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Background on PIP

Personal Injury Protection (PIP) is a mandatory auto insurance coverage in Kentucky. All insured drivers must carry PIP coverage of at least $10,000, but additional coverage can be obtained for up to $50,000. The coverage can be used for medical expenses, lost wages, funeral expenses, and replacement services.

Costs Are Increasing

PIP costs in Kentucky have been increasing at an unacceptable rate for a decade because costs are not managed and current law prevents any real oversight of PIP medical bills. When medical bills are paid under other types of medical coverage such as workers’ compensation, health insurance, Medicare, or Medicaid, health care providers must comply with fee schedules or negotiated rates that limit the amount that they may be reimbursed. There is no similar requirement for PIP coverage in Kentucky.

While most health care providers charge reasonable costs under PIP coverage, some abuse the system by charging amounts that greatly exceed charges for identical services when they are paid by other types of coverage. This cost-shifting has the real impact of hurting the consumer who is counting on PIP coverage.

Problems for Consumers

A person with $10,000 in PIP coverage might be counting on PIP to cover wages that were lost due to an accident in addition to his or her medical costs. Kentucky law does allow a claimant to direct his benefits as he wishes to pay lost wages, medical bills, or other costs at his or her discretion but if a claimant fails to make that election then it is possible that medical bills could use up the whole benefit.

If a medical provider submits inflated bills then a claimant’s medical benefits will be used up even more quickly than they would be for bills at more normal rates. The remainder of the medical bills would then need to be covered under the person’s health insurance, which is likely subject to deductibles and co-pays, unlike PIP assuming that the claimant even has health coverage.

Solicitation is a Problem

Another aspect of PIP costs that should be considered is the manner in which some medical clinics in Kentucky operate.  While most medical clinics maintain the highest ethical standards there is a subset of providers, often coming from other states, which use questionable practices.  These questionable clinics will often solicit those who have been in a motor vehicle accident, provide substandard care, and submit inflated bills until PIP benefits are exhausted.  Sometimes they will bill for services which have not even been provided at all.

Many times these clinics will work on a cross-referral system with attorneys.  For many years attorneys have been prohibited from directly soliciting those who have been in motor vehicle accidents for 30 days following an accident.  However, there was no similar provision for medical clinics and therefore clinics could use “runners” to solicit clients on their behalf and then refer those clients to attorneys.

In the 2015 session of the Kentucky General Assembly, IIK was among many interested parties who sought a legislative solution to this problem.  HB 153 which was sponsored by Rep. Jim Gooch (R-Providence) required several medical licensing boards to enact regulations prohibiting the solicitation of accident victims by providers. This law had subsequently been upheld in court and it is our hope that it will serve to curb some of the questionable practices of some clinics.

Cutting Down on PIP Fraud

Insurance fraud, particularly PIP fraud, is a serious problem in Kentucky, especially in the Metro Louisville area. In the 2019 legislative session, IIK was integrally involved with passing HB 151, a bill sponsored by Rep. Joe Fischer (R-Ft. Thomas) that made many beneficial changes regarding insurance fraud.

Among the provisions of HB 151 that will affect PIP are the following:

• The criminal penalties for insurance fraud were increased to match those for theft found in KRS 514.030.
• Medical licensure boards named in HB 153 above are now required to report suspected insurance fraud to the DOI Fraud Investigation Division. DOI investigates all such reports for a possible criminal referral.
• In order to cut down on solicitation of accident victims through the use of accident reports, personal information must be redacted from accident reports bought by news outlets which do not meet the criteria to receive unredacted reports.
• A Stark Law was established in KY for most medical providers. The Stark law is a Federal law that prohibits a medical professional from making a referral to another entity in which he/she has a financial interest for Medicare and Medicaid billings.

IIK’s Solution

IIK has joined with other interested parties in advocating for a number of reforms that would serve to contain the rapid rise of PIP costs.  Following are the reforms that we advocate:

• Limit the types of medical treatment covered by PIP. We want to be certain that only treatment by licensed medical providers is covered.
• Impose the workers’ compensation fee schedule on PIP claims, thereby limiting the billing abuses which are currently taking place. The workers’ compensation fee schedule was chosen since it provides for more generous reimbursement for providers than any other statutorily required coverage fee schedule.
• Change the statutory presumption of reasonableness. Under KY law all medical bills submitted under PIP are presumed to be reasonable. We advocate establishing criteria under which a medical bill would not be considered reasonable. Included among the criteria are bills in excess of “customary” charges, the bill did not use the current CPT code, or if it was not submitted in a timely fashion.
• Allow insurers to properly investigate PIP claims without going to court. Insurers need to be able to challenge claims that are not related to the accident, or which do not provide medical improvement of the claimant.

IIK is committed to combatting abuses in the PIP system in order to benefit policyholders and others who rely on the system.  We will continue to advocate for legislative and other changes to accomplish that goal.