insurance policies, and requires insurers to conduct a reasonable investigation before refusing to pay a claim.


Despite Liberty Mutual’s reliance on a single database, and using a blanket approach to determine reasonableness instead of analyzing the specific bill submitted, the Supreme Court found that the use of FAIR Health and 80th percentile practice was not universally unfair and found no violation of the Consumer Protection Act.


Speaking for the dissent, Justice Debra Stephens noted that Liberty Mutual had not shown that its application of an 80th percentile rule using the FAIR Health database constituted a “reasonable investigation” into a specific charge or established that a provider’s charge was unreasonable. Justice Stephens rightly noted that “it is entirely possible that patients may incur reasonable medical expenses greater than the 80th percentile benchmark in a given geographical area, and Liberty does not demonstrate how FAIR Health provides sufficient information to categorically reject all charges above the 80th percentile.”


Justice Stephens further noted that while the use of databases such as FAIR Health can provide a useful tool in conducting a reasonable investigation, it should not be the only method used to determine if the investigation was reasonable. She also noted that to determine the amount of a bill is categorically unreasonable, without further inquiry, fails for the same reason that the court held the “maximum medical improvement (MMI)” methodology at issue in Durant vs. State Farm2


failed: it is clearly more restrictive than the ordinary meaning of “reasonable” requires.


Justice Stephens added that it was “naïve” to pretend that insurance coverage limits and reimbursements do not affect providers’ charges over time, as the majority opinion contended. This will likely have an impact on what “usual and customary” charges are in network-based healthcare coverages. For example, a study done in Alaska measured healthcare costs in a 10-year period using this 80th percentile methodology. The study concluded this method caused an 8.16% to 24.65% increase in healthcare expenditures in Alaska. In fact, the Alaska legislature repealed the 80th percentile rule right before the Schiff decision came out.


References:


1. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 105 Wn.2d 778, 783, 719 P.2d 531 (1986) 2. https://www.courts.wa.gov/opinions/pdf/1015763.pdf 3. https://www.insurance.wa.gov/complaints-appeals-fraud/complaints/file- complaint-or-check-your-complaint-status


Since the Schiff decision was issued, we have seen not just Liberty Mutual, but all auto carriers using some sort of reduction practice when paying bills under PIP. Unfortunately, every carrier is applying this decision differently and there is no uniformity on how it is being used. Insurers should have to provide the basis and supporting data for their investigation. Consumers have a right to know what is going on behind closed doors, especially when it impacts the insurance benefits they paid for.


Even worse, the FAIRH Health data claims to be based on the provider’s “Geo Zip”, which in one instance was the 980 zip code, which includes all provider data from Algona to Black Diamond, Bellevue, Kent, Snoqualmie to Vashon. It is not too hard to imagine how that data is being manipulated to reduce your bill.


We are disappointed with the court’s interpretation of PIP law and the Administrative Code in this instance. Fortunately, the Office of the Insurance Commissioner is looking into this issue.


Action Steps: Now is the time to speak up. If you find in your practice that your bills are being reduced when submitted to your patient’s PIP carrier then the patient needs to complete the OIC Complaint form in the link below3


and contact a seasoned and


experienced personal injury attorney. The attorney should demand that (1) the patient’s insurer provide the reasoning behind the reduction, (2) obtain the secret data used to reduce the treatment bills and harm the patient’s access to care, and (3) demand the insurer pay 100% of the bill.


“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.”


Ple x us September 20 2 5 13


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