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What's wrong with no-fault insurance

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By MARTIN DYCKMAN, Times Associate Editor

© St. Petersburg Times
published November 24, 2002

TALLAHASSEE -- A budget crisis. The class size amendment. Medical malpractice. Nursing homes. Worker's compensation. Slot machines for the racetracks. As if there weren't already enough incendiary issues to make wise legislators envy the people they defeated, Jim King lit another huge bonfire during his first speech as Senate president.

"The Senate will examine fraud in the Personal Injury Protection insurance market and will work diligently to clean this problem up, or if necessary, eliminate it altogether," he said.

Though only the lobbyists seemed to take notice, that was nothing less than a threat to repeal Florida's entire no-fault auto insurance law. Only a general tax increase could affect more people.

King said later that he would prefer to repeal no-fault because he thinks it is still "fraught with fraud" despite legislation that was aimed at the problem last year. But for now he's deferring to colleagues who asked him to give reform one last chance.

As the insurance industry is split the same way, the odds don't favor outright repeal.

But if you are a responsible doctor or medical administrator it is time for you to be giving King your undivided attention anyway. It's not just shady clinics and overly aggressive lawyers who have a lot to lose.

The crux of Florida's no-fault law, enacted 31 years ago, is that motorists must insure themselves for the medical expenses and wage losses they would suffer from routine accidents. The minimum coverage for this personal injury protection -- called PIP -- is $10,000 with a maximum deductible of $2,000. Above that, your health insurance takes over, if you have any. You can collect from the other driver only if you can prove a permanent injury. Trouble is, Florida doesn't require the other guy to have personal injury liability insurance unless he's already had an accident.

So virtually everyone has (or is supposed to have; many people cheat) $10,000 worth of PIP. But suppose that were no longer the law and no one had to have it?

According to the Kaiser Family Foundation, there are some 2.6-million Floridians who have no health insurance. No Medicare. No Medicaid. Nothing to pay doctors or hospitals when they are hurt.

That prospect ought to focus the medical community's attention on an obvious, less drastic solution to part of the PIP controversy: comprehensive fee schedules for all treatments. These are already a feature -- though a hotly disputed one -- in worker's compensation, which happens to be the only other insurance sector where coverage is required by Florida law. The Legislature last year applied worker's comp limits in some cases, and Medicare limits in others (but at double the rate) to some of the more abuse-prone procedures under PIP.

Last year's no-fault "reform" was inspired by a statewide grand jury report that said ". . . A number of greedy and unscrupulous legal and medical professions have turned that $10,000 coverage into their personal slush fund."

But from the viewpoint of the insurance industry, Insurance Commissioner Tom Gallagher, and Sen. Walter "Skip" Campbell, D-Tamarac, who will be King's point man on the issue, the reforms only partly addressed the abusive fee problem and did nothing to discourage lawsuits that they believe -- on this, you can be sure, the trial lawyers differ -- ought not to be filed.

"I will tell you, it's not working," says Gallagher. 'I don't know whether repeal is the right thing. I wouldn't mind a sunset for a few years." If nothing else, he says, "We need to get rid of the pot of money people are reaching into."

Vincent J. Rio III, a corporate counsel for State Farm, says that dubious claims are paid because insurance companies can be assessed high legal fees if they deny a claim and lose in court.

"The bottom line," he contends, "is you can't afford to go to trial."

State Farm and Nationwide, two of the largest insurers, now want to repeal no-fault. Many companies still favor trying another fix.

"When we originally proposed no-fault . . . we thought it was a good way to pay people's medical bills without incurring all the friction costs of litigating who was at fault, and we thought there would be sufficient savings that it wouldn't cost consumers any more. . .," Rio said. "We have concluded that fixing no-fault is politically impossible. If we try to make the tort (lawsuit) threshold stronger, the trial bar has the political muscle to kill that. If we try to enact an across-the-board fee schedule, the medical providers have the muscle to kill or dilute that. If we try to change the attorney's fee statute . . . the trial lawyers have the political muscle to kill that also."

That's only one side of a many-sided argument. The lawyers and doctors will have theirs to say, and there will also be a similar bruising fight over worker's compensation insurance. Florida businesses claim they pay the nation's highest rates, yet workers get among the lowest benefits. Something is wrong, but no one agrees on what.

Much of this would be moot, of course, if the United States, like everyone else in the industrialized world, enjoyed a single health care system serving everybody.

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