PIP-tastic: A couple of thoughts to keep in mind as contentious debate on PIP reform is revived
While this week will be a busy week in Florida politics with continued stories on the RPOF voter registration cluster, the David Rivera scandal (bigger cluster) focus has already started to turn toward the rate requests being sent into OIR – effectively reviving the debate on PIP reform, auto rates and if the law will work and give Florida drivers relief.
Now, before anyone asks if I am going to bring back up the infamous Charlie Crist, “drop like a rock” comment, I am not. Not yet at least. And here is why…
The PIP legislation passed and became law this past session, roughly 6 months ago. But the rampant fraud and shysters had been up to no good for a lot longer. A LOT longer.
So while the measures that were passed are meant to eradicate fraud and make sure the claims and injuries and accidents are legit, we need to give all of them time to work before we start nailing the insurance industry for false promises and saying that the new law should make rates drop, but the insurers are dragging their feet and hurting consumers.
Now that is not to say that I am a lover of insurance companies and that I am delusional enough to think that everything they say will happen and that there are not bad operators in the insurance industry. But in general, on this issue, I agree with their “slow and steady” mantra because I too want to see if the fraudulent accidents will be lessened, the strip mall PIP clinics will close up and the fraudulent lawsuits that drive up my car and home insurance will begin to dwindle.
So, to my consumer advocate lawmaker friends, my friends in the trial lawyer camps, chiros and such, and to my friends in the press corps and the naysayers who will take to social media this week, I offer you the below food for thought. And yes, I have sat down with experts in the insurance industry to get my facts and education. And remember that while I am an equal opportunity offender, I am also an equal opportunity listener and in this case what I have learned, I think, makes legitimate sense.
Consider these points of clarification, and what I think should be considered education:
· Many of the key cost containment provisions included in the new PIP law (also referred to as HB 119) do not take effect until January 1, 2013. While the new PIP law has the potential to mitigate PIP fraud and abuse, these provisions must first be allowed to go into effect before that potential may be realized.
· The savings projections included in Pinnacle Actuarial Resources’ rate impact study of HB 119 are for premium indications, not actual premiums. It is important to note that the Florida Office of Insurance Regulation, after reviewing an insurer’s rate requests, as well as its book of business, claims experience, loss costs and general market conditions, sometimes requires insurers to charge higher premiums than what they request in order to ensure rate adequacy.
· The Pinnacle savings projections are based primarily on two provisions in HB 119: the $2,500 PIP sublimit applicable to nonemergency medical conditions and the elimination of massage and acupuncture. These are the two provisions that plaintiff’s attorneys and providers have already sworn to challenge in court. The efficacy and ability of HB 119 to produce cost savings is based solely upon the law’s ability to withstand court challenges from those that stand to gain from the law’s downfall. (In fact, the a number of providers filed a constitutional challenge to the law in Tallahassee’s circuit court last week.)
· Also, The Pinnacle study’s savings projections are for the PIP portion of auto premiums only. According to the Florida Office of Insurance Regulation, “PIP is roughly 20 percent of the overall insurance bill for people that select standard coverages.” Even if the PIP portion of the premium goes down, market factors, including those factors affecting PIP premiums, may cause other portions of the premium, such as bodily injury or uninsured motorist coverage, to go up.
· While the Pinnacle study projects possible savings, it is important to note that insurers must take into account market conditions, their own policyholders’ needs and the requirements of the Florida Office of Insurance Regulation when making rate filing requests.
So there you have it. One point of view from those in the know in the insurance industry. Yes, a bit wonky and yes a bit explanation heavy. But we need to know all of the facts and details and understand how all of this works before we grab the pitch forks and torches.
Now that said, bring on the pitch forks and torches.