The ever-changing world of PIP is unpredictable. Frequent legislative changes, coupled with an oftentimes inconsistent and limited body of case law, constantly changes the way insurers defend PIP claims. In an arena that has become more about attorney’s fees in nominal breach of contract actions than about the swift and efficient resolution of insurance claims for insureds, insurers are faced with the complex task of defending within the confines of a confusing and offense-driven league.
One such changing area involves the use of the Medicare fee schedule to adjust Florida PIP claims. Both the courts and the legislature have changed the rules, causing Florida PIP insurers to re-evaluate their policy language and their claims handling.
The Florida No Fault Statute requires that insurers reimburse eighty percent of reasonable expenses for medically necessary treatment. The 2007 amendment provided a framework for evaluation of reasonableness when paying claims. Section 627.736(5)(a), Florida Statutes provides :
(5) CHARGES FOR TREATMENT OF INJURED PERSONS-
(a) 1. Any physician, hospital, clinic, or other person or institution lawfully rendering treatment to an injured person for a bodily injury covered by personal injury protection insurance may charge the insurer and injured party only a reasonable amount pursuant to this section for the services and supplies rendered, and the insurer providing such coverage may pay for such charges directly to such person or institution lawfully rendering such treatment, if the insured receiving such treatment or his or her guardian has countersigned the properly completed invoice, bill, or claim form approved by the office upon which such charges are to be paid for as having actually been rendered, to the best knowledge of the insured or his or her guardian. In no event, however, may such a charge be in excess of the amount the person or institution customarily charges for like services or supplies. With respect to a determination of whether a charge for a particular service, treatment, or otherwise is reasonable, consideration may be given to evidence of usual and customary charges and payments accepted by the provider involved in the dispute, and reimbursement levels in the community and various federal and state medical fee schedules applicable to automobile and other insurance coverages, and other information relevant to the reasonableness of the reimbursement for the service, treatment, or supply.
Additionally, the 2007 amendment provided insurers with an option to limit reimbursement as set forth in section 627.736(5)(a)(2), Florida Statutes.
2. The insurer may limit reimbursement to 80 percent of the following schedule of maximum charges:
a. For emergency transport and treatment by providers licensed under chapter 401, 200 percent of Medicare.
b. For emergency services and care provided by a hospital licensed under chapter 395, 75 percent of the hospital’s usual and customary charges.
c. For emergency services and care as defined by s. 395.002(9) provided in a facility licensed under chapter 395 rendered by a physician or dentist, and related hospital inpatient services rendered by a physician or dentist, the usual and customary charges in the community.
d. For hospital inpatient services, other than emergency services and care, 200 percent of the Medicare Part A prospective payment applicable to the specific hospital providing the inpatient services.
e. For hospital outpatient services, other than emergency services and care, 200 percent of the Medicare Part A Ambulatory Payment Classification for the specific hospital providing the outpatient services.
f. For all other medical services, supplies, and care, 200 percent of the allowable amount under the participating physicians schedule of Medicare Part B. However, if such services, supplies, or care is not reimbursable under Medicare Part B, the insurer may limit reimbursement to 80 percent of the maximum reimbursable allowance under workers’ compensation, as determined under s. 440.13 and rules adopted thereunder which are in effect at the time such services, supplies, or care is provided. Services, supplies, or care that is not reimbursable under Medicare or workers’ compensation is not required to be reimbursed by the insurer.
The Florida Supreme Court recently released a game-changing decision in Florida PIP law. In Geico Gen. Ins. Co. v. Virtual Imaging Servs., Inc., 2013 WL 3332385 (Fla. 2013), the Court held that Florida PIP insurance policies must give notice to policy holders that claims will be calculated using the Medicare fee schedule limitation set forth in section 627.736(5)(a)(2), Florida Statutes, in order to use the Medicare fee schedule when adjusting Florida PIP claims.
Over the last few years, most Florida PIP carriers have been using the Medicare fee schedule without specific policy reference, instead usually relying on a clause that generally purports to incorporate the provisions of the Florida PIP Statute. Generally, the language in most PIP policies states that the carrier will reimburse a reasonable amount for medically necessary services in accordance with the Florida No Fault Statute. The advantage of this approach was that there would be no need to rewrite the policy for specific statutory references as the statute was amended.
In Geico, the pertinent portions of the policy language at issue provided:
Under Personal Injury Protection, the Company will pay, in accordance with, and subject to the terms, conditions, and exclusions of the Florida Motor Vehicle No-Fault Law, as amended, to or for the benefit of the injured person:
(a) 80% of medical expenses; and
(b) 60% of work loss; and
(c) Replacement services expenses; and
(d) Death benefits.
“medical expenses” is defined as “reasonable expenses for medically necessary medical, surgical, x-ray, dental, ambulance, hospital, professional nursing and rehabilitative services for prosthetic devises and for necessary remedial treatment and services recognized and permitted under the laws of the state for an injured person.”
The Court found that because the policy did not make specific reference to use of the Medicare fee schedule, the language was insufficient to put insureds on notice of Geico’s intent to limit payment by utilizing the permissive fee schedule as set forth in section 627.736(5)(a)(2), Florida Statutes. This decision approves the similar result of the 4th DCA in Kingsway Amigo Ins. Co. v. Ocean Health, Inc., 63 So. 3d 63, Fla. 4th DCA 2011.1 In Kingsway, the court held that insurance companies are required to give notice to the insured of the intent to use fee schedules at the time of policy issuance or renewal. The court held that the 2007 amendment of section 627.736, Florida Statutes contained both a mandatory and permissive method of paying claims. Section 627.736(5)(a)(1), Florida Statutes set forth a mandatory reimbursement of 80% of all reasonable expenses. However, an insurer could elect to limit its reimbursement as set forth in section 627.736(5)(a)(2), Florida Statutes. The court held that because the election was permissive, the insurer must clearly and unambiguously identify which payment method it will elect. Id. at 65.
The Florida legislature has also addressed the Medicare fee schedule notice issue. The 2012 amendment to section 627.736(5)(a), Florida Statutes provides:
5. Effective July 1, 2012, an insurer may limit payment as authorized by this paragraph only if the insurance policy includes a notice at the time of issuance or renewal that the insurer may limit payment pursuant in this paragraph. A policy form approved by the office satisfies this requirement. If a provider submits a charge for an amount less than the amount allowed under subparagraph 1., the insurer may pay the amount of the charge submitted.
While the most recent PIP statute amendments codified this requirement as of July 1, 2012, the decision in Geico v. Virtual Imaging, will apply to all cases for policies that have taken effect since January 1, 2008. Most carriers have already changed their policy language in response to the Kingsway v. Ocean Health, decision and the new statute change. The CSK team has been at the forefront of this issue by assisting a number of Florida PIP carriers and out-of-state carriers with evaluation of the language of their Florida PIP coverage. CSK is assisting many insurance companies as they grapple with the game-changing actions of the courts and legislature. We believe careful evaluation of policy language, an aggressive defense strategy, and a current knowledge of the playing fields will keep insurers in a game winning position.
1 The policy language at issue in Kingsway v. Ocean Health, provided: “The Company will pay in accordance with the Florida Motor Vehicle No Fault Law, as amended, to or for the benefit of the injured person:
1. 80% of medical expenses; Medical expenses means those expenses that are required to be reimbursed pursuant to Florida Motor Vehicle No Fault Law, as amended, and that are reasonable expenses for medically necessary services.”
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