New Jersey Governor Chris Christie’s administration is proposing to overhaul the state's auto insurance rules to limit medical expenses for people injured in car crashes.
A new rule proposed this week would make dozens of changes to the state’s personal injury protection, or PIP, system. The state seeks to standardize the fees paid to same-day surgery centers, reduce costs associated with alternative providers and clamp down on attorney’s fees and the use of arbitration to settle coverage claims. It would add around 3,000 treatment codes in an effort to simplify billing, speed repayments and reduce disputes.
“The medical fee schedules are rules are intended to establish limits on the amount of medical expenses paid by insurers on behalf of New Jersey residents who are injured in automobile or bus accidents, thereby lowering the cost of automobile personal injury protection coverage and motor bus medical expense coverage in New Jersey,” the proposal says.
The state Department of Banking & Insurance says PIP coverage costs accounted for 97 percent of all rate increase requests over the past year. Insurers pay $1.23 in benefits for every $1 of PIP-related premiums collected, the state says.
Auto insurance isn’t the dominant political issue it was 10 to 15 years ago, when it (along with property taxes) nearly toppled then-Gov. Christie Whitman in an unexpectedly close re-election effort in 1997. But the state, in part due to its population density, still has among the nation’s highest auto insurance rates.
The Property Casualty Insurers Association of America says changes to auto insurance enacted in 2003 under Gov. James McGreevey increased competition in the state but didn’t address PIP. It says the average PIP claim in the state has risen by 65 percent since 2001, compared with 36 percent in other states with no-fault insurance systems, and has nearly double the average cost, at nearly $16,400.
As a result, says PCI, New Jersey drivers pay 59 percent more for PIP coverage and 27 percent more for their total liability premium than drivers in other no-fault states.
“Unless there’s a way of handling the medical side of this, it could disrupt the whole system,” said Richard Stokes, regional manager and counsel for the association. “If you don’t solve the PIP, the medical cost side of the changes that we saw in 2003, we’ll only have a crisis at some time. Certainly we’re not calling ‘the sky is falling’ or anything like that, but at the same time there’s a need for change to keep the system moving forward and help to provide a stable and predictive marketplace.”
The state also seeks to reduce the number of times that arbitration is used to settle disputes between insurance companies and providers, because such filings grew from 34,190 in 2005 to 61,765 in 2010. A simple, standard internal appeal process must be provided by insurers and used first.
Cases where future treatment isn’t at issue and less than $1,000 is in dispute would be decided without an in-person hearing, based instead on paper filings.
The new rules would also alter how an arbitrator decides on awarding attorney’s fees. The state says that in 31 percent of roughly 10,700 awards last year that include attorney’s fee, the attorney award was higher than the PIP benefit granted.
The proposed rules would allow the state to reject use of any diagnostic tests or practices that aren’t evidence-based, clinical guidelines published in peer-reviewed journals. The state says it has become aware of tests and procedures supported by anecdotal evidence and wants to block that.
Every car insurance policy in New Jersey must including personal injury protection benefits — often called PIP, it covers the benefits for covering medical care for injuries, regardless of who’s liable for an accident.