FOR IMMEDIATE RELEASE
September 12, 2007
HOSPITALS URGE STATE FARM TO “DISCLOSE ALL THE FACTS” TO CONSUMERS ON THE REAL IMPACTS OF POST NO-FAULT RATE FILING
TALLAHASSEE, FL – For months, State Farm has claimed that the principal benefit of repealing no-fault auto insurance in Florida is that drivers will save money on their auto premiums.
State Farm’s claim of 16 percent average savings is based on eliminating Personal Injury Protection (PIP) and medical payments coverage from drivers’ policies. But in order to achieve savings that big, State Farm is presuming that its customers won’t buy the new optional medical payments coverage the insurer is offering.
So what’s the real savings to State Farm customers if they opt for the new medical payments coverage? In fact, their savings could be lower than $8 for less comprehensive health coverage, a review of State Farm’s rate filing by Florida’s hospitals found.
Additionally, in the same rate filing, State Farm is actually raising rates on two other coverages in anticipation that medical costs now covered by PIP will be shifted to Bodily Injury (BI) liability and Uninsured Motorist (UM) protection.
The hospital review of State Farm’s rate filing drew almost identical conclusions to an analysis conducted by The Miami Heraldof recent auto insurance rate filings.The newspaper’sfindings were published Tuesday in a story headlined “Big drop in auto insurance rates is unlikely.”
“A Miami Herald review of various auto policies that come up for renewal early next month shows savings of 10 percent or less – and that is if consumers don’t buy medical payments coverage to replace benefits now provided by PIP. Adding that wipes out any savings and in most cases costs more than before,” the newspaper reported.
Under one rate scenario evaluated by hospitals, a State Farm customer now paying $488.50 for a six-month policy including PIP would pay $481.08 under the new rate filing – a savings of just $7.42 – if they added the new medical payments coverage.
“We’re calling on State Farm to disclose all the facts to Florida’s consumers about the real implications of eliminating PIP from their policies,” said Wayne NeSmith, President of the Florida Hospital Association.
“While State Farm customers may see some initial premium savings if state leaders allow no-fault to expire, their rates are going up for other coverage on their policies. And the real bottom line is, any savings that consumers might achieve will basically be wiped out if they buy medical payments coverage,” said Tony Carvalho, President of the Safety Net Hospital Alliance of Florida.
State Farm and other advocates for eliminating Florida’s 37-year-old no-fault system argue that PIP is a duplicative coverage for those who also have health insurance. But in late August, the U.S. Census Bureau reported that Florida ranks third highest among 50 states in the number of residents without any health insurance. Between 2004 and 2006, an average 3.6 million Floridians, or one in every five state residents, had no health insurance, the Census Bureau found. For those under age 65 – who don’t qualify for Medicare – Florida ranks second highest in the nation, with nearly one in four lacking health insurance.
Thus, under State Farm’s rate filing, if drivers and their passengers lack health insurance coverage, and the consumer didn’t buy any optional medical payments coverage on their auto policy, both the driver and passengers would likely have no medical coverage if hurt in a crash.
State Farm’s rate filing covers two entities, State Farm Mutual Auto and State Farm Fire and Casualty. A hospital review of the insurer’s rate filing found:
Meanwhile, the rate filing shows State Farm’s new optional medical payments coverage does not include PIP’s co-pay requirements, but also has fewer benefits than those the company now provides under PIP. For example:
State Farm’s rate filing bears out what Florida’s hospitals have repeatedly warned will be the result if the governor and the Florida Legislature allow the no-fault system to expire October 1: Over time, the cost of auto insurance will go up, not down, as drivers pay more for coverage such as BI and UM. And motorists who lack health insurance will be dangerously exposed if they are hurt in a crash and have no medical coverage on their auto policies.
“Florida’s hospitals believe that the governor, legislative leaders, CFO Alex Sink, and state regulators should take a close look at State Farm’s rate filing and its true implications for consumers,” NeSmith said. “Florida should not put itself in the position of requiring drivers to carry mandatory coverage to pay for a dented bumper, but not a broken arm. They must address the no-fault system before October 1.”
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To view the State Farm rate filing visit:
http://www.fha.org/PIP/State-Farm-Rate-Filing.pdf
To view
the Miami Herald story on State Farm’s and other auto rate
filings visit:
http://www.miamiherald.com/business/story/233086.html
State Farm Rate simulation
The following example is based on State Farm’s base rates for its preferred company, State Farm Mutual Automobile Insurance Co., with no adjustments for factors such as driver class or rating territory and no surcharges or discounts. The example assumes that under the old system, the driver purchased a six-month policy providing Bodily Injury Liability with limits of $25,000/$50,000, Property Damage Liability with limits of $25,000, PIP with statutory limits of $10,000, Uninsured Motorist, Comprehensive, and Collision, and that under the new system, the driver purchased the same coverages in the same amounts, except that optional Medical Payments with limits of $10,000 was purchased to replace the old PIP coverage.
Example 1: State Farm Mutual Automobile Insurance Co.
Coverage |
Before |
After |
BI/PD Liability |
$185.10 |
$210.00 |
PIP |
$115.80 |
0 |
Uninsured Motorist |
$51.00 |
$53.60 |
Medical Payments |
0 |
$83.38 |
Collision |
$74.90 |
$74.90 |
Comprehensive |
$16.70 |
$16.70 |
Expense Fees |
$45.00 |
$42.50 |
TOTAL |
$488.50 |
$481.08 |
To view the State Farm rate filing visit:
http://www.fha.org/PIP/State-Farm-Rate-Filing.pdf
 |
Tony Carvalho |