As No-Fault Debate Goes on, Insurers Accuse 'Gouging'

By Randy Diamond, The Palm Beach Post, Fla.

May 3--Florida's no-fault auto insurance system is nearing the legislative finish line in Tallahassee, but it's still unclear if a checkered flag is going to be waved signifying an end to the race.

Most insurance companies are trying to do away with no-fault, which includes personal injury protection, known as PIP. It is set to expire Oct. 1. Insurers say hospitals are charging them more than others are under the system, which pays up to $10,000 a person injured in an auto accident.

For example, State Farm Mutual Auto Insurance Co. cited an example in which a bill it received from Palms West Hospital in Loxahatchee showed a $4,000 charge for a CT scan. The imaging test was done on the abdomens of auto accident victims who have State Farm coverage.

The hospital would receive only $412 from Medicare for the procedure and $322 under Florida's workers compensation system, according to the insurer.

"It's price gouging," said State Farm spokesman Chris Neal, adding that Palms West isn't alone since most hospitals do the same thing.

That overcharging results in higher premiums, he said.

Hospitals admit that higher charges are passed on to auto insurers but say the money is used to help pay for emergency room care and other services in hospitals, often for uninsured people.

Hospital officials say they set a fixed fee for emergency care and hospital services but that reimbursement rates can vary because of government-set discounted fee schedules or because price reductions can be negotiated by a health insurer.

There is no fee schedule for most medical procedures under the no-fault law.

Ronald Lavater, CEO of Palm West, said the facility has discount programs in place with some auto insurers, including Allstate and Geico.

But Allstate spokesman Adam Shores said the discounted rates it pays hospitals are still higher than they should be. Allstate has been unable to negotiate such discounts at most Florida hospitals, he said.

Neal also said State Farm has tried unsuccessfully to negotiate discounts with hospitals.

The state legislature ordered a fee schedule in 2003 for MRIs, another medical test, and tightened some controls.

Current legislators have considered adding additional fee schedules, but neither of the measures now before lawmakers includes them.

Legislators remain divided on whether they should extend the law at all.

The Senate approved a bill extending no-fault in its present form until 2012.

However, the House is expected to begin debate today on a newly amended measure that would provide $10,000 in emergency care and $3,000 in chiropractic care. Now, the $10,000 can be spent anywhere on care.

The session ends Friday, although a special session on property taxes will convene in June.

Insurers have promised major discounts for consumers if no-fault is scrapped. State Farm estimated premiums would decline 16 percent statewide.

The no-fault system provides big money to medical providers throughout Florida. A Florida Hospital Association survey of 91 medical centers showed that $350 million in payments were received in 2005 for emergency room services. The also survey showed that 40 percent of the injured lacked health insurance.

Health insurance would become the primary payer of accident claims if no-fault were scrapped, which means that hospitals would be strapped with of millions of dollars in additional uncompensated emergency room care, said Rich Rassmussen, communications director for the hospital association.

"The loss of revenue could mean some hospitals might have to scale back trauma care," he said.

The availability of emergency care is already a growing problem.

Although auto insurers in Florida make a profit, generally in the 10 percent range, most companies experience losses when it comes to selling the mandatory no-fault coverage.

The repeal of the 1971 law that set up the no-fault system would mean improved profitability for auto insurers. Hospital charges are just one issue.

The core problem has to do with the system being rife with fraud, said Charles Grimsley, president of the Florida Property and Casualty Association, which represents a dozen auto insurers.

The system even punishes insurers for challenging what they think are inflated or unnecessary charges: If they lose the case, they risk having to pay court-awarded legal fees, which can be in the $60,000 to $80,000 range, Grimsley said.

"It's not worth it."

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