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Automobile No-Fault Independent Medical Examinations

Automobile No-Fault
Independent Medical
Examinations





Report to the
Budget Committee on Health Care
Senator Judy Lee, Chairman






September 24, 2002
Table of Contents

Executive Summary ....................................................................................................... 1


Part I

General Discussion ........................................................................................................ 3


Issue 1 Impact Independent Medical Examinations Have on the

Provision of Motor Vehicle Insurance Benefits in the State ....................................... 4


Issue 2 Are Medical Service Providers Willing to Perform
Independent
Medical
Examinations? ......................................................................... 7


Issue 3 How Do Other States Regulate Independent Medical Examinations?...... 10


Issue 4 Recommendations .................................................................................. 12

Summary of Automobile No-Fault IME Process Comments ......................................... 14

Criticisms ................................................................................................................ 14

Industry
Response .................................................................................................. 14

Other
States
Solutions ........................................................................................... 15

Other
Suggestions .................................................................................................. 16

Related
Issues ........................................................................................................ 17

Docket Sheet


Part II

PIP Closed Claim Study -- 2001-2002

Background .................................................................................................................... 1
Study Description ........................................................................................................... 2
Data Sheet ...................................................................................................................... 3
Findings........................................................................................................................... 9
Conclusions................................................................................................................... 12
Exhibits.......................................................................................................................... 13 Executive Summary

At the direction of the 2001 Legislative Assembly, the North Dakota Insurance
Department initiated a study of the North Dakota automobile Independent Medical
Examination review process to review the impact that Independent Medical
Examinations have on the provision of motor vehicle insurance benefits in the state.

The Department held three public input sessions at which it received oral comments
from numerous interested persons. Others filed written comments with the Department.
The information gathered from public comments is provided in Part I of the report.

The Insurance Department also conducted a study of the insurance industry relative to
the industrys use of Independent Medical Examinations (IMEs) and Independent
Records Review (IRR) in the handling of claims. Part II of the report provides the results
of the PIP closed claim study which covered the period August 1, 2001, through August
30, 2002.

Certain parties criticized the present IME process, arguing that IMEs at times impact
benefits by terminating the benefits prematurely. They argue that the examinations are
not independent or impartial, but rather are conducted most often by out-of-state
examiners who are hired by the insurance company and who most often are not
regularly practicing medical service providers and who depend on the income from the
insurance companies for their livelihood. They argue that the examiners, because they
are dependent on the insurance industry for their livelihood, are biased in favor of the
insurance industry. The critics note that the examiners most often find in favor of the
insurance company.

As one solution to the problem, the critics suggest that the state implement some form
of alternate dispute mechanism that would involve an impartial review by a third party to
settle disputes between the treating provider and the company examiner. They note
that an alternative mechanism is especially significant for small claims that are do not
justify the hiring of an attorney to pursue the dispute through the expensive legal
process.

The insurance industry argues that IMEs are necessary to control questionable
claims. It argues that controlling questionable claims allows the company to control no-
fault costs, thereby enabling the industry to provide legitimate no-fault benefits at a
reasonable cost. The industry also argues that at present the disputes can be settled
through the legal process. The industry also notes that any form of alternate dispute
resolution will involve more cost to the companies, a cost that will ultimately be passed
on to the policyholders.

The interested parties submitted numerous other comments and suggestions that are
set forth in the report that is attached.

1 The Department study notes that several of the other no-fault states have implemented
some form of no-fault alternate dispute mechanism, including arbitration, mediation,
informal conciliation, or review panels.

Each of the alternative dispute mechanisms involved some expense, with the expense
paid by either the claimant, the company, or the states taxpayers, depending upon the
scope of the alternative mechanism and upon the manner in which the alternative
mechanism is financed.

Senate Bill No. 2244 invited any recommendations as a result of the study. The
Department does not have any specific recommendations. The attached report notes
that if the Department were to make a recommendation, that it would be that the
Legislature consider an alternative dispute mechanism as an alternative to the formal
legal process, especially for smaller claims.

The study does not attempt to estimate the cost of implementing any specific change to
the present system, but the Department can do so if a specific change is proposed by
any of the interested parties or the legislature.

A summary of comments and proposed changes appears at the end of Part I of the
report.

A copy of the Departments docket sheet that lists the parties filing comments is also
attached.

2

Part I
General Discussion

The North Dakota Automobile Accident Reparations Act, N.D. Century Code Chapter
26.1-41, is a remedial act that was designed to reduce litigation, promote prompt
resolution of claims, stabilize insurance prices, and provide ready availability of
coverage necessary to the provision of accident benefits. (Hillborne v. Nodak Mutual
Insurance Company, Cass County District Court, Judge Erickson, May 20, 1999.)

No-fault insurance, as it is known, was designed to encourage quick, informal payments
to assure injured plaintiffs are compensated for their injuries. One of the primary
purposes of the no-fault law is to avoid protracted litigation over issues of fault or
causation. The intent was to secure rapid payment of claims by eliminating the fault
controversy and wasteful litigation, similar to the objectives of workers compensation
statutes. (Note: See Piatz v. Austin Mutual Ins. Co., 2002 N.D. 115, and cites to Weber
v. State Farm Mutual Auto Ins. Co., 284 N.W.2d 299, 301 (N.D. 1979).)

The trade-off between no-fault and the previous fault based system was that no claim
could be pursued against a secured person unless a party first met the no-fault
threshold. N.D. Cent. Code § 26.1-41-08. The law was designed to correct the
perceived vices of an entirely fault based system.

N.D. Cent. Code § 26.1-41-11, the North Dakota Auto Accident Reparations Act,
requires that an injured person submit to an examination by a physician designated by
the no-fault carrier to establish continued eligibility for benefits. The examination,
referred to as an Independent Medical Examination or an IME, is criticized by some as
being unfair, mostly because the physicians designated by the no-fault carrier are
perceived as being biased in favor of the no-fault carrier and against the injured person.

To address the criticism, the 57th Legislative Assembly considered a proposed change
to the no-fault law in Senate Bill No. 2288. The proposal was patterned after the
Colorado IME system wherein a dispute over the need for continued medical treatment
is referred to an IME examiner selected by the parties from a list of five examiners
selected by the Colorado Insurance Department. The Department is required to
maintain a list of examiners that are willing to perform IMEs.

Senate Bill No. 2288 as initi