New N.J. Auto PIP Fee Schedule to Moderate Medical Costs

Two years after it was adopted, the New Jersey personal injury protection medical fee schedule has gone into effect due to a recent decision by the state Superior Court's Appellate Division. Now, automobile insurers say reimbursement for medical costs can be controlled and expensive litigation over the payments can end. Simply, the schedule can keep insurance costs down.

"The implementation of this schedule is a victory for all New Jersey drivers," said Bernie Flynn, president and chief executive officer of New Jersey Manufacturers. "Medical costs had been spiraling out of control for some time. This will help moderate costs in the system."

Flynn said doctors and ambulatory surgical centers will still receive "reasonable and appropriate" reimbursement for their services. Not so, said the New Jersey Medical Society, who appealed the new fee schedule as soon as it was adopted in late August 2007. However, the battle between insurers and medical professionals over the fees for people injured in car accidents has been a fixture in New Jersey since the early 1990's, when the Fair Automobile Insurance Reform Act was passed to address rising auto insurance costs and included the establishment of a fee schedule.

State Department of Banking and Insurance spokesman Marshall McKnight said the schedule was implemented the same day the appellate ruling was returned on Aug. 10. Commissioner Neil N. Jasey said the PIP costs have "been a major factor pushing auto insurers to seek rate increases recently." Allstate New Jersey Insurance Co. received approval from the state to raise auto rates nearly 9% for about 300,000 customers, in part, because of an rise in hospital and medical costs under the state's PIP coverage (BestWire, May 7, 2009).

Since auto reforms were passed in 2003, "Allstate New Jersey's average PIP payout increased 67%," said Allstate spokesman Walter Tomasheski. "We feel this is an important decision with a cost control benefit to New Jersey drivers, who ultimately pay these costs through premiums."

The schedule "helps contain rapidly rising health care costs by setting reasonable limits on insurer payments for medical services. It also reduces costly and time consuming payment disputes by discouraging court and arbitration proceedings," Jasey added.

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