SESSION PREVIEW: INSURANCE ISSUES TAKE BACKSEAT, STILL IMPORTANT

By MICHAEL PELTIER
THE NEWS SERVICE OF FLORIDA

THE CAPITAL, TALLAHASSEE, January 5, 2012......At the center of the storm in recent years, insurance legislation may take a back seat this session as lawmakers turn their attention to redistricting and a budget shortfall in a critical election year for both parties. 

But industry officials expect lawmakers to attempt some targeted changes in the areas of property insurance and the state-backed hurricane fund while addressing fraud and abuse in the automobile and workers' compensation markets. 

"Probably for the first time in a decade, a major property insurance bill is not going to suck all the air out of the room," said Sam Miller, executive vice president for the Florida Insurance Council. "We just don't believe there is going to me a major hurricane insurance bill this session."

Likewise, disagreement over non-property insurance related issues may prove too difficult a lift. Among the most controversial are proposals to fix the state's no-fault automobile insurance system and stem rising costs in workers' compensation by limiting the ability of physicians to dispense re-packaged drugs.

"The session may become very stressed with a lot of competing interests," said Don Brown, a former state representative who now lobbies for insurance interests. "While it may be a long shot to see that they all get addressed, we do believe that it is absolutely necessary that we advance the dialog on them."

PIP INSURANCE WILL TAKE CENTER STAGE

With lawmakers leery of making dramatic changes to the state's property insurance market, eyes will turn to automobile insurance as competing parties joust over how to stem a surge of personal injury protection claims that appear to have followed legislatives changes made several years ago. 

Adopted in 1972, PIP coverage requires a driver's insurance company to pay up to $10,000 to cover medical bills and lost wages after an accident regardless of who is at fault. Florida is one of a dozen states that require PIP coverage.

The Insurance Information Institute, a national industry research group, estimates that fraud alone could cost policyholders nearly $1 billion in higher premiums this year. 

Lawmakers in 2007 tried putting caps on the what would be paid for various medical procedures. But then claims and litigation skyrocketed as attorneys for motorists and heath care providers wrangled with insurance companies over payment.

"We believe there are some straightforward, fraud fighting fixes that will help the system and help the consumer," said Donovan Brown, general counsel for the Property and Casualty Insurers' Association of America, no relation to Don Brown.

But beyond targeted fraud protection, which has received widespread support, further reforms may be difficult. A task force set up by Chief Financial Officer Jeff Atwater, for example, completed its work without coming to consensus on a long list of topics from clinic oversight to attorney fees. 

Insurers, for example, want caps on attorneys fees and reductions in "multipliers", calculations that allow fees to go far higher than the $10,000 individual benefits awarded in individual PIP cases. 

Plaintiff attorneys, however, led by the Florida Justice Association, contend such multipliers are needed because individual cases often have an impact on thousands of similar claims. 

"The Legislature must narrowly focus PIP reforms on fraud only, without restricting the access to courts for those truly injured in auto accidents," the Association said in a recent policy statement. "If the Legislature decides that the PIP system is beyond repair, the FJA supports considering a move to a fault system where drivers will be responsible for the harm they cause by carrying bodily injury liability insurance."

Even efforts to clamp down on fraud may be difficult as groups like the Florida Medical Association fight to limit restrictions to truly fraudulent clinics and providers. 

"The FMA believes that the focus of any legislative effort should be on giving law enforcement and the Department of Health the resources and tools they need to stop the fraud, put those who break the law in jail, and revoke the licenses of the health care providers who participate in schemes to defraud the PIP system,” said FMA spokeswoman Rebecca O'Hara.   

WORKERS COMPENSATION

Once boasting some of the highest rates in the country, Florida's workers' compensation insurance market was largely retooled in 2003 following complaints by business owners and insurers over skyrocketing costs. Since then, rates have dropped by more than half. 

In October, however, Florida Insurance Commissioner Kevin McCarty approved an 8.9 percent rate hike requested by the industry. 

Among the biggest cost drivers, McCarty cited drug repackaging. The practice involves doctors dispensing drugs to injured workers rather than writing prescriptions to be filled at pharmacies. 

"This practice has become a critical cost driver in the workers' compensation insurance marketplace," McCarty said in October. "It is imperative that the Florida Legislature address this issue during the upcoming legislative session."

Supporters of physician dispensing, including the FMA, argue that the practice benefits workers' compensation patients by making them more likely to take medications than if they have to go to pharmacies.

"It is an important part of the workers' comp system and encourages patient compliance, which can ultimately save money in the long run by helping people get back to work more quickly," O'Hara said in a statement.

Critics including Associated Industries of Florida and the National Federation of Independent Businesses say prices for the repackaged drugs are inflated and account for 2.5 percent of the proposed 8.9-percent average rate increase for businesses.

CITIZENS AND CAT FUND: 

Barring major rewrites to the state's property insurance system, which was last modified in 2011, lawmakers are likely to address targeted changes dealing with Citizens Property Insurance Corp, the state-backed insurer that now holds 1.5 million policies. 

They will also be asked by some to alter the way the state's Hurricane Catastrophe Fund is financed, by placing more burden on Citizens customers who live along the coast while allowing insurance companies more time to amass the capital needed in the event of a major storm. 

Citizens now has the power to place a surcharge on nearly every insurance bill in the state if it can't cover such losses. Although industry estimates vary somewhat, Citizens could pay roughly $20 billion before assessing policyholders. 

That figure includes $6.5 billion included in the CAT fund. Given market pressures, however, state officials overseeing the fund say they may not be able to find enough bond buyers if the state gets hit with a massive storm.