No-fault repeal a boon for lawyers but will hurt hospitals and the poor, opponents say

Repealing Florida’s no-fault auto insurance system might eliminate barriers to “pain and suffering” monetary awards for accident plaintiffs and attorneys, but premium savings for policyholders will be minimal, fraud won’t go away, and hospitals and low-income drivers will suffer, opponents say.

Legislative bills to replace requirements that drivers buy $10,000 in personal injury protection coverage — in place in Florida since 1979 — are gaining momentum in the House and Senate this year. If enacted, PIP insurance would no longer be available and vehicle owners would instead be required to buy higher levels of bodily injury liability coverage.

Repeal would eliminate a basic level of coverage that all vehicle owners are required to buy to pay for their own emergency medical care after a crash. Instead, vehicle owners would be required to buy liability coverage that would cover occupants of other vehicles.

That opens the door for more lawsuits, according to opponents.

Kim Driggers, assistant general counsel for the Florida Chiropractic Association, said she knows of no outcry from policyholders to change the current system. Rather, the major proponents for repeal are trial attorneys who want the ability to pursue the responsible party, she said.

The Florida Justice Association, a trade organization of trial lawyers, said society has a “moral imperative” to assign financial responsibility to an at-fault party.

But what attorneys really want is to pursue more financial awards for pain and suffering, which would entail eliminating the PIP law’s requirement that victims prove their injuries are permanent.

In addition, the bills would require vehicle owners to buy more than $10,000 in liability coverage and that would create a bigger pool of money for the attorneys to pursue. The House version would require vehicle owners to buy at least $25,000 in coverage for injury or death of one person and $50,000 for two or more persons beginning next Jan. 1.

The Senate would phase in higher coverage limits before requiring $30,000 for injury or death of one person and $60,000 for two or more persons by 2023.

A repeal will enable attorneys to file lawsuits more easily and in greater volume, Driggers said.

Michael Carlson, president of the Personal Insurance Federation of Florida, which represents several major auto insurers, also said the repeal effort would be a boon to trial attorneys. “They really want to go to a tort system and why wouldn’t they?” he said. Carlson has said his organization will support the bill only if it restricts’ attorneys’ abilities to sue insurers over allegations insurers acted in “bad faith” in dealing with patient claims.

Neither bill includes bad faith restrictions, and the Senate bill includes another provision the foundation says it can’t support — a requirement to buy $5,000 in emergency medical coverage. The so-called MedPay coverage is meant to allay concerns within the medical provider community over losing PIP’s fast-reimbursement feature.

The House bill, which passed the full chamber last spring and cleared it again on Friday by a vote of 88-15, includes no MedPay requirement. The Senate version was approved by the chamber’s Banking and Insurance Committee on Wednesday.

Driggers said she believes a repeal will increase opportunities for attorneys to pursue lucrative bad faith awards from insurance companies.

“Remember, the reason PIP was put in place was to decrease litigation,” she said.

States adopted no-fault insurance systems in the 1960s and 1970s to provide basic protection to motorists regardless of fault. The ability to pursue money from at-fault parties was reserved for the most seriously injured parties and only after PIP policies were exhausted.

PIP policies provide quick payment for emergency transportation providers, hospital emergency rooms, and physicians. For the injured policyholder, it covers 80 percent of medical expenses and 60 percent of lost income. A $5,000 death benefit is provided as well, so families can bury their loved ones.

Those benefits can be critical for people without health insurance, Driggers said. “For a lot of people, PIP is the only health insurance they have,” she said.

In a hearing in early 2017, Florida Hospital Association spokeswoman Crystal Stickle urged lawmakers to keep the current system. “It is working for our hospitals and provides a basic level of coverage for over 2.6 million [Florida residents without health insurance] should they become involved in a motor vehicle accident,” she said.

FHA spokeswoman Monica Corbett said Friday that the association would prefer the state keep the no-fault system intact. But if repeal is inevitable, the association prefers the Senate version, with its MedPay component, over the House version.

House Rep. Richard Stark, a Broward County Democrat, said he was concerned that higher coverage levels for mandatory liability insurance will cost more and result in more low-income drivers deciding not to buy any auto insurance coverage. “We never expanded Medicaid and how many people are going to say, ‘Forget it. I can’t afford it,’” Starke said in a House Commerce Committee hearing in November.

Although repeal proponents cite a widespread movement by former PIP states back to liability systems, Driggers says few mention the fact that 21 states retained availability of PIP and that 16 of those states require vehicle owners to purchase both.

Repealing the no-fault law would fundamentally shift not just how responsibility is assigned after accidents but how emergency care for accident victims is funded.

Under the House bill, medical providers would have to wait until liability claims are settled or litigated. That takes up to two years, Driggers said.

Losses currently covered by PIP would be shifted: $469.7 million in losses would shift to health insurers; $32.8 million would shift to health care providers; and $82.9 million would be absorbed by the patients themselves, according to a 2016 study commissioned by the state Office of Insurance Regulation.

Colorado abandoned its no-fault system in favor of a liability-based system in 2003. Because the change increased the number of auto crash patients with no insurance and the number relying on their health insurance policies, reimbursement rates fell from 60 percent before the repeal to 36 percent three years later, according to a 2007 study by BBC Research & Consulting.

As noted in a Florida House analysis, Colorado went from having the ninth-highest auto insurance premium before the change to 21st highest afterward, as average premiums declined from $921 in 2002 to $738 in 2007 and have remained stable since.

The analysis does not note that Colorado required $100,000 in PIP coverage — not $10,000 as Florida requires — and total liability coverage required after the repeal was less than $100,000.

Still, average liability premiums also declined significantly in two other states that repealed their no-fault systems — Georgia in 1991 and Connecticut in 1994, according to a 2010 study by the RAND Institute for Civil Justice. The study said it could not determine the reasons, but said possible reasons might include less efficient handling of medical claims by auto insurers compared to health insurers.

Florida’s 2012 reforms were also meant to slow an increase in premiums. It worked, for awhile, as rates declined 14.4 percent in 2014 before rising again by 25.7 percent by 2016. State officials said those increases could have resulted from rising treatment costs, more miles driven and more motor vehicle crashes.

For most Floridians, premium savings from a no-fault repeal should be modest, according to projections in the 2016 analysis commissioned by the state Office of Insurance Regulation.

Under the House bill, average premiums would drop 5.6 percent — or $68.12 per car.

Under the Senate bill, with the $5,000 MedPay component, average premiums would increase from $1,209.51 to $1,231.69.

While repeal proponents frequently cite pervasive fraud within the PIP system, the 2012 revisions resulted in a 16 percent decline in fraud by 2013-14.

Rep. Erin Grall, a Vero Beach personal injury lawyer and sponsor of this year’s version of the House repeal bill, acknowledged in the November Commerce Committee hearing that no one can predict with any degree of certainty what will happen to insurance rates if repeal is enacted.

She urged the House to pass it anyway. “Let’s truly find out what the rates would be in a pure shift from PIP to bodily injury,” she said.

Repeal critics say fraud is unlikely to disappear if no-fault is repealed.

“We should expect to see an initial drop in PIP-related fraud,” Carlson said in an email. “But criminals don’t quit, they just move on, so we would expect fraudsters to try and find ways to game the [bodily injury liability] system. Nothing will prevent a phony PIP medical clinic from becoming a phony BI medical clinic.”

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