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Letter to the Editor
Thursday March 7
New Jersey Appellate Court Upholds Precertification Requirement for Injured Motorists
TRENTON, N.J. -- According to A.M. Best, a New Jersey appellate court has upheld a provision in the state's 1998 automobile insurance reform law that requires injured motorists to get precertification from their insurers before receiving some diagnostic tests and medical treatments.
The Insurance Council of New Jersey views the provision as a strengthening of the insurance department's authority to implement cost savings to fight fraud and abuse in the system.
The court's decision was based on a lawsuit the Coalition for Quality Health Care filed in 2000 against the New Jersey Department of Banking and Insurance.
Trial lawyers and health-care providers argued that the requirements unfairly gave insurers the power to prevent injured motorists from filing lawsuits by denying payments for tests and treatments they needed to meet the new, stricter standards. Supporters of the provision said that the rules are intended to combat fraud and abuse in the auto insurance system, not to limit medical care.
Former New Jersey Banking and Insurance Commissioner Jaynee LaVecchia issued an order in March 1999 mandating a 15 percent auto insurance rate reduction totaling $750 million, along with guidelines requiring medical providers to demonstrate and document the medical necessity of treatment they provided for auto-accident injuries.
The final portion of the medical-fee schedule fills in specific fees for all types of medical treatment codes. With this adoption--for medical procedures no longer on the fee schedule--an insurer's limit of liability will be the provider's usual, reasonable and customary fee as provided by state law, according to the department.
the National Association of Independent Insurers (NAII) considers the New Jersey Appellate Court's decision a positive step in promoting true auto reform.
"We are pleased that the Court once again recognized the importance of the medical cost savings features of the 1998 AICRA act. This is the second time in four years this act has been challenged in court and in both instances the Department has been ruled to be acting in accordance with the law," said Don Cleasby, assistant vice president and assistant general counsel for the NAII.
"While the Appellate Court ruling represents a major victory for New Jersey insurers and consumers, the NAII feels that much more needs to be done to stabilize the state's volatile insurance market. Over the past three years, excessive insurance regulation in New Jersey has strangled competition resulting in more than 20 auto insurance companies leaving the state," commented Cleasby. "The NAII and several of its member companies are actively working with the Coalition for Auto Insurance Competition (CAIC), a group of concerned businesses, insurance agents, companies and trade organizations to help restore competition and choice back to the New Jersey insurance market."
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