Florida Passes Bill aimed at PIP Car Insurance Fraud

John Egan

Florida lawmakers have passed legislation that supporters hail as a monumental step toward reducing car insurance fraud in the Sunshine State. However, one consumer advocacy group in Florida complains that the legislation "will treat consumers like criminals."

Bill puts limits on medical benefits

Supporters say the bill will crack down on fraud carried out under Florida's no-fault car insurance law. Under the law, a car owner must carry at least $10,000 worth of personal injury protection (PIP). PIP covers medical expenses for injuries suffered in a car accident by the insured motorist, passengers in the insured car and relatives living in the policyholder's home. The coverage kicks in regardless of who caused the crash.

One of the main ways that fraudsters take advantage of the no-fault law is by staging car accidents -- complete with fake injuries and phony victims -- then collecting PIP benefits from car insurance policies.

The bill would provide PIP benefits of $10,000 or more only to people who are seriously injured in car crashes. For someone with moderate injuries, the PIP limit would be $2,500.

The legislation also would:

  • Require someone filing a PIP claim to get medical treatment within 14 days in an ambulance or at a hospital or doctor's office. This is aimed at clamping down on phony medical clinics that are set up solely to commit PIP fraud.
  • Tighten licensing requirements for medical clinics.
  • Ban PIP reimbursements for massage and acupuncture treatments. Chiropractic treatments still would be eligible for PIP payments.
  • Yank a doctor's license for five years if he's found guilty of PIP fraud.

On March 10, the final day of the 2012 legislative session, the Florida House passed the PIP reform bill 80-34. The Florida Senate approved it by a narrower margin -- 22-17. Gov. Scott Rick Scott is expected to sign the legislation into law.

A costly problem

Lynne McChristian, a spokeswoman for the nonprofit Insurance Information Institute, says the legislation retains PIP benefits for policyholders, "while retracting it from those most often found to be abusing it."

"Of course, it will take awhile to see how well the changes work," McChristian says. "At this point, there is every reason to be optimistic that true progress toward fighting the fraud has been made."

Scott says the legislation will save Floridians money "that otherwise would have found its way into the pockets of fraudsters, unethical providers and trial lawyers."

The Insurance Information Institute says no-fault insurance fraud has cost Florida drivers more than $1.3 billion in higher car insurance premiums since 2009.

R.J. Lehmann, deputy director of the Center on Finance, Insurance and Real Estate at The Heartland Institute, a nonprofit think tank, says the House version of the bill would have more aggressively reduced costs for PIP insurance claims. Nonetheless, the final measure "represents progress in curbing rampant fraud in the system," he says, and should halt escalating insurance premiums.

Legislation is a 'rude awakening'

Bill Newton, executive director of the nonprofit Florida Consumer Action Network and a board member of the Consumer Federation of America, says the bill does a disservice to Florida consumers by stripping them of benefits and padding the pockets of car insurance companies.

"Floridians are in for a rude awakening when this anti-consumer legislation becomes law," Newton says. "They will find their benefits slashed, their options limited and absolutely no focus on stamping out the rampant fraud the insurance industry claims as the cause for higher auto insurance premiums."

Newton says the legislation would "treat consumers like criminals."

"Anyone claiming PIP benefits will be subject to deposition-style examinations under oath at the insurance company’s discretion, by the insurance company’s psychologists, doctors and attorneys," he says. "In other words, your insurance company can have their shrink ask you anything they want under oath (let your imagination help you here) and they don’t even need a reason to do so. Some people will probably forgo their PIP benefits rather than be subject to such an ordeal."

Newton acknowledges the bill does contain some "good things," but wants lawmakers to fix some of legislation's problems during the 2013 session. "We hope the bill works as advertised," he says.

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