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January 24, 2013 Steve Lehmann Florida House Bill 119 An Early Look at Florida’s Newest Auto No-Fault Reform
January 24, 2013Steve Lehmann
Florida House Bill 119An Early Look at Florida’s
Newest Auto No-Fault Reform
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Steven G. Lehmann, FCAS, FSA, FCIA, MAAAConsulting 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
About the Presenters
Executive Summary
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• 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%
Impact Analysis of House Bill 119
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Analysis of Major Bill Provisions
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• 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
PIP Medical Benefits
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• 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
PIP Medical Fee Schedule
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• 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
Prevention of PIP Related Fraud
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• 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
Prevention of PIP Related Fraud
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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%
IRC Fraud Data
Estimated Impacts
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Anticipated Income Effects
Item # Item Description LinesMinimum
ImpactCentralImpact
MaximumImpact
1 Expansion of Florida Traffic Crash Report Long Form 130-154 0.0% -0.8% -1.5%
2 Clinics must be Licensed 331-334 0.0% 0.0% 0.0%
3 Establish Automobile Insurance Fraud Strike Force 478-613 -0.5% -1.3% -2.0%
4 Separation of Death Benefit 668-669 & 777-781 0.6% 0.7% 0.8%
5 Initial Services within 14 Days 677-679 0.0% -0.8% -1.5%6 Limitation on Non-Emergency Conditions 750-754 -9.8% -12.3% -14.7%
7 Exclusion of Massage Therapy & Acupuncture 755-776 -6.9% -8.7% -10.4%
8 Repay Medicaid within 30 Days 821-823 0.0% 0.0% 0.0%9 Submission of Revised Claim within 15 Days 852-860 0.0% 0.0% 0.0%
10 Additional 60 Days for Fraud Investigation 964-975 0.0% 0.0% 0.0%
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Anticipated Income Effects
Item # Item Description LinesMinimum
ImpactCentralImpact
MaximumImpact
11Report All Claims Denied for Fraud to Division of Insurance Fraud 975-977 0.0% 0.0% 0.0%
12 Fix Medicare Fee Schedule 1049-1057 0.0% -0.8% -1.5%
13Insureds Must Comply with Policy Conditions/Examination Under Oath 1428-1439 0.0% 0.0% 0.0%
14Insureds Refusal to Submit/Failure to Appear at 2 Medical Exams 1522-1525 -0.6% -0.9% -1.2%
15Attorney Fees Calculated w/o Contingency Fee Multiplier 1543-1545 -0.2% -0.2% -0.2%
16Loss of License to Practice for 5 Years/Reimbursement for PIP 10 Years 1746-1751 0.0% 0.0% 0.0%
(1) Adjustment for Overlap 1.1% 2.4% 3.5%
(2) Overall Anticipated Impact on Losses -16.3% -22.7% -28.7%
(3) General and Other Acquisition Expenses 14.3% 14.3% 14.3%
(4) PIP Premium Savings -14.0% -19.5% -24.6%
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Bodily Injury, Uninsured Motorists andUnderinsured Motorists Offset
Item # Item DescriptionMinimum
ImpactCentralImpact
MaximumImpact
(1) PIP Premium Savings Excluding Fraud -13.5% -17.7% -21.6%
(2) Lawsuit Recovery for Comparative Negligence 50% 50% 50%
(3) Percentage of Claims when at least 1 Driver has BI 91.0% 91.0% 91.0%
(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 3.0% 3.9% 4.7%
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Implementation
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• 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
Ratemaking for House Bill 119
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Questions
