A recent decision by the state’s Appellate Division has ruled in favor of the Personal Injury Protection (PIP) fee schedule, which was sitting in legal limbo for nearly two years after the Department of Banking and Insurance made it effective in late 2007. This decision will help keep insurance costs down for New Jersey drivers for decades to come, and may even allow New Jersey to lose the title of having the highest auto insurance rates in the country.

Originally adopted to go into effect on October 1, 2007, the PIP fee schedule was appealed by certain groups of the medical community, chiropractors, and surgery centers, citing that certain physicians would not receive adequate payment for treatment and services related to auto accidents.

The Appellate Division granted a legal “stay” and issued an injunction while it reviewed the legal challenges set forth by the appellants. In August the court addressed each of the challenges and validated the methodology used by DOBI in deriving the PIP fee schedule.

New Jersey operates as a “no-fault” PIP state, which means when people are injured in a car accident their auto insurance pays for their treatment, regardless of who was at fault. The treatment auto insurers are responsible for paying includes anything from chiropractic care to major surgeries.

When treatment is rendered, auto insurers are billed and must pay the medical providers for each treatment if it is deemed medically necessary and not subject to any other exclusion. If the treatment rendered by these medical providers is listed on a set PIP fee schedule the rates paid are indisputable and not legally challengeable, so long as it was considered medically necessary.

However, if the treatment is not listed on the schedule auto insurers are obligated to pay the “usual, customary, and reasonable” rates.

The ambiguity of what is considered “usual, customary and reasonable” is the crux of why this decision is so important. Over the past decade certain infamous surgery centers and chiropractors have burdened the auto insurance industry by over-billing for certain treatments and then suing auto insurers on the basis that the billed amount was the usual, customary, and reasonable rate. These legal disputes have not only clogged up the legal forum, but due to heavy incentives for attorneys to take these disputes against auto insurers, it has undoubtedly raised the costs for auto insurance in New Jersey, resulting in higher rates for drivers.

Neighboring no-fault PIP states such as Pennsylvania and New York have more than 1,000 procedures listed on their fee schedules to contain costs for auto insurance. By contrast, until this recent Appellate Court decision, New Jersey had only 92 on its list. As a result, certain notorious surgery centers, which were created as a low cost alternative to hospitals, routinely over-billed auto insurers for simple procedures cashing in on millions.

A certain surgery center recently charged more than $24,000 per procedure for three 30-minute back manipulation procedures while under “twilight anesthesia.” However, the vast research by DOBI conducted over the years determined that this procedure should receive a prevailing cost of $190 per procedure. The cost to litigate severely inflated claims like this one by auto insurers results in tens of millions of dollars annually.

In late 2007, after years of studies conducted by DOBI, in accordance with legislation passed years earlier, the list of procedures was expanded from 92 to over 1,400 of the most common medical procedures. The amounts paid were based upon comprehensive studies from Medicare, Medicaid, and prevailing fees paid for these procedures throughout the state.

Through the expanded fee schedule, reimbursement of medical costs can be controlled and the old standard of long, drawn out, expensive litigation over payments can finally come to an end. PIP claims will be processed more efficiently under these new guidelines and the honest physicians and medical providers who are being unfairly labeled as drivers of the rising auto insurance industry costs will no longer continue.

DOBI has truly been fundamental in its research of this issue and of adopting the fee schedule, enabling insurers to keep costs down and this judicial victory only supports its diligence.

This is not just a victory for the auto insurance industry. Every driver in New Jersey has been affected by the spiraling costs of certain abusive surgery centers and abusive chiropractor practices. The expanded fee schedule finally puts auto insurers in a position to control costs and pass along savings to our policyholders.

This ruling serves as a monumental movement to creating a fairer marketplace for all New Jersey drivers. While some of the appellants have filed a petition to the Supreme Court for another review of this legal issue, this decision, as it stands now, will remain the most meaningful decisions in New Jersey auto insurance history.

Poe is an attorney, CPA, and chief operating officer of CURE Auto Insurance, located at 214 Carnegie Center. He earned his bachelor’s in accounting and finance from the University of Colorado in 1994 and his J.D. from Seton Hall in 2002.

That same year Poe helped launch NJ PURE — New Jersey Physicians United Reciprocal Exchange — a not-for-profit medical malpractice insurer, through which members are screened on a case-by-case basis and agree to share the insurance risk among themselves in a not-for-profit manner.

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