NJ’s New Personal Injury Protection Regulations Manage Medical Access to Reduce Auto Insurance Costs and Boost Profitability
By Francis M. Smith
Managed health care has had tremendous backlash by both by consumers and providers in its effort to stem health care costs. When the NJ Department of Banking and Insurance published reimbursement rates for treatment of injuries resulting from automobile accidents, it raised similar concerns regarding the State of NJ’s intrusion into the practice of medicine.
First established by the 1972 No Fault Act, medical fee reimbursement rates are determined by the NJ Commissioner of Banking and Insurance (N.J.S.A. 39:6A-4.6), who also assigns the organization for administering disputes over medical expenses (N.J.S.A. 39:6A-5.1). In July 2011, the NJ Department of Banking and Insurance (DOBI) proposed significant changes to better contain costs. In 2012, they filed for more substantial changes (44 N.J.R. 282(1)) regarding medical fee schedules for personal injury and proposed a streamlined process for disputing medical reimbursements. The new medical reimbursement schedule and dispute process went into effect this year on Jan. 4, 2013.
NJ’s process for handling medical expenses for automobile accident injuries has been frustrating and exhausting for injured victims of car accidents. Although the insurance industry has the clout to influence regulation changes, consumers do not. The insurance companies wear clients down by requiring multiple, repeated time-consuming tests before finally approving necessary treatments. The new Personal Injury Protection regulations do not fix these problems faced by consumers.
The new Personal Injury Protection (PIP) regulations impact injured parties, health care providers and/or insurers in five ways:
Dispute Resolution Process. The No Fault Act permits that any party may submit to PIP arbitration any dispute regarding the recovery of Personal Injury Protection benefits. NJ has assigned Forthright as the administrator of its No-Fault arbitration program. To reduce the number of disputes in arbitration over small amounts of money a PIP dispute between the medical provider and insurer can now be adjudicated with a "documentary review", or an "on-the-papers" proceeding. Conditions for this more streamlined process include: (1) both parties need to consent, or (2) no further treatment is in issue, and (3) the amount in question is less than $1,000. (N.J.A.C. 11:3-5.2)
Assignment of Benefits. The No Fault Act provides that Personal Injury Protection benefits are assignable only to a medical provider of service benefits. The DOBI amendment states that any assignment from an insured to service provider must include both benefits and duties imposed by the policy. Restrictions on the assignment, to be deemed reasonable, must be consistent with efficient coverage administration and be targeted at the prevention of fraud. (N.J.A.C. 11:3-4.9(a)) What this means to consumers is the choice of medical providers may be restricted by the State of NJ to providers who agree to: (1) the insurer’s review plan, (2) holds the insured harmless for co-payment penalties, and (3) agrees to submit disputes to PIP arbitrations, currently administered by Forthright.
Counsel Fees. Although the Act initially provided that fees incurred in PIP arbitration were to be considered reasonable if they were consonant with the amount of the award in accordance with a schedule established by the N.J. Supreme Court, DOBI conducted a study of arbitration awards in 2010 and discovered that counsel fees did not vary significantly regardless of the size of the award. Noting that the Supreme Court had, in fact, not established the requisite schedule, DOBI's new regulations, while still requiring the Dispute Resolution Process to apportion costs, changed the definition of what constituted reasonable counsel fees. (N.J.A.C. 11:3-5(e)) The calculation is primarily driven by what the regulations call "the lodestar" or number of hours reasonably expended with the emphasis on "reasonably".
Standard Professional Treatment Protocols. The Act provides that all treatment, diagnostic tests and services are to be rendered according to common standards and practices. DOBI essentially opined that showings of medical necessity were being supported by relatively self-serving methods such as publications produced by proponents of the treatment at issue. Standard Professional Treatment Protocols now mean "evidence-based clinical guidelines/practice/treatment published in peer-reviewed journals." (N.J.S.A. 39:6A-4(a))
Internal Appeal Procedure: In an effort to facilitate consistent internal appeal procedures, DOBI has implemented some changes, all in furtherance of its new rule "to establish standards for a uniform internal appeals process for PIP disputes... ." With the regulations, all insurance companies now must use the same appeal process for medical decision-point plans. That is, when a physician and insurer do not agree on whether a medical treatment or test is required, the physician now has only one appeal process to manage, rather than different appeal processes for every insurance company. (N.J.A.C. 11:3-4.7B)
To attorneys who represent accident victims, these changes signal a significant shift that alters the playing field in favor of insurance companies who can now deny benefits without fear of significant consequences (and certainly none in the arbitration process). In other words, the changes result in an environment where insurance companies have essentially nothing to lose in denying benefits. If allowed to stand, the changes instituted by DOBI will paint New Jersey as a state that is anti-consumer and pro-insurer with regard to auto insurance and medical benefits provided by auto insurance policies. New Jersey Association for Justice, an organization of personal injury attorneys representing people injured in motor vehicle accidents, has commenced legal proceedings intended to force reconsideration of the new Personal Injury Protection regulations.