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*Adrianna de la Cruz-Muñoz

Florida is a no-fault insurance state.[1] Florida no-fault insurance is also “referred to as personal injury protection (PIP).”[2] Under Florida Statute Section 627.736(4), PIP benefits are primary, even if you have health insurance.[3] Following a car accident, PIP benefits cover eighty percent of “all reasonable for medically necessary medical, surgical, x-ray, dental, and rehabilitative services” up to $10,000.[4] The first $250 to $1,000 in charges are applied to the deductible and paid by the insured. Additionally, twenty percent of the accident-related medical expenses are paid out of pocket by the insured in the form of copayments. These copayments can easily surpass several thousand dollars. Only after the $10,000 limit is reached, does the insured’s health insurance benefits kick in.

The PIP copayments virtually always exceed what the injured person would have to pay for the same treatment through their health insurance. This is because health insurance companies typically contract with hospitals and doctors for lower reimbursement rates for treatment received by its insured.[5] Car insurance companies, on the other hand, reimburse the hospital for “seventy-five percent of the hospital’s usual and customary charges” for “emergency services and care provided by a hospital.”[6] Thus, although health insurance companies actually reimburse the hospital at far lower rates than the hospital bills on its chargemaster, the chargemaster will still reflect the massive amount charged by the hospital.[7] This leads to a misconception regarding a hospital’s existing usual and customary charges.[8] In fact,

Recent research suggests that on average, chargemaster prices are more than 300 percent of the amount hospitals actually get paid for their goods and services . . . In fact, recent research indicates chargemaster rates can be in excess of 10 times the Medicare allowable cost. Not surprisingly, hospitals actually collect their full chargemaster rates from less than 5 percent of their patients.[9]

Nevertheless, car insurance companies agree to pay a whopping seventy-five percent of these inflated charges. In turn, those who are injured in an accident are forced to pay exorbitant amounts in copayments through PIP, even if they could have paid thousands of dollars less through their health insurance.[10] Thus, the way no-fault insurance is structured in Florida puts injured parties with health insurance in a significantly worse position financially.

There are several possible ways to remedy the problem caused by mandated, primary PIP coverage in Florida. First, drivers with health insurance can be given a choice regarding which benefits are primary: either PIP or their health insurance.[11] Second, “courts and legislatures [can] provide guidance regarding a clear and transparent method based on [actual] payments and not on charges for establishing the usual, customary, and reasonable price for medical care.”[12] Third, the Florida legislature can amend Section 627.736(5)(a)1.b. to provide that car insurance companies only reimburse the hospital for a smaller percentage of the hospital’s usual and customary charges. Particularly, the reduced percentage should be similar to the rates negotiated by health insurance companies. These solutions may be implemented independently or together, though the legislature is unlikely to simultaneously implement both the second and third options.

* J.D. Candidate, May 2020, Florida International University College of Law

[1] See Fla. Stat. § 627.730 (2019) (“Sections 627.730–627.7405 may be cited and known as the ‘Florida Motor Vehicle No-Fault Law.’”).

[2] 1 Florida Automobile Insurance Law § 3.1 (2018).

[3] Fla. Stat. § 627.736(4) (2019).

[4] Id. § 627.736(1)(a).

[5] Robert Pearl, M.D., 3 Ways Hospitals Overcharge You (and What Can Be Done About It), Forbes (Sept. 5, 2017), (“To keep costs in check, insurance companies negotiate discounted rates with each hospital in their network.”).

[6] § 627.736(5)(a)1.b.

[7] George A. Nation III, Hospitals Use the Pernicious Chargemaster Pricing System to Take Advantage of Accident Victims: Stopping Abusive Hospital Billing, 66 Drake L. Rev. 645, 682 (2018) [hereinafter Stopping Abusive Hospital Billing].

[8] Id. at 683 (“The chargemaster-based pricing system, with its grossly excessive prices and the confusion it creates regarding the usual, customary, and reasonable value of healthcare, is the real cause of the hospital price-gouging problem.”).

[9] Id. at 681.

[10] Id. at 651 (“Note that in Jean’s case, there is a huge $10,023 difference between the contract rate of $750 and the hospital’s chargemaster-based list price of $10,773. In other words, the list price is 14.36 times greater than the contract rate.”); see also Lauren Sweeney, Hospital Price Lists Fail to Shed Light on the True Costs of Care, WINK News (May 20, 2019), ($71,000 difference between the Southwest Florida hospital’s initial chargemaster price of $93,000 and the discounted rate of $22,000 paid by New York Medicaid).

[11] See Emily Delbridge, The Requirements for Auto Insurance in Michigan, The Balance (June 25, 2019), (“Michigan auto insurance policies have different levels of PIP available.” e.g., coordinated with medical, where “having primary health insurance through an employer will help reduce the cost of auto insurance.”).

[12] Stopping Abusive Hospital Billing, supra note 7.