Insurer CEO Commentary: Why Florida Is Missing Out on PIP Savings

Florida legislators, drivers, and reporters want to know when the savings are coming from the Personal Injury Protection (PIP) reform law enacted in 2012. So do we.

PIP is a money-loser for car owners and insurance companies. According to a recent Florida Office of Insurance Regulation study, insurers pay an average of $1.15 in losses and expenses for every dollar collected.

The courts aren’t helping. An amendment to the 2008 No-Fault Act permitted insurers to limit reimbursement for PIP medical expenses to twice what Medicare Part B pays. However, medical providers continue to charge PIP insurers as much as six times the rate and persuade the courts to OK the bills.

In 2012, the Third and Fourth District Courts of Appeal ruled that insurers cannot limit reimbursement to that schedule unless they change all policies. Then, one court declared the amended policies to be ambiguous and disallowed the lower fee schedule. Hence, no one is saving money.

Most of the 2012 amendments went into effect Jan. 1. They apply to new and renewed policies, not existing ones, so it will take all year to affect every driver.

For claims filed under the new rules, it remains to be seen whether the courts will allow insurers to use the new amendments. A class action lawsuit is challenging the constitutionality of the payment restrictions for massage therapy and acupuncture. And websites are sprouting up with docs-for-hire to sign off on chiropractor claims.

The legislature sought to limit plaintiff attorney’s fees, but certain county court judges have circumvented that by simply increasing hourly rates. Now, most PIP lawyers collect $400 to $500 per hour.

Based on what has happened in the courts, we do not have high expectations that the 2012 amendments will provide an immediate cost savings. It could take years for the courts to sort through the legal issues.

We have been in this business long enough to know that nobody sheds a tear when an insurance company is forced to pay out more money. But while some judges may believe they are taking money from a deep-pocket insurance company to help out the little guy, they are unwittingly destroying the PIP system by allowing PIP clinics and attorneys to gouge PIP insurers, deplete the risk pool, and drive up premium rates. Unless something is done to fix the courts, PIP will continue to serve as a retirement fund for fly-by-night clinics and the lowest level of plaintiff attorneys.

In the meantime, we’ll try to conduct business according to the new PIP law. We don’t want to pay more for insurance, and we don’t want our customers to, either. The savings will come if the law is enforced the way it was written.

Parrillo is chairman and CEO of United Automobile Insurance Co. in Miami Gardens, Florida.