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NJ Ins. Commish Puts and End to a Sham

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Posted by Charlie Barone on April 09, 2000 at 14:39:57:

For Release: February 28, 1996


Also Decides to Pursue PIP Managed Care Through Legislative Solutions

TRENTON - Insurance Commissioner Elizabeth Randall today announced that she is abandoning her predecessor's proposal that would have allowed auto insurance companies to offer a body shop network option.
Randall said she agrees with a Hearing Officer's recommendation that she repeal an amendment adopted in August by Commissioner Drew Karpinski because it would fail to provide a significant benefit to consumers.

That amendment to a regulation would have allowed the Department of Insurance to consider filings from auto insurance carriers interested in offering their policyholders the option of saving premiums by agreeing to have their car repaired by a body shop in the carrier's network.

Randall said she is also withdrawing a second regulation that would have set up standards that any insurance company's program would have to meet.

The Commissioner said that after carefully reviewing the issue, she agreed with a Hearing Officer's report that cited several reasons for abandoning the auto body repair network concept at this time.

"To succeed, this would have to be a widespread program. Only one carrier expressed interest in offering this type of program to its policyholders," said Randall.

"While auto body repair costs in New Jersey are high, these costs aren't the real culprits in driving up the costs of auto insurance. Medical costs are, and personal injury protection costs are what policymakers need to focus their attention and efforts on," she said.

Randall said a close analysis of the issue revealed that adoption of the auto body network option would fail to yield significant premium savings to consumers. Rather, any savings would likely be to insurance companies in adjusting their losses.

In addition, Randall said, many insurers are already referring consumers to certain body shops under an informal, voluntary system of Direct Repair Programs.

"These programs are working well. To bureaucratize these programs with new regulations flies in the face of Governor Whitman's efforts toward regulatory reform. If it ain't broke, don't fix it," said Randall.

The Commissioner also announced that she is continuing to scrutinize a proposed regulation that, if adopted, would have given auto insurance policyholders the option of choosing a managed-care organization to provide treatment for auto accident injuries.

Randall has until July to adopt, withdraw or let die the PIP managed care regulation.

"The concept of PIP managed care clearly has merit as a way to contain medical costs, reduce fraud and stem the spiraling costs of medical care related to accidents," she said.

"However, the kind of program that could be created by the adoption of this regulation by the Department is less appealing and will be certainly less successful than what can be done by the Legislature. The Department is blocked by law from enabling consumers to save deductibles and co-payments, two features consumers find attractive.

"Managed care for auto insurance is working in Colorado and for workers' compensation in New Jersey. In order to work for PIP in New Jersey. I believe, legislation is the preferred route," said Randall.

The Commissioner called on the Legislature to work with her to find solutions to the spiraling costs associated with PIP expenses.

"PIP abuse and PIP losses are killing the system," said Randall.

The Commissioner said that one of her top priorities is to improve New Jersey's auto insurance market for consumers.

She praised the enactment of a law, sponsored by Assemblyman Gerald Zecker and recently signed by Governor Whitman, that will ensure that auto insurers are notified within 21 days that a policyholder has started medical treatment for an auto accident-related injury.

Before, multiple treatments could continue for up to two years (the statute of limitations for filing a lawsuit) before an insurance company had to be notified that the treatment was taking place.

"This allowed insurers little or no opportunity to determine if treatment was necessary or excessive. Under the new law, insurers will be better able to implement cost-containment measures," Randall said.

Another piece of legislation, which the Department will be working on this session, is Assemblyman Richard Bagger's peer review organization bill.

"Peer review is one measure to combat fraud and abuse in the system. Peer review organizations are composed of medical professionals who can analyze treatments rendered to injured people to verify that the treatments were not fraudulent or excessive," Randall said.

She said peer review has worked successfully since 1990 in Pennsylvania.

"It is time we enact this initiative in New Jersey," said Randall.

The Commissioner said she is looking forward to working closely with members of the Legislature to enact meaningful auto insurance reform measures during this session.

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