Overuse, abuse problems with no-fault system

Filed under: Opinion |

Dear Mr. Boyd,

I am Carole Walker, Executive Director of the Rocky Mountain Insurance Information Association, and it was with some concern that I read the article, Holistic Practitioners Losing Ground with Tort System, in the April 16, 2004 edition of the Colorado Springs Business Journal. As a representative of an industry that impacts everyone who drives a car, owns a home and a business in Colorado, I don’t think your staff has all the necessary information or background on the complexity of the recent change in Colorado’s auto insurance system.

While I agree with the fact that non-traditional practitioners are losing money on the tort system, I would argue that that the extravagant over-use and abuse of such treatments were a major part of the problem with Colorado’s broken no-fault system. Charges for chiropractors amounted to 31 percent of claimed PIP losses for medical professionals. This was the most expensive of any of the medical professionals in Colorado. Chiropractic and non-traditional treatments are excluded from most standard health plans. There were many providers who benefited from Colorado’s version of no-fault and built businesses on the backs of Colorado auto insurance consumers.

Under Colorado’s old no-fault auto insurance system, here’s how the PIP dollar was divided up among medical professionals:

n Chiropractor charges – 31 percent

n Physical therapist charges – 18 percent

n Orthopedist charges – 8 percent

n Alternative professionals – 8 percent

n ER physicians – 12 percent

n General practitioners – 9 percent

Non-medical claims for wage losses (that were often duplicate to employee sick leave benefits) accounted for 10 percent and all other losses (such as “essential services,” for example, a baby sitter or house keeper) made up the remaining 9 percent of Colorado PIP losses.

While there is nothing wrong with these treatments, the average auto insurance consumer was forced pay for these extravagant, costly benefits (the second most expensive mandated medical benefits package in the country), whether they would ever choose to use a chiropractor, acupunturist, aromatherapist, or not. Many auto insurance consumers were demanding more individual choice and the option for lower rates. Many also felt like they were paying for health care twice-through duplicate coverage on auto and health insurance. Many others simply couldn’t afford insurance and took their chances by breaking the law and driving without it.

Your article also does not interview any one from a much larger business interest that represents more than 3 million insured drivers in the state who were very upset about the cost crisis that was spiraling out of control in Colorado-the auto insurance industry. Dr Nehring, who serves as a lobbyist for the chiropractic industry, makes an unsubstantiated comment that most people are not saving money under the new system. In fact the National Association of Independent Insurers released a study in December that shows the following:

n The average annual cost of a liability-only policy, which now meets all the state legal requirements and includes optional uninsured motorists coverage, is $503 compared to $691 with the no-fault requirements and UM/UIM coverage-that adds up to a 27 percent average drop in annual premium.

n Most drivers in the study chose to purchase a full policy that includes required liability coverages, along with optional uninsured motorists, comprehensive and collision coverages. The average annual premium for that policy has dropped from $1,018 to $869-that’s about a 15 percent reduction.

The findings of the study were supported by the actual rate filings by the Colorado Division of Insurance. The DOI also found that the shift to health insurance from the transition is 1.12 percent In fact, medically necessary chiropractic care may still be paid for under the tort system. Dr. Nehring’s assertation that most states have a better tort system than Colorado simply isn’t true. In the 37 other tort states, 25 allow customers to decide how much medical coverage they want, need and can afford. The 12 states that do have some mandated amount of medical coverage, require an average amount of $6,800.

Since auto insurance is required by law, it should at least be fair and offer customers choices to design coverage they need. I hope that RMIIA can be a resource for you and your writing staff in the future. Obviously, we expect you to get the other side of the story, we just hope that you will include ours and the statistical information that supports it.

Thank you for your time and attention on this subject. Please don’t hesitate to contact us on insurance issues for information and perspective.

Best regards,

Carole Walker, Executive Director

Rocky Mountain Insurance Information Association