What’s pushing up your auto insurance premium? Check the hospital bill

Maybe it was bound to happen: Hospital, clinic and doctor charges for accident insurance claims are going up, up, up.  While the number of nationwide claims for personal injury protection and bodily injury are falling, the costs are rising, according to the Insurance Research Council.

That shouldn’t be happening. Motor vehicle deaths are at their lowest level since 1949, due in part to greater car safety.

But auto insurance premiums are going up everywhere, not just in Florida where PIP fraud is a leading cause. James Ruotolo, an insurance fraud technologist at the software company SAS, blames an increase in medical treatment costs. Caregivers are ordering more sophisticated tests and more treatments.

While better testing is leading to improved patient treatment, “there is little evidence to suggest that the dramatic rise in diagnostics is fully warranted,” he writes for the publication Insurance Technology.

“Not only do the costs of the diagnostic treatment itself increase the claim costs, the fact that several diagnostic tests were ordered serves to establish a position that an injury is more severe.”

Statistics show that the inflation for auto and work-related accidents is going up twice as fast as general medical inflation. Ruotolo says doctors, clinics and hospitals are looking for new places to make money, so they’re ordering more expensive tests and treatments.

Sometimes those tests and treatments are needed, but not always. After looking at a lot of big bills, some insurance companies are looking more closely at the charges. They suspect what’s now being called “soft fraud,” in which needless tests are conducted just for the revenue.

“This ‘soft fraud’ has occurred in Florida PIP claims for years,” says Richard Parrillo Sr., CEO of United Automobile Insurance Company.

“It is a major factor in the huge increase in auto insurance premiums. It’s unfortunate because it is Florida’s citizens that have to pay for all of this unnecessary treatment.”

Auto insurers are serious about fighting the problem. Their insurance fraud departments are working with government and private health insurance investigators to learn more about how to detect and fight overbilling.

It’s a start in the battle against a new kind of insurance fraud, but Ruotolo writes that auto insurers are far behind others in detecting what’s legitimate and what’s not. Until the insurers get a handle on the problem, they will be passing along the higher costs to drivers.

“It is not the insurers that are far behind in detecting the fraudulent treatment,” Parrillo says. “It is the courts that have failed to crack down on medical providers that are ordering and performing all these unnecessary services. These medical providers do it because they know they can get away with it.”

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