No-Fault Law's Fate a Source of Hospital Anxiety
Mar 24, 2007By Urvaksh Karkaria, The Florida Times-Union, Jacksonville
Mar. 25--The prospect of an auto insurance law fading into history is triggering financial heartache among Florida hospitals.
The hospitals rely on mandatory medical coverage provided by auto insurers to help pay for care provided to accident victims, especially those without health insurance.
The Florida No-Fault law, scheduled to expire in October, requires drivers to purchase Personal Injury Protection, which pays up to a maximum of $10,000, regardless of fault, for injuries caused in an automobile crash. The law's future is being debated in the current legislative session and is the focus of intense lobbying by hospitals, auto insurance companies and others.
The auto insurance industry wants to get rid of PIP, saying it forces drivers to buy extra health insurance coverage they don't need. They also point to claims fraud under the PIP system.
At the other end of the table sit hospitals that want to see PIP live on, because without it they could end up providing free medical care to auto accident victims without health insurance. Florida hospitals received more than $350 million in PIP money last year, according to conservative estimates from the Florida Hospital Association.
Health insurance companies also want PIP coverage to stick around, because without it they would face increased exposure to medical claims and likely have to jack up already-rocketing premiums.
Hospitals can't afford to subtract $400 million to $500 million of uncompensated care from their bottom line. They already provide free care to the waves of uninsured streaming into their ERs, said Steven Smith, director of state legislative relations at Blue Cross and Blue Shield of Florida.
"Accidents happen, people get injured," Smith said, "What happens in auto accidents ought to be paid for by auto carriers." Auto insurers lash out at No-Fault law Auto insurance carriers promise Floridians lower premiums if the No- Fault law ends as scheduled.
State Farm's Florida auto insurance customers, for instance, will save an average of $360 annually per two-car household once the law ends.
"Our customers are getting ripped off [by PIP]," State Farm spokesman Chris Neal said. "They are paying a lot of money for a coverage that many of them don't need, and many of them don't want, and they get no benefit from it." Neal asked why, for instance, a 65-year-old retired couple on Medicare must buy an additional $10,000 in medical coverage from State Farm when any auto accident-related injuries they suffer would already be covered by their government health insurance.
"Responsible people take care of themselves and are covered in case of an accident," Neal said. "So you want to punish all the responsible people for the few people that aren't responsible? It makes absolutely no sense and it's real poor public policy."
Critics of the PIP system also say it is plagued with fraud and allows hospitals and other medical providers to overbill auto insurance carriers.
Medical providers don't have to charge auto carriers negotiated fees for services rendered, like they do with public and private health insurers. The No-Fault law also does not limit the number of treatments a service provider can perform on an auto accident victim and charge the carrier for, said George Grawe, Allstate Floridian's general counsel.
"There's nothing in the statute that tells your [auto] insurance company what is a reasonable charge, and what is a reasonable course of treatment," Grawe said. "All of the bad guys know that any time there's an automobile accident, if you can coax the people who are involved in the accident to go to certain providers, they know that those providers are going to be able to charge whatever the heck they want to charge for the treatments that are associated with it, [and collect the $10,000]."
Auto insurance fraud in Florida -- which largely involves the PIP system -- costs the average family $240 annually, according to the state's Department of Financial Services. Last year, 225 people were convicted of PIP fraud.
PIP is the only source of payment for those injured in motor vehicles without health insurance. A recent Florida Hospital Association study puts that number at about forty percent of all people involved in car crashes who were treated in the ER.
The average ER bill for treating accident victims was $2,250, while the average inpatient bill was $54,430, and the average outpatient bill was $2,083, according to a 2005 FHA survey.
Shands Jacksonville has a lot to lose if the PIP system goes away: The hospital received about $14 million last year in PIP payments to provide mostly emergency care to vehicle accident patients.
"It would be a tremendous revenue loss to the system," said Paul Rosenberg, senior vice president of Shands HealthCare, which owns Shands Jacksonville. "The end result is more unfunded care for hospitals." Baptist Health hospitals received about $5.5 million from PIP last year, while Flagler Hospital received $885,000 in fiscal 2006.
Baptist Health, which operates five area hospitals, does not overbill auto insurers, or order unnecessary tests on auto-accident patients, Chief Financial Officer Mike Lukaszewski said.
"The thought that just because there's some -- pot of money out there, that a hospital or a doctor is just going to order up tests -- that are unnecessary, is just ridiculous," he said.
Auto carriers are charged the hospital's standard rates, which tend to be higher than what managed-care companies that have negotiated discounts with the hospital pay, Lukaszewski said.
"Hospitals don't jack their rates up when they treat a patient who is covered by PIP," he said.
Recouping most of the money spent on treating uninsured accident victims without PIP coverage's financial cushion will be a challenge.
"We can attempt to negotiate higher rates from the insurers," Lukaszewski said, "but ...[insurers] are constrained in how much they can pay out in dollars from the premiums they collect."
Not everyone buys the hospitals' story.
Hospitals are overestimating the financial hit they'll have to shoulder in the absence of the No-Fault law, Grawe said.
"I'm not going to tell you that there isn't going to be some percentage of the population that is now having [their] bills paid by PIP that will go to emergency rooms and not have any coverage," the lobbyist said. "But it's going to be a much smaller percentage than [proponents of the No-Fault law] would lead you to believe." A Tallahassee-based coalition of consumer groups, auto insurance carriers and businesses agreed.
Eighty percent of accident-related medical care would continue to be covered by auto insurers either under bodily injury or medical payment coverages already carried by the majority of Floridians, voluntarily, a study commissioned by Floridians for Lower Insurance Costs noted.
The study, whose results were released earlier this month, concluded that only about 4 percent of hospital care paid for by no-fault auto insurance would not be covered by either auto or health insurance.
Even as auto insurance carriers would like PIP to disappear, some agents who sell auto policies would prefer it stay. The reason: the agents get paid a commission based on the total policy premium, which would be leaner, without PIP.
Passing on the costs PIP dollars isn't a problem just for medical providers.
In the absence of PIP reimbursement, hospitals said they are likely to recoup some of their costs by squeezing higher reimbursements from health insurance companies -- further driving up health insurance costs in Florida.
Health insurers would also be stuck with medical claims sooner. Under the No-Fault law, auto insurers now have to pay the first $10,000 in claims, with health insurers picking up the check only after that limit -- and any member deductibles -- are reached.
If the PIP law is not extended, health insurers in Florida would be liable for about $400 million in annual medical claims that auto insurers currently absorb, according to the Florida Association of Health Plans.
The auto insurance lobby dismisses the hospitals' and health insurers' concerns as fear mongering.
"The vast majority of states [38] don't have No-Fault or PIP systems, and health [insurers] and hospitals do just fine in those jurisdictions," Allstate's Grawe said.
Apparently not. More than three years after the repeal of Colorado's no-fault auto insurance system, trauma centers there say revenue is down at least $80 million a year since the switch; some health care providers are waiting three years to get paid; and injured drivers are hiring lawyers to deal with collection notices, according to the Denver Business Journal.
Although hospitals and health insurers are fighting to save PIP, most of them agree reform is needed. Several reform bills are winding their way through the legislative session.
One bill calls for the Personal Injury Protection law to be extended to Jan. 1, 2010. Another mandates medical payments coverage for hospitals of $25,000 per individual and $50,000 per accident as a substitute for PIP coverage. Other proposed legislation would require motorists to buy $25,000 of bodily injury coverage.
Grawe questions the need for mandating medical coverage. Florida drivers, he said, can already voluntarily buy coverage from auto insurers, to help pay for their accident injuries, regardless of fault.
"It doesn't work," State Farm's Neal said, "to force people to buy things that they don't need, and they don't want."
AT A GLANCE:
PIP facts:
--Under the Florida No-Fault law, drivers must purchase Personal Injury Protection, which pays up to a maximum of $10,000, regardless of fault, for bodily injury caused in an auto crash.
--PIP coverage pays for 80 percent of expenses for medically necessary services, 60 percent of lost wages, 100 percent of replacement services such as child care, housekeeping or yard work, and $5,000 for death benefits.
Source: Florida Department of Financial Services
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