premium side.

This new proposed legislation requires that in order to be eligible for PIP to pay for medical treatment, the injured person must seek emergency medical care at an emergency care facility within 72 hours. First, not all injuries develop in a 72 hour window and, second, many honestly injured people try to “tough it out” for days and weeks before seeking medical treatment. For those honest people who have real injuries, but who have not run to the hospital within 72 hours, the insurance company is going to be permitted to deny PIP claims. So, who will pay for those bills?

Based upon a Florida Senate Bill Analysis, the following factors are set forth as the motivation for new legislation and a reduction in consumer rights:

• PIP payouts have increased from approximately $1.5.8 billion in 2008 to approximately $2.5.8 billion in 2010.
• From 2006 to 2010, the number of lawsuits pending at year-end increased by 387%, while the number of settlements increased 315%.
• Florida PIP claims involve approximately 100 medical treatments at an average total cost of $12,000, well above the national average excluding Florida of approximately 50 treatments at an average total cost of $8,000
• The PIP pure premium in Florida, which is the amount of premium needed to cover losses, has increased 50 percent, from just under $100 per car in the 4th quarter of 2008 to over $150 per car in the 3rd quarter of 2010 (the most recent period for which data was collected).
• The rise in PIP payouts and the corresponding increase in premium costs are occurring despite the fact that the number of crashes and crashes with injuries decreased from 2005 to 2009, according to the Department of Highway Safety and Motor Vehicles.

These bases for the new legislation ignore the following influential facts:

• PIP payouts increased by 40% in three years, but rising health care costs overall have increased those costs by as much as 10% to 28% without fraud.
• Lawsuits may have increased under PIP laws, but no lawsuit can be filed without a denial of full benefits by the insurance carrier. So, who is driving the increase? If these lawsuits have no merit, why are courts not sanctioning lawyers and parties under current frivolous lawsuit laws?
• Insurance companies and legislators can work to control the rising medical charges from physicians and hospitals by going to the source of those charges and without attacking consumers’ rights.
• Premiums for personal injury protection (PIP) coverage may very well have increased 50%, but what has the state done to examine the very suspect accounting practices used by insurance companies writing coverage in Florida?
• If health care clinic ownership is too easy to obtain and maintain, there already exists plenty of laws not being aggressively applied by state agencies. Those agencies are well equipped legally to police any charlatans who may operate sham facilities.
• If law enforcement officers are failing to identify all occupants of motor vehicles in crashes, provide them with methods to accomplish it. Allow videos of accident scenes and witnesses. Provide a technology solution for law enforcement officers to capture license and ID information at the scene.
• Create alliances between insurance companies and law enforcement to pursue and prosecute fraud. Require insurance companies to reactivate the “special investigation units” that most of them had in the 1970’s and 1980’s.

Without aggressively enforcing laws already on the books, I suggest it is most likely that those trying to defraud the system will simply adapt. They will take up the time and expense of emergency medical units to be shuttled directly to the hospital so they can make the 72 hour window and will find ways to work the new system. This will do nothing but increase overhead and time for emergency medical personnel and local governments.

Although this new legislation, if passed, might have some impact on fraud; it will do so at the cost of honest consumers. If government’s approach is to continue not enforcing laws already in existence, why should anyone believe that this new legislation will have any impact on fraud?

I think it is more likely, as with similar laws, defrauders and insurance companies will maintain or improve their bottom line profits; while honest consumers will be the ultimate losers.