Florida House Bill 119
An Early Look at Florida’s
Newest Auto No-Fault Reform
Steve Lehmann
January 24, 2013
About the Presenters
Steven G. Lehmann, FCAS, FSA, FCIA, MAAA
Consulting Actuary
Bloomington, Illinois
• 40 years experience in personal lines insurance
• Fellow of the Casualty Actuarial Society and Society of of of
of Actuaries and Member of the American
Academy of Actuaries
1
Executive Summary
Impact Analysis of House Bill 119
• Study on behalf of the Office of Insurance Regulation to
determine independent estimate of savings resulting from
new law
• Report dated August 20, 2012 can be found at
www.pinnacleactuaries.com in the Knowledge Center
• Overall savings estimated at 14.0% - 24.6% of Auto No Fault
(PIP) Premiums
• Assumes adequate PIP Rates
• Savings will be realized over time as policies are renewed with
revised PIP premiums
• Offsetting increase in BI/UM Premiums estimated at 3.0% 4.7%
3
3
Analysis of Major Bill Provisions
PIP Medical Benefits
• Bill Provisions
– Initial care and services must be received within 14 days
– Care has to be directed by licensed physician, osteopathic
physician, or chiropractic physician, or needs to occur in a
hospital, emergency facility or during emergency transportation
– $2,500 non-emergency / $10,000 emergency limit
– Massage and acupuncture are not reimbursable under any
circumstances
• Analysis
– IRC data on number of days until treatment received
– IRC data on medical treatment and injuries
– Mitchell data on massage therapist CPT codes
5
PIP Medical Fee Schedule
• Bill Provisions
– Applicable fee schedule is Medicare Part B schedule in effect on
March 1 of each year
– Reimbursement levels is 200% of fee schedule for ambulatory
surgical centers, clinical laboratories, and for durable medical
equipment
• Analysis
– Use of fee schedule currently in the industry
– Mitchell data on fee schedule use
6
Prevention of PIP Related Fraud
• Bill Provisions
– A health care practitioner found guilty of insurance fraud loses
his or her license for 5 years and may not receive PIP
reimbursement for 10 years
– Insurers are provided an additional 60 days (90 total) to
investigate suspected fraudulent claims however, an insurer that
ultimately pays the claim must also pay an interest penalty
– All health care clinics must be licensed
– Law enforcement must complete a long crash form, if not law
enforcement report required then drivers must submit report to
DHSMV within 10 days
– Creates Automobile Insurance Fraud Strike Force
7
Prevention of PIP Related Fraud
• Analysis
– Health care practitioners: potential for fines and prosecution is
significant, but level of enforcement has been minimal
– Long form: reviewed data from Florida Highway Crash Statistics
and Mitchell on the change in number of claimants per claim
– Strike force: discussion with anti-fraud division personnel,
review of other states effectiveness, and insurance company
interviews, and review of IRC data
8
IRC Fraud Data
State
Total Claims
Claims
Referred
to SIU
Compromised
Claims
Comp/
Referred
Comp/Total
FL
1,312
47
25
53.2%
1.9%
NJ
789
31
8
25.8%
1.0%
NY
1,010
44
9
20.5%
0.9%
MA
610
17
4
23.5%
0.7%
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Estimated Impacts
Anticipated Income Effects
Item # Item Description
Lines
Minimum Central Maximum
Impact
Impact
Impact
1
Expansion of Florida Traffic Crash Report
Long Form
130-154
0.0% -0.8%
2
Clinics must be Licensed
331-334
0.0%
3
Establish Automobile Insurance Fraud Strike
Force
478-613
4
Separation of Death Benefit
5
6
Initial Services within 14 Days
Limitation on Non-Emergency Conditions
7
Exclusion of Massage Therapy &
Acupuncture
8 Repay Medicaid within 30 Days
9 Submission of Revised Claim within 15 Days
10 Additional 60 Days for Fraud Investigation
668-669 &
777-781
-1.5%
0.0%
0.0%
-0.5% -1.3%
-2.0%
0.7%
0.8%
677-679
750-754
0.0% -0.8%
-9.8% -12.3%
-1.5%
-14.7%
755-776
-6.9% -8.7%
-10.4%
821-823
852-860
964-975
0.6%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
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11
Anticipated Income Effects
Item # Item Description
Report All Claims Denied for Fraud to Division of
11 Insurance Fraud
12
16
Fix Medicare Fee Schedule
Insureds Must Comply with Policy
Conditions/Examination Under Oath
Insureds Refusal to Submit/Failure to Appear at 2
Medical Exams
Attorney Fees Calculated w/o Contingency Fee
Multiplier
Loss of License to Practice for 5
Years/Reimbursement for PIP 10 Years
(1)
Adjustment for Overlap
(2)
Overall Anticipated Impact on Losses
(3)
General and Other Acquisition Expenses
(4)
PIP Premium Savings
13
14
15
Lines
Minimum Central Maximum
Impact
Impact
Impact
975-977
0.0%
0.0%
0.0%
1049-1057
0.0%
-0.8%
-1.5%
1428-1439
0.0%
0.0%
0.0%
1522-1525
-0.6%
-0.9%
-1.2%
1543-1545
-0.2%
-0.2%
-0.2%
1746-1751
0.0%
0.0%
0.0%
1.1%
2.4%
3.5%
-16.3% -22.7% -28.7%
14.3% 14.3% 14.3%
-14.0% -19.5% -24.6%
12
12
Bodily Injury, Uninsured Motorists and
Underinsured Motorists Offset
Item # Item Description
Minimum Central Maximum
Impact Impact Impact
(1)
PIP Premium Savings Excluding Fraud
-13.5% -17.7% -21.6%
(2)
Lawsuit Recovery for Comparative
Negligence
(3)
Percentage of Claims when at least 1 Driver
has BI
(4)
Average PIP Premium
209.37 209.37 209.37
(5)
Average BI and UM Premium
432.99 432.99 432.99
(6)
Bodily Injury and Uninsured Motorist
Offset
50%
50%
50%
91.0% 91.0% 91.0%
3.0%
3.9%
4.7%
13
13
Implementation
Ratemaking for House Bill 119
• Most provisions of law effective January 1,
2013
• New provisions typically effective with policy
renewal
• Savings will be realized over time as policies
are renewed with revised PIP premiums
• Ratemaking typically utilizes emerging data
and trends which won’t begin to show new
law effects until late 2013 and into 2014
15
15
Questions
Thank You for Your Attention
Steve Lehmann
309.807.2302
slehmann@pinnacleactuaries.com
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