New Jersey’s New Deal For Insurance Customers

Posted & filed under Car Insurance News.

Fighting back rising insurance premiums, New Jersey has proposed a set of new reforms to its Personal Injury Protection.   The state has historically had some of the highest insurance costs in the country, and these new measures seek to curb the rapid rise in the cost of insurance.

While rates did decrease after then-governor James McGreevey enacted changes in 2003 which help to encourage competition, rates are again on the rise.

Personal Injury Protection (PIP), a type of vehicle cover that is mandatory in some states – including New Jersey – protects customers against hospital bills, loss of wages and other personal damages incurred during an accident. It is called ‘no-fault’ cover, because it covers you regardless of whether the accident was your fault or not, and does not damage your no-claims bonus or contribute to the cost of your premiums.

Legislation as it stands, however, allows for a great deal of abuse by unscrupulous medical practitioners, who have been able to exploit loopholes in order to over-bill for medical procedures performed in accident cases.  The state’s Department of Banking and Insurance says 97 percent of rate increases in 2010 were due to rising personal injury costs. In fact, for every dollar taken in by insurance companies as PIP premiums, they shell out $1.23 in benefits and payouts.

“A few outlying providers found ways to abuse and take advantage of the system, and really have an unfair and inequitable way of drawing down New Jersey’s coverage dollars,” said Insurance Commissioner Thomas Considine.

In this scenario, rising premiums are unavoidable.   That is why the state has taken measures to reduce the value of the average PIP claim.

Loopholes to Exploit

PIP claims work on a similar basis to Medicare, in that there is a prescribed list of treatments with set amounts that doctors can claim as reimbursement for these procedures.   Unfortunately, the list is only 1,000 treatments long, and some accidents require treatments which are not on this list.

This allows healthcare professionals to bill for additional procedures, such as Manipulation Under Anesthesia (MUA), an unconventional and expensive procedure that is normally an alternative to much cheaper treatments. The new legislation nearly doubles the list of prescribed treatments, reducing the opportunity to abuse the billing system.

It also restricts the ability for doctors to ‘re-bill’ for procedures.   For example, if you were to need x-rays, the new legislations prevents doctors from billing first for the doctor’s consultation and then for the x-ray, and then for the doctor’s consultation to interpret the x-rays and give you results.

Now, doctors will only be able to claim for extra medical procedures if it can be proven in peer-reviewed documentation that the treatment was necessary, and was the only available option, for the patient’s injury.

Changes to Dispute Process

In addition to the changes in healthcare provision regulations, the new bill lays out some changes to the process whereby denied claims are disputed and appealed. In the past, insurance companies could use any company to investigate a disputed claim.   Now, these companies will have to be registered with the state, and will be subject to regulation.

In addition to this, disputes under $1,000 can now be handled on paper, without the claimant having to show up in person.  Since claimants must appear in person during office hours, this has been a limitation for people who could not make it to hearings because of work commitments.

The new changes seek to make the process simpler for customers, and less expensive for both insurance companies and their customers.   Currently all disputes must be taken to court, which can result in expensive legal fees.

These legal fees, which represent an additional cost to consumers, are also being attacked by proponents of the bill. They say that legal costs associated with claims that go to court are “out of control”, citing an example in 2010, where one lawyer was paid $3,380 in legal fees for a case where the patient received $375 in benefits.

“Unclear” Whether Customers Will Benefit

The immediate beneficiary of these changes will be insurance companies, who will see lower costs associated with Personal Injury Protection claims.   Whether or not these savings will be passed on to consumers is unclear.   On paper, at least, it stands to reason that consumers should see a slowdown in the rate that their insurance premiums are increased over the next few years.

New Jersey Citizen Action, a consumer advocacy group, says the new rules are about helping insurance companies and limiting consumers’ access to the benefits they pay for.

“This is like a teacher having two bad kids in the class who are unruly, then telling every kid in the class to put their head down on the desk and miss lunch for the day,” said Lauren Townsend, the group’s organizing and advocacy director.