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No Fault What Happens After Expires?

Jun 19, 2007

By Russell Ray, Tampa Tribune, Fla.

Jun. 20--It's been the law in Florida for 36 years.

But come October, the state's no-fault auto insurance law, which requires drivers to have at least $10,000 of personal injury protection, will expire.

If the Legislature doesn't step in to extend PIP, the way Floridians purchase auto insurance will change dramatically. If drivers don't start preparing for the changes now, they could get caught in an accident with no coverage, consumer groups say.

Auto insurers say the end of PIP will lead to significantly lower rates and reduce the fraud that has plagued the program for years. State Farm, the state's largest auto insurer, plans to lower its rates 16 percent, on average, once no-fault goes away. Other insurers are expected to announce lower rates soon.

The end of PIP won't eliminate the cost of medical care for those injured in an auto accident. PIP supporters say its demise will cost motorists more, not less, in the long run.

Health insurers and hospitals say they will take over much of the costs now covered by PIP, and that premiums for auto and health insurance will rise as motorists buy more insurance to cover the cost of medical care.

Blue Cross and Blue Shield of Florida, the state's largest health insurer, says the elimination of no-fault will raise health insurance premiums for a family of four by $240 to $336 a year. The higher rate will be needed to cover the added cost of paying claims from auto accidents.

'Scare Tactics'?

Auto insurers and others who lobbied hard for the sunset of no-fault say hospitals and health insurers are exaggerating the potential effect of PIP's termination.

"They're nothing more than scare tactics," said Allison North Jones, spokeswoman for Floridians for Lower Insurance Costs, a coalition formed to press for the sunset of no-fault. "Eighty percent of the care that's currently compensated by auto insurers will continue to be compensated by auto insurers, whether it's through bodily injury or uninsured motorists coverage."

Under the no-fault system, motorists who are injured in an accident are compensated regardless of fault. For hospitals and others providing trauma care, the mandatory coverage means they're guaranteed to recover up to $10,000 of the cost of care almost immediately.

Hospitals and trauma centers fear that switching from a no-fault system to a tort system will delay reimbursements for care provided to accident victims by months or even years. To collect those costs, hospitals may have to sue, boosting their legal costs.

The Florida Hospital Association, which wants to preserve the no-fault system, said eliminating PIP will cost the state's hospitals and trauma centers at least $350 million a year as they foot the bill for drivers who have no health insurance.

About 40 percent of auto accident victims treated by Florida hospitals and trauma centers in 2005 had no health insurance other than the required PIP coverage, said Florida Hospital Association spokesman Richard Rasmussen.

"Under federal and state law, we've got to treat and stabilize them regardless of their ability to pay," Rasmussen said. "We're going to feel the bulk of the burden of this."

A No-Fault Fault

Florida's no-fault system has led to widespread fraud by dishonest doctors and clinics that bill for unnecessary and expensive medical procedures to get the full $10,000 of coverage guaranteed for every accident.

"Most of our members believe they are being charged a lot more for PIP than they need to," said Sam Miller, spokesman for the Florida Insurance Council. "All of our members agree that the current system is broken."

The Legislature attempted to reform the no-fault system during the last regular session but failed to reach a compromise. Gov. Charlie Crist said last week that he may call a special session in September to reform the system and fight the fraud.

The House and Senate introduced separate reform bills during the regular session, which ended last month. The House measure called for mandatory coverage but limited payments to emergency rooms and in-hospital treatment. The Senate proposal extended the existing no-fault system for four years but included $3.5 million to fight fraud. Both bills eventually died.

"They've been trying to reform this system for over a decade," Jones said. "It's why the sunset was put into law in the first place."

PIP supporters, including the Florida Hospital Association, acknowledge that the fraud and inflated medical charges are problems.

"We recognize there are some bad players out there, but those issues can be addressed," Rasmussen said.

Without PIP, auto insurers say a typical two-car family with health insurance in Florida will save $250 a year on auto insurance. For State Farm clients, the savings would average about $360 a year.

Those who don't have health insurance would be smart to buy additional auto insurance to cover medical expenses, although such coverage won't be required if no-fault expires with no changes from the Legislature.

"There's certainly going to be some cost shifting," Jones said. "Independent health care will have to pick up some of it, but we don't believe the cost shift will be that significant."

There Are Ways To Fill Gap

Medical payments coverage, or Med-Pay, is an option auto insurers provide, but the expense would eliminate some of the savings created by PIP's termination. What's more, Med-Pay rates might increase once PIP goes away, said Miller, the spokesman for the Florida Insurance Council.

"If we no longer have PIP, and Med-Pay is going to be dollar one, the amount of money that companies are going to pay under the Med-Pay piece is going to go up dramatically," Miller said.

PIP also could be replaced with bodily injury coverage to cover the medical costs for drivers and passengers injured in an accident you caused. Uninsured motorists insurance is another form of coverage drivers can buy to replace PIP.

"People should check carefully and make sure they have those coverages," said Bill Newton, executive director of the Florida Consumer Action Network. "It's an additional cost to the consumer because you probably don't have it now."

The rates for those types of coverage will go up if PIP is allowed to sunset, Newton said. PIP's demise means there will be more uninsured motorists on Florida's roads and highways and thus more demand for uninsured motorist insurance, Newton said.

Colorado was the last state to get rid of a no-fault system. In that state, auto insurance rates have dropped at least 15 percent since no-fault was eliminated in 2003, according to the Colorado Division of Insurance.

Colorado's trauma centers say revenue is down at least $80 million a year since the switch to a tort system.

Florida's auto insurers, health insurers and hospitals are digging in for one more battle should the Legislature take up the no-fault issue during a special session in September.

As Miller put it, "The only thing that seems to be clear is that there will be one more attempt by the Legislature to pass something."

Reporter Russell Ray can be reached at (813) 259-7870 or rray@tampatrib.com.

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