A preliminary report on the impact of Florida's no-fault auto insurance law suggesting it could result in savings between 12 percent and 20 percent on a portion of drivers' premiums is presenting as many questions as answers.
Regulators have cautioned drivers that the findings may have minimal impact on their overall premiums.
As part of the new law that reformed Florida's personal insurance protection law earlier this year, lawmakers called for an independent actuarial study to be conducted to calculate the potential savings from the bill.
Among other things, the law gives accident victims only 14 days to seek treatment and provides $10,000 in benefits for acute injuries and $2,500 for lesser injuries. The law also includes reductions in legal costs, a list of approved medical providers and licensed clinics, creates a medical fee schedule, and adds several anti- fraud provisions.
The bill came as a result in an explosion in PIP claims that increased by 28 percent between 2006 and 2010 at a cost increase of $1.5 billion to $2.5 billion.
Now regulators have released a preliminary report conducted by Pinnacle Actuarial Resources Inc. that indicates that the projected savings from the Law (HB 119).
"It is important that the public not be misled, keeping in mind these are preliminary calculations," said Office of Insurance Regulation Spokesperson Jack McDermott.
For example, the projected savings may translate into few dollars since the premium change only applies to the PIP portion of the policy, which represents roughly 20 percent of a policy. The savings may also only mitigate the size of an insurer's PIP rate increase. Additionally, any savings will not take effect until January 1.
In addition to the caveats cited by the OIR, the study itself noted that it did not take into consideration the new medical fee schedule, the elimination of massage therapists and acupuncturists as medical providers, or the reinforced anti-fraud laws.
"Our work is subject to inherent limitations," noted the study.
Even with all the caveats, McDermott said the study does point a way forward.
"Overall, Pinnacle's draft report does give us preliminary indications that HB 119 will positively impact the marketplace and will ultimately benefit consumers," said McDermott.
Insurer groups are expressing caution about the study, which they note is based on a law that doesn't take effect until next year and is still facing court challenges.
Donovan Brown, representing the Property and Casualty Insurers Association of America, said the study provides a framework as regulators, the industry and the public begin to assess the influence of the new law on PIP rates. Brown cautioned, however, that more time and study are needed before final conclusions can be drawn about the PIP law.
"It is imperative that policymakers, regulators and Florida drivers understand that it must have adequate time to take effect," said Brown. "As with any comprehensive legislative package, there will be implementation processes and other issues that must be addressed."
Even though the industry scored a big victory with the passage of the PIP reform bill, industry officials remain concerned about the mandated rate decreases called for in the law. As of Oct. 1, every insurer must submit a rate filing reflecting a 10 percent reduction in the PIP portion of its rates or provide a detailed reason why it is unable to do so. A similar provision is scheduled for Jan. 1, 2014 calling for a 25 percent rate drop.
Proponents of the mandated rate decrease said the language gives insurers carte blanche to offer any reason for not lowering rates while at the same time they are able to benefit from the savings from the bill.
According to a weekly report made to Governor Rick Scott by OIR, only one filing has been approved that reflects the savings associated with the bill. However, as mentioned by the OIR earlier, the savings reduce the amount of a requested increase but do not overall premiums. OIR said the insurer's experience supported an increase in its PIP rates of 45 percent; however, because of the bill, the insurer chose to only request an eight percent increase.
Additionally, as of Aug. 1, OIR said 89 insurers had filed new forms to reflect the amount to pay doctors and for health care services, based on Medicaid rates.
Charles E. Boyle 07 Aug, 2012
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