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Will PIP changes work? State pays firm to find out

The Florida Legislature enacted sweeping changes to the state’s no-fault auto insurance law this year in hopes of reducing premiums. Now the state will pay private actuaries to determine whether it will work.

On Tuesday, the state Office of Insurance Regulation signed a $150,000 contract with Pinnacle Actuarial Resources to analyze the impact of changes to the law that requires drivers to buy personal injury protection (PIP) coverage.

They include reducing to $2,500 the amount paid for non-emergency care, limiting fees for attorneys who  successfully argue complicated cases and requiring some drivers to submit to examinations under oath in cases of suspected fraud.

The findings are to be submitted to legislative leaders and the governor no later than Sept. 15. LeRoy Boison, formerly of Insurance Services Office (ISO), is the account executive for the review. ISO is the property/casualty insurance industry's leading supplier of statistical, actuarial, underwriting, and claims data.

The law allowed the Office of Insurance Regulation to choose a consultant without a competitive bid process. However, OIR spokesperson Jack McDermott said, the office reached out to 37 different vendors that were capable of providing services. He said three submitted proposals: Pinnacle, Merlinos and Milliman.

The law authorized OIR to spend up to $200,000 on the study. The money comes from an insurance regulation trust fund supported by fees and charges.

When wrestling with substantive change to insurance—whether it’s medical malpractice, the property market or workers' compensation—the Legislature often requires the state to hire independent actuaries to analyze the proposed savings that should take effect if the changes are implemented. As they wrestled with PIP changes in the waning hours of the session, legislators included the analysis in the bill.

The findings will serve as a benchmark, said Robert Reyes, partner at the lobbying firm First Floridian, whose clients include insurance companies. “The idea is to get an objective third party to tell us what the savings should be,” he said.

The future of Florida’s no fault insurance system dominated the 2012 debate. It was a top priority for Gov. Rick Scott, who traversed the state pushing for changes, Chief Financial Officer Jeff Atwater and the insurance industry.

PIP currently covers up to $10,000 in medical benefits after an auto accident. The new law excludes some non-essential coverage – massage therapy and acupuncture – and limits payment for non-emergency care to $2,500.  Up to $10,000 is still covered for emergency transportation and treatment.

Insurance companies are required to file rate cuts of at least 10 percent in their PIP base rate by October or make a case why the reduction isn't justified. By 2014 the required rate cut goes to 25 percent.


Carol Gentry, founder and special correspondent of Health News Florida, has four decades of experience covering health finance and policy, with an emphasis on consumer education and protection.