PERSONAL INJURY PROTECTION ROUNDTABLE RECOMMENDATIONS November 2010 R. Terry Butler, Esq. Florida Insurance Consumer Advocate Representing Alex Sink Chief Financial Officer State of Florida
TABLE OF CONTENTS Page Numbers Background 1 Recommendations - Office of the Insurance Consumer Advocate Staged Accidents 2 Licensure of Health Care Clinics 3 PIP Claim Handling Process 5 Fee Schedule 6 Examination Under Oath 6 Policies Rescinded for Alleged Misrepresentation 7 Exhibit I: NICB - Staged Accident Analysis Florida 2008 2009 https://www.nicb.org/newsroom/press_releases/florida-staged-accidents Exhibit II: Agency for Health Care Administration, Health Care Clinic Unit Analysis of Health Care Clinic Exemptions in Florida, Miami-Dade and Hillsborough Counties
Background The Florida Motor Vehicle No-Fault law requires registered vehicle owners and drivers to purchase Personal Injury Protection (PIP) insurance that pays for bodily injury claims arising out of the ownership, maintenance or use of a motor vehicle without regard to who caused the injury. PIP insurance provides $10,000 of coverage for bodily injuries. PIP pays 80% of all medically necessary expenses, 60% of lost gross income, and death benefits equal to the lesser of $5,000 or the remainder of unused PIP benefits per individual. PIP covers the policyholder, relatives residing in the same household, persons operating the insured vehicle, passengers in the insured vehicle and persons who are struck by the insured vehicle without regard to who is at fault for causing the injury. No-Fault systems are intended to benefit consumers by assuring that insurance will pay for most of the necessary medical treatment for injuries while holding down the cost of automobile insurance due to eliminating most litigation over issues of who is liable for paying for losses. In recent years, the No-Fault Law has been under attack by some stakeholders and was repealed for a short period of time. When the Legislature reenacted the Florida s Motor Vehicle No-Fault Law in 2008, it did so after consideration of the negative impact of repeal on emergency care services, trauma centers, medical providers and hospitals. It was determined at that time that Florida is best served by a no-fault system rather than a tortbased system. The National Insurance Crime Bureau (NICB) is an insurer funded and supported, not-for-profit organization exclusively dedicated to preventing, detecting and defeating insurance fraud through information analysis, investigation and public awareness. The NICB recently issued a study entitled Staged Accidents Analysis Florida 2008 2009 (Exhibit I). According to information submitted to NICB by its member insurers, there was a 58% increase in questionable claims involving staged accidents in Florida from 2008 to 2009. The study concluded that on a national level, Florida is now ranked number one with regard to the number of questionable claims involving staged accidents. On a local level, Tampa has replaced Miami as the number one city in Florida for questionable claims involving staged accidents. Questionable claims increased by 290% in Tampa and by 11% in Miami between 2008 and 2009. The goal of the perpetrators of staged accidents is to collect payment from insurers for fraudulent injury claims under the No-Fault Law. Florida is one of twelve states that have nofault auto insurance systems. The NICB report concluded that Florida has the highest rate of fraudulent PIP claim activity among these states. Some insurers, as well as attorney members of the roundtable who represent accident victims, expressed the view that Floridians would be better served by a mandating bodily injury liability insurance coverage instead of No-Fault coverage. Mandatory bodily injury liability coverage would shift the responsibility for payment of an injured party s claims for medical expenses and income loss to the party who caused the accident and injuries. However, a majority of the roundtable participants were of the opinion that Floridians are still best served by a no-fault system. While the very nature of a no-fault system provides ample opportunities for fraudulent activities, it is believed that with a consolidated effort by the Legislature, regulators, law enforcement agencies and insurance companies, fraudulent activities can be controlled. NOTE: The roundtable was shown live on the WFSU Florida Sunshine channel and there was a conference call-in number available for those who were interested, but could not attend. In addition, we received public comments and solicited recommendations from interested parties. Videos of the roundtable can be viewed at: http://www.myfloridacfo.com/ica. 1
Recommendations - Office of the Insurance Consumer Advocate The Insurance Consumer Advocate s Office offers the following recommendations to address concerns pertaining to: staged motor vehicle accidents; licensure and exemption from licensure of health care clinics; the insurance claims handling process; the fee schedule for payments to medical providers; the questioning of claimants under oath; and rescission of policies for alleged misrepresentation by the policyholder on the application for motor vehicle insurance coverage. Staged Accidents As stated, the National Insurance Crime Bureau s (NICB) report noted that Florida is now ranked number one with regard to reported questionable claims involving staged accidents and on a local level, Tampa has replaced Miami as the number one city for reported questionable claims involving staged accidents. Based on the statistics, it appears that the partnership formed between law enforcement and the insurance industry to create the Major Medical Fraud Task Force in South Florida is making progress in combating fraudulent activities associated with PIP coverage and staged accidents. For this reason, a second task force is currently being creating in Central Florida. While these groups are bringing awareness to the issue of staged accidents, there is still a need for legislation and funding for additional law enforcement and other changes in Florida s laws to combat this fraudulent activity. Staged accidents not only have a financial impact on our communities and insurance premiums, they can also cause serious injury and even death to innocent persons. Recommendations: Increase funding to the Department of Financial Services, Division of Insurance Fraud, for additional staff to investigate fraudulent activities and prosecute insurance fraud. Create a dedicated team of statewide prosecutors to pursue insurance fraud. Require all law enforcement officers to complete the long form of the crash report when there are passengers in the vehicle involved in an accident in order to document the name, address and contact information of each passenger. Increase minimum mandatory terms of imprisonment and fines for persons convicted of violating Section 817.234, Florida Statutes, for filing false claims for benefits under the Florida s Motor Vehicle No-Fault Law. Provide immunity from criminal prosecution to members of an insurer s designated Anti- Fraud Investigation Unit who in good faith share information regarding suspected fraudulent activities involving health care practitioners and/or health care clinics with the various professional medical boards. (Similar to Section 626.989(4)(c) & (d), Florida Statutes, which provides immunity from prosecution to designated members of an insurer s Anti- Fraud Investigation Unit who share information with the Division of Fraud relating to persons suspected of committing fraudulent insurance acts.) Support legislation to adopt provisions of the Coalition Against Insurance Fraud s Insurance Fraud Model Act that are not currently in Florida law. The Act can be found on the Coalition s website at: http://www.insurancefraud.org/downloads/model%20fraud%20act.pdf. 2
Licensure of Health Care Clinics The roundtable participants strongly believe that health care clinics that are exempt from licensure are at the epicenter of PIP claims fraud and staged accidents. According to the Department of Financial Services Division of Insurance Fraud, in 90% of PIP fraud cases involving clinics, the clinics are exempt from licensure. In 2000, the Fifteenth Statewide Grand Jury recommended to the Legislature that all medical facilities be regulated and licensed due to PIP fraud being committed by unscrupulous medical providers within unlicensed clinics. In 2001, legislation was enacted that required all clinics not wholly owned by licensed health care practitioners to be registered by the Department of Health. In 2003, the Legislature passed the Health Care Clinic Act. This Act transferred the registration/licensure authority to the Agency for Health Care Administration (AHCA). The new licensure program allowed AHCA to perform level 2 background screening on owners, medical directors and licensed health care practitioners at the clinic. It also required surveys of every clinic prior to licensure and gave AHCA the right to enter any of these clinics at any time to review documentation for fraud in billings and any other area of concern. The Act also made it unlawful for a clinic that is required to be licensed to operate without the health care clinic license. However, in 2004, the law was changed again, resulting in the exemption of numerous additional entities from licensure such as certified comprehensive outpatient rehabilitation facilities, physical, occupational and speech therapy clinics, certified end-stage renal disease facilities, and licensed massage therapists. Prior to 2004, a health care practitioner who wholly owned a clinic qualified for an exemption if the services provided at the clinic were within the scope of the owner s health care practitioner license. This was changed to allow the practitioner to hire other practitioners whose licenses had a scope exceeding that of the owner s license. As a result, for example, a licensed massage therapist who is exempt from having to obtain a clinic license can wholly own a clinic and hire medical doctors to perform physician level services. The clinic would remain exempt from licensure as a health care clinic. This unlicensed clinic can then provide a full range of treatment for injuries covered by PIP under the license of the physician. While this scenario may appear appropriate, it is considered a common method used to establish a front for criminal activity. According to ACHA, the overall number of health care clinic exemptions issued decreased between 2008 and 2009. However, in Miami-Dade County the number of exempt clinics increased by 32% and in Hillsborough County the number of exempt clinics increased by 110% (Exhibit II). Furthermore, the number of exemptions issued to massage therapists increased by 342% in Miami-Dade County and by 975% in Hillsborough County. A remedy would be to return to prior law that allowed a health care practitioner who wholly owned a clinic to be exempt from licensure and regulatory review if the services provided at the clinic were within the scope of the owner s health care practitioner license. 3
Licensure of Health Care Clinics (cont.) RECOMMENDATIONS: Require health care clinics to be licensed if medical services are offered outside of the scope of the owners practitioner s license. However, there should be no restrictions on services provided within the scope of license by licensed health care providers who provide services in the clinic. Require the Certificate of Exemption from licensure as a health care clinic to be renewed every two (2) years or whenever there is a change in ownership and require continued disclosure and remedies for false or misleading applications. Require clinic application and exemption forms to include a statement that knowingly providing a false, misleading or fraudulent application or document relating to licensure or exemption or compliance with the clinic licensing law is a fraudulent insurance act that is subject to investigation by the Division of Insurance Fraud and may be grounds for discipline by Department of Health licensing boards. Provide that submitting false, misleading or fraudulent information on a clinic application or exemption form is a felony. Strengthen penalties for submitting a fraudulent application and conducting fraudulent activities at health care clinics. Require a 12-month license suspension for any physician or other practitioner licensed in Florida who is found guilty of insurance fraud involving PIP benefit claims. (Alternately, decertify licensed practitioners who allow their names to be used to foster fraudulent activities at a health care clinic.) Require health care clinics to be licensed if their operations are more than 50% devoted to PIP claims. (Alternatively, require licensure if a clinic promotes its business and/or any of its practices as a PIP provider in advertising, on a marquee, on business cards or in any directories.) 4
PIP Claims Handling Process The Florida Insurance Code outlines the PIP claims handling process for medical providers who treat persons with injuries sustained from an auto-accident. It specifically states, in part, that insurers shall not be considered to have been furnished with notice of the amount of covered loss or medical bills due unless the statements or bills comply with all requirements, and unless the statements or bills are properly completed in their entirety. In addition, the insured person or his/her guardian must sign the Disclosure and Acknowledgment form to ensure informed consent. This document must be signed by the licensed medical professional and the original form must be manually sent to the insurer. Additionally, medical providers are not allowed to send any billing statements electronically to the insurer. Therefore, in order to prove compliance with the specific timelines, billing statements must be mailed certified. These procedures were implemented to combat fraud. However, they have created a difficult and time consuming claims handling process that may actually create many of the billing disputes that lead to litigation. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) mandated the adoption of standards for electronically conducting certain health care administrative transactions between health plans and health care providers. Medical providers process health insurance claims electronically in accordance with the Standards for Electronic Transactions that were adopted to implement HIPPAA requirements. In contrast, for PIP claims, all statements and bills for medical services must be submitted to the insurer on properly completed approved forms that must be printed and mailed to the insurers. Also, automobile insurers do not have a uniform system for adjudicating claims and do not provide an explanation of benefits (EOB) that clearly explains the insurer s actions on the provider s bill. Several of the medical providers and associations indicated that they often receive communications regarding PIP claims from insurers in various forms, including post-it notes. It is believed that a uniform claims handling process and use of EOBs by insurers would simplify the PIP claims process, reduce the number of errors, minimize the time needed to resolve disputes, expedite payments, deter fraud, and reduce litigation. Recommendations: Study the feasibility of requiring insurers to adjudicate claims electronically in accordance to the Federal Transactions Standards. Study the feasibility of requiring insurers to provide an Explanation of Benefits (EOB) in a standardized format for each health care provider bill received by the insurer. Allow insurers to suspend the payment of a claim for 60 days from the date of receipt when, based on actual knowledge or reasonable belief a prudent person should have after reviewing the claim, fraud is suspected. This change will allow the insurer an additional 30 days to properly investigate the claim, reduce the need for a demand letter, expedite payment for valid claims and deter fraudulent activity. 5
Fee Schedule The fee schedule currently in use was enacted in 2008 to provide insurers with a ceiling for charges which are paid to medical providers and was designed to reduce costs and eliminate litigation regarding what is a reasonable charge. At that time, it was acknowledged that medical providers would receive a lower reimbursement amount under a fee schedule. However, the limitations placed on the amount medical providers would receive from PIP benefits were designed to reduce fraud and unnecessary medical care. One of the reasons Florida s Motor Vehicle No-Fault Law was re-enacted was to benefit hospitals since it would reduce the amount of uncompensated treatment they must render to auto-accident victims treated in emergency rooms and trauma centers. 1 While the fee schedule appeared to be forthright, there have been many interpretations and this has lead to litigation. In addition, insurers have noted that the PIP coverage limit of $10,000 can be exhausted within 30 days. Benefits are exhausted sooner due to the higher costs of treatment in hospitals and the drastic increase in the number of procedures and the frequency of treatments performed for soft-tissue injuries. While it is anticipated that the Federal Healthcare Reforms will make medical care available to all citizens, there will still be a need for PIP coverage to pay for emergency transportation, loss of income, death benefits and other medical expenses that may not be covered by the Federal Healthcare Reform. Recommendations: Clarify the utilization of the 2007 Medicare Part B fee schedule. There are differences between the 2007 Medicare Part B fee schedule found on the Centers for Medicare and Medicaid Services website at www.cms.gov, and the 2007 Medicare Part B fee schedule found on the First Coast Services Options (FCSO) website at www.medicare.fcso.com. First Coast Services Options is Medicare s administrator in the State of Florida. Clarify that the fee schedule is the maximum amount of reimbursement payable by insurers to medical providers for medical procedures and treatment covered by PIP. Examination Under Oath Examination under oath (EUO) is an insurance contract provision that permits the insurer to obtain statements under oath pertaining to claims and facts relating to accidents. An EUO can be an inconvenient process for consumers. Sometimes they last for several hours, regardless of the policyholder s physical condition. While EUOs are a valuable tool for combating insurance fraud, professionals who work with policyholders have complained that EUOs have become abusive and over utilized. Recommendations: Establish standards or thresholds so that an EUO may be required only when the person who will be examined is the only source of information that is reasonably necessary for the insurer to obtain in order to properly adjust a claim. Restrict the request for documents to be provided by the insured at an EUO to only documents that are pertinent to the claim. Allow insureds to have counsel present at all EUOs. Allow insureds to videotape and stenographically record the EUO. Allow insureds to contest the scheduling of an EUO and the questioning in an EUO, without jeopardizing coverage, until a court resolves the dispute. 6 1 Florida Senate Bill Analysis CS/SB 40-C, October 2, 2007
Policies Rescinded for Alleged Misrepresentation Currently, the Florida Insurance Code allows an insurer to rescind the insurance contract after a loss if there is evidence that the applicant/policyholder concealed, omitted or provided false information which would have affected the premium or offer of coverage. While it is agreed that an insurer should have the option to rescind the insurance contract if insurance fraud is discovered; the roundtable participants raised concerns about post-claims underwriting which is prohibited by law. A common reason for an insurance contract to be rescinded after a loss is that an insurer discovers that the policyholder had a child above the driving age residing in the household when the application was completed, but did not disclose this information. Unfortunately, it is often difficult to determine whether the applicant intentionally omitted information on the application, did not understand the question or whether there may have been a language barrier between the applicant and the insurance agent. Nevertheless, when an automobile insurance contract is rescinded after an auto-accident which involves personal injuries, the policyholder becomes responsible for the medical bills and the medical providers are often not paid. In addition, this would rescind the policyholder s property damage liability insurance and therefore there would not be coverage to pay for damages to another vehicle involved in an accident when the policyholder is the at-fault driver. Recommendations: Require all applications for automobile insurance to have a YES or NO question pertaining to roommates and other family members residing in the same household. If the response is YES, the applicants would be required to write (in his /her own handwriting) the name(s) of their roommates and/or other family members residing in the same household. If the response is NO, the applicants would be required to write (in his / her own handwriting): There are no roommates or other family members residing in the household. This requirement will ensure that applicants fully understand the question and provide the insurer with indisputable confirmation as to whether the applicants/policyholders intentionally withheld or omitted information when the application for coverage was completed. (The Florida Insurance Code currently requires a written statement on applications for homeowners insurance to ensure that the applicant has a clear understanding pertaining to certain policy exclusions or coverage restrictions.) Provide that insurers who fail to notify the insured within 21 days of the date of a motor vehicle insurance application that the application contains a misstatement or material misrepresentation that should have been discovered within 21 days by a reasonable investigation by the insurer waives the right to later cancel the policy based on the information unless the insured fails to provide the correct information to the insurer. 7
EXHIBIT II Analysis of Health Care Clinic Exemptions in Florida and Miami-Dade, Hillsborough Counties 2005 through 2010 Possible cause analysis of increases in questionable PIP claims within Miami-Dade and Hillsborough County August 17, 2010 Statistical Information Provided by the Agency for Health Care Administration, Health Care Clinic Unit
Comparison of All Health Care Clinic Exemptions Issued from 2005 through 2010 (annualized) Between 2008 and 2009, the overall health care clinic exemptions received for the year decreased, however exemptions issued in Miami-Dade county increased by 32% and exemptions issued in Hillsborough county increased by 110%. There is an expected increase of 80% in Miami-Dade county from 2009 to 2010 and an expected increase of 13% in Hillsborough county. Expectations are based on seven months annualized to one year. Data extracted from the following information: YEAR Total Number of Exemptions Issued in Florida Miami-Dade County Hillsborough County 2005 502 154 43 2006 564 161 43 2007 818 187 45 2008 786 197 52 2009 747 261 109 2010 - July 586 274 72 2010 Annualized 1005 470 123
Comparison of Health Care Clinic Exemptions Issued Under. 400.9905(4)(g), F.S. for Top Counties According to data collected across Florida s top counties of exemption issuance, Miami-Dade and Hillsborough counties continue to experience steady increases in the number of practitioner exemptions issued each year while Palm Beach, Broward, and Orange counties remain relatively stable. Based on the statistics, the greatest percentage of health care clinic exemptions are issued in Miami- Dade and Hillsborough counties, accounting for nearly half of all exemptions issued in the state of Florida. Data extracted from the following information: YEAR Miami-Dade County Hillsborough County Palm Beach County Broward County Orange County 2005 115 35 30 57 15 2006 98 28 27 42 18 2007 121 27 31 38 21 2008 153 44 53 52 53 2009 215 96 52 39 24 2010 - July 239 61 24 30 19 2010 - Annualized 410 105 41 51 33
Annual Comparison of Exemptions Issued by Practitioner Type in Miami-Dade County Further examination reveals that these percentages can be further broken down into specific practice acts which constitute the increases. Between 2008 and 2009, exemptions issued to Massage Therapists under Chapter 480 increased 324% in Miami-Dade County. There is a continued increase of exemptions issued to Massage Therapists from 2009 to 2010 with the overall expected increase of an additional 154%. Data extracted from the following information: YEAR Massage Therapists (Chapter 480) Chiropractors (Chapter 460) Medical Doctors (Chapter 458) Other Practitioner Exemptions under s. 400.9905(4)(g), F.S. 2005 12 15 68 20 2006 27 14 42 15 2007 18 9 69 25 2008 25 44 51 33 2009 106 41 56 12 2010 - July 157 35 35 12 2010 Annualized 269 60 60 21
Annual Comparison of Exemptions Issued by Practitioner Type in Hillsborough County Between 2008 and 2009, exemptions issued to Massage Therapists under Ch. 480 increased by 975% in Hillsborough County. New exemptions issued under Ch. 480 are expected to decline from 2009 to 2010. Exemptions issued to Chiropractors under Ch. 460 between 2008 and 2009 increased by 46% in Hillsborough County. New exemptions issued under Ch. 460 are expected to increase by 89% from 2009 to 2010. Data extracted from the following information: YEAR Massage Therapists (Chapter 480) Chiropractors (Chapter 460) Medical Doctors (Chapter 458) Other Practitioner Exemptions under s. 400.9905(4)(g), F.S. 2005 3 8 18 6 2006 1 7 13 7 2007 3 6 12 6 2008 4 13 21 6 2009 43 19 26 8 2010 - July 19 21 11 10 2010 Annualized 33 36 19 17
Overview An analysis of health care clinic exemption issuance in Florida over a five-year period has revealed substantial increases in Miami-Dade and Hillsborough counties in the past two years. Upon further research, the increases are found to be associated with the number of exemptions granted under certain chapter practice acts of the Florida Statutes, namely Chapter 460 Chiropractic Medicine and Chapter 480 Massage Therapy. Under the current statute, Chapter 400, Part X, Florida Statutes (F.S.), the following issues may be causally related to the increase in questionable PIP claims: An application for a certificate of exemption is a voluntary process. Any entity claiming to be exempt from health care clinic licensure can operate on self-determined status and seek reimbursement for services without the State s knowledge that the entity is in operation. There is no renewal provision for a certificate of exemption; once issued, the certificate stands unless the practitioner cancels it. There is no provision for providing services within a practitioner s scope of practice, thus allowing practitioners such as massage therapists to essentially own a full medical clinic, hire a practitioner such as a medical doctor or chiropractor, and bill for services without any state oversight. There is no provision to require an entity/practitioner to report the types of insurance reimbursement being sought. There is no provision to cancel an existing certificate when a new certificate has been issued as the result of a change of ownership or an entity ceases to be actively registered with the Florida Department of State, Division of Corporations. There is no provision stating that the certificate is valid only for the entity, provider, and location for which the certificate is issued. There is no background screening requirement for owners of the exempt entity. Owners may have a felony conviction of fraud and legally own a clinic.