Florida House Bill 119

1. Florida House Bill 119 An Early Look at Florida’s Newest Auto No-Fault Reform January 24, 2013 Steve Lehmann

2. About the Presenters Steven G. Lehmann,FCAS, FSA, FCIA, MAAAConsulting ActuaryBloomington, Illinois • 40 years experience in personal lines insurance • Fellow of the Casualty Actuarial Society and Society of ofof of Actuaries and Member of the American Academy of Actuaries

3. Executive Summary

4. Impact Analysis of House Bill 119 • Study on behalf of the Office of Insurance Regulation to determine independent estimate of savings resulting from new law • Report dated August 20, 2012 can be found at www.pinnacleactuaries.com in the Knowledge Center • Overall savings estimated at 14.0% - 24.6% of Auto No Fault (PIP) Premiums • Assumes adequate PIP Rates • Savings will be realized over time as policies are renewed with revised PIP premiums • Offsetting increase in BI/UM Premiums estimated at 3.0% - 4.7%

5. Analysis of Major Bill Provisions

6. PIP Medical Benefits • Bill Provisions • Initial care and services must be received within 14 days • Care has to be directed by licensed physician, osteopathic physician, or chiropractic physician, or needs to occur in a hospital, emergency facility or during emergency transportation • $2,500 non-emergency / $10,000 emergency limit • Massage and acupuncture are not reimbursable under any circumstances • Analysis • IRC data on number of days until treatment received • IRC data on medical treatment and injuries • Mitchell data on massage therapist CPT codes

7. PIP Medical Fee Schedule • Bill Provisions • Applicable fee schedule is Medicare Part B schedule in effect on March 1 of each year • Reimbursement levels is 200% of fee schedule for ambulatory surgical centers, clinical laboratories, and for durable medical equipment • Analysis • Use of fee schedule currently in the industry • Mitchell data on fee schedule use

8. Prevention of PIP Related Fraud • Bill Provisions • A health care practitioner found guilty of insurance fraud loses his or her license for 5 years and may not receive PIP reimbursement for 10 years • Insurers are provided an additional 60 days (90 total) to investigate suspected fraudulent claims however, an insurer that ultimately pays the claim must also pay an interest penalty • All health care clinics must be licensed • Law enforcement must complete a long crash form, if not law enforcement report required then drivers must submit report to DHSMV within 10 days • Creates Automobile Insurance Fraud Strike Force

9. Prevention of PIP Related Fraud • Analysis • Health care practitioners: potential for fines and prosecution is significant, but level of enforcement has been minimal • Long form: reviewed data from Florida Highway Crash Statistics and Mitchell on the change in number of claimants per claim • Strike force: discussion with anti-fraud division personnel, review of other states effectiveness, and insurance company interviews, and review of IRC data

10. IRC Fraud Data

11. Estimated Impacts

12. Anticipated Income Effects

13. Anticipated Income Effects

14. Bodily Injury, Uninsured Motorists andUnderinsured Motorists Offset

15. Implementation

16. Ratemaking for House Bill 119 • Most provisions of law effective January 1, 2013 • New provisions typically effective with policy renewal • Savings will be realized over time as policies are renewed with revised PIP premiums • Ratemaking typically utilizes emerging data and trends which won’t begin to show new law effects until late 2013 and into 2014

17. Questions

18. Thank You for Your Attention Steve Lehmann 309.807.2302 slehmann@pinnacleactuaries.com