Why Are Auto Insurers No Longer Paying 100% of My Bill?
Arthur D. Leritz, Attorney at Law Adler Giersch PS, WSCA Leadership Level Corporate Partner
A 2024 Washington State Supreme Court decision, Schiff v. Liberty Mutual, has upended years of practice and procedures for patient and providers. The Court approved the insurer’s use of a computer database to determine whether a provider’s bill for patient services is reasonable, and whether it should be fully paid.
For several years, Stanley Schiff, MD, Ph.D., submitted over 20 treatment bills to Liberty Mutual under his patient’s personal injury protection (PIP) or MedPay auto coverages. Many of Schiff’s bills were reduced to the 80th percentile, based on the “FAIR Health” data. Under Liberty Mutual’s practice, if a provider’s bill was below 80% of similar providers charged for the same services for the area, it was paid in full. However, if the provider’s charge exceeded the 80th percentile, then Liberty Mutual’s only paid up to 80% of what other providers in a “geographic zone” were charging.
In May 2017, Dr. Schiff sued Liberty Mutual alleging that its practice of reducing payments to healthcare providers violated Washington state’s PIP law, Administrative Code, and the Consumer Protection Act. Dr. Schiff further asked the court to stop Liberty Mutual from making reductions to provider bills because Liberty was not conducting a “reasonable investigation” of the treatments before refusing to pay bills in full.
12 www .ch ir oh ealth.or g
Liberty Mutual claimed that the use of FAIR Health, and the 80th percentile practice, was reasonable based on the language of PIP insurance law in Washington and the Washington Administrative Code, which do not require an investigation into the reasonableness of an individual provider’s bills. Liberty Mutual also claimed that, since this practice was reasonable, there were no PIP law nor Consumer Protection Act violations.
In analyzing whether Liberty Mutual’s practice violated the Consumer Protection Act, the court used the five-factor test previously established in the case of Hangman Ridge1
:
1. Is this an unfair or deceptive act or practice; 2. In trade or commerce; 3. Which affects the public interest; 4. From an injury to plaintiff’s business or property; and
5. Is there a causal link between the unfair or deceptive act or practice, and the injury.
In examining the fairness issue, the court addressed this under the applicable Washington Administrative Code section 284 – 30 – 330, which requires an insurer to adopt and implement reasonable standards for the investigation of claims arising under
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32
