The Star-Ledger

Rising N.J. Auto Insurance Premiums Must Be Tamed

The Star-Ledger — Sunday, August 7, 2011

By Star-Ledger Editorial Board

We all remember when New Jersey's auto insurance market was a mess. Policies were, by far, the most expensive in the nation, insurance companies were fleeing the state and angry motorists were marching on Trenton.

But in 2003, Gov. James E. McGreevey spearheaded reforms that increased competition and drove down prices. Those changes, however, steered clear of personal injury protection, the mandated part of a policy that covers medical expenses for accident victims.

Tweaking PIP meant wrestling with two powerful special interests — lawyers and doctors — and McGreevey believed those battles would bog down overall reform. So he fixed what he could.

Now, PIP costs are spiraling out of control and New Jersey drivers — still paying more than most — are getting antsy again. Over the past decade, the average claim has increased 65 percent, to $16,397 in 2010, in part because of these rising medical costs. That's twice as much as other no-fault states, and increases in New Jersey PIP costs are outpacing medical costs in general.

Something must be done about untamed auto premiums. The administration's plan, which addresses three cost drivers — fraud, and medical and legal costs — appears sensible.

By setting standard prices for more procedures and treatments, the plan makes it more difficult for doctors to pad or fake their bills. For injured drivers, only treatments outlined in medical journals would be fully covered. If you see a healer who prescribes rubbing moss on a neck injury, then bills $1,000, it won't be covered.

Lauren Townsend, of New Jersey Citizen Action, believes "patients should be able see anyone who can make them well." But limiting treatments to those recognized by the overall medical community is standard practice and makes sense. And placing 2,000 treatments on a fee schedule should give consumers more for their buck. Most New Jersey drivers have $250,000 of PIP coverage. With cost containment, that will go further.

Legal costs, too, will be shaved by an arbitration system. (In 2010, there were 61,000 disputes.) Now, when a doctor wants payment and an insurer balks, the lawyer's fee often far exceeds the disputed amount. Under the new plan, arbitrators could slash fees.

Personal-injury attorney Gerry Baker says the solution to arbitration overload is simple: "Tell insurers to pay claims."

Critics predict patients will suffer reduced access to medical care, but until this is proven, the goal should be to reduce rates. Competition should make sure these savings are passed on to consumers, but regulators can help, too. When asked for a rate increase, they should tell insurers, "We saved you all this money and you still want an increase? Let's take a closer look at your books."

Top Top | NJCA in the News | NJCA Homepage