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New Jersey’s no-fault auto insurance system, which all sides agree is a mess, will be studied thoroughly this summer by the state for the first time in its 30-year history. Banking and Insurance Commissioner Holly Bakke said last Monday her department has contracted with the Insurance Services Office of Jersey City to perform the actuarial study needed to determine how to fix the system. Bakke and representatives from trial lawyers, medical providers and the insurance industry agree that every option is on the table, including scrapping no-fault and returning to the traditional tort system. Bakke’s announcement followed a meeting of the 35-member Auto Insurance Working Group in Trenton and the release by her department of working papers from the first phase of the group’s dialogues to date. Bakke formed the group shortly after taking office in March, naming insurance company executives, agents, doctors, trial lawyers and a representative of the Brain Injury Association. Several leaders of the Association of Trial Lawyers of America-New Jersey and an officer of the New Jersey Medical Society serve in the group, which is charged with examining every aspect of auto insurance and offering potential solutions. The working papers released last week contained potential solutions, though there was no consensus, or even a majority, on the solutions. Ultimately, a final report in August will offer proposals to Bakke, and Gov. James McGreevey’s staff is expected to fashion legislation to send to lawmakers. One potential solution, listed in a working paper produced by the New System Panel, one of three panels within the group, recommended abolishing no-fault and returning to a tort system. When newspaper stories reported that the group was advising such a move, industry representatives cried foul. Bakke responded a day later with a letter to the members of the group calling the stories a “mischaracterization” that could undermine the process. John Tiene, president of the Insurance Council of New Jersey, weighed in with a letter to Special Deputy Commissioner Rolando Torres Jr. last Wednesday blasting the release of the working papers. The release, he added, led to “confusion … in the media.” A department spokeswoman, though, says the papers had to be released under the new open public records act. ATLA has for many years supported abolition of no-fault, which limits the right of an auto-accident victim to sue for pain and suffering in exchange for having medical bills paid by their own carrier, regardless of who caused the accident. Doctors, clinics, hospitals and diagnostic-testing services have argued for years that the system, especially since a 1998 law designed to cut medical costs and reduce premiums was enacted, is unfair to the medical profession. For its part, the insurance industry has railed against what its sees as too much regulation, manifested by the exodus of companies willing to write auto insurance in the state. State Farm Indemnity Co., the state’s largest insurer, is set to leave New Jersey this summer. Despite the sharp divisions, all members of the panel that is examining no-fault signed off on the selection of the Insurance Services Office as the actuary from eight firms Bakke recommended. Actuarial firms that performed studies in 1998 for the industry and ATLA were not chosen. In spite of the preliminary nature of the working papers, Bakke did say her department “will take immediate action to protect consumers” on several issues raised by the working group. She listed five areas that will get immediate attention, but that disclosure triggered even more angst from industry representatives. Tiene, president of the Insurance Council of New Jersey and a member of the Existing System Panel, disputed that the panel focused on those areas for attention and action. In his letter to special deputy Commissioner Torres, Tiene said that neither the entire group nor the panel came to a consensus on areas that needed immediate attention. “Citing the issues identified for future discussion as justification to take immediate action hurts the credibility of not only the working group process, but also those invited to participate,” he wrote. Tiene accused the department of “hiding behind the working group process to justify its actions.” Mary Caffrey, a spokeswoman for the department, responds by saying it was the department, not the panel, that decided to take such action. She characterizes the actions as merely “fine tuning” the Automobile Insurance Cost Reduction Act of 1998, which produced a 15 percent rate drop for motorists and established medical guidelines and “care paths” on how to treat a variety of injuries, particularly soft-tissue injury. The industry says the bulk of insurance fraud stems from such injuries. Bakke said in her release that the department would certify, and set standards for, medical networks established by the carriers. Under the AICRA, accident victims must go to a network clinic for diagnostic testing, or pay up to 50 percent of the cost themselves. Medical providers pushed for such standards. Doctors and plaintiffs’ lawyers don’t like the networks, according to the industry, because they would rather pick a clinic they feel may give them a favorable report. Doctors and lawyers, however, simply say victims need higher standards. Bakke said the department will revisit the fee schedule for medical providers. Fees, especially for an MRI, are capped now; the industry favors that cap, while doctors and lawyers want it to be raised. The care paths also will be revamped to reduce treatment delays, said Bakke, a victory for lawyers and doctors who say current controls violate a doctor’s right to choose how to treat the patient. Carriers say the controls, including “decision-points” that require doctors to check with carriers before moving ahead with further treatment, are needed to keep costs down. Bakke also said she would move to reduce arbitration time and costs, “in part by demanding prompt-pay standards by auto insurers.” Doctors complain that carriers delay paying undisputed medical bills, forcing them to go to court or arbitration, clogging up the system more. Finally, Bakke said she would “boost scrutiny of insurers to make sure they are catching fraud in the underwriting process.” That causes industry executive Tiene to bristle because “it puts the industry in such a bad light without saying anything about catching fraud by anyone else in the system.” In short, both sides agree that Bakke’s initial moves favor lawyers and doctors more than the industry. Richard Wildstein, who heads ATLA-NJ’s auto reparations committee and who is in the working group, gives Bakke high marks for the entire effort. Gerald Baker, who heads the State Bar’s auto reparations committee and also serves in the group, joins Wildstein and Tiene in lauding Bakke for putting the disparate groups together to attempt to hammer out as much as possible before final decisions are made. Baker, though, notes that in the end, McGreevey will make a political decision. “McGreevey won the election on a promise that he will help the consumers and the doctors,” says Baker. Unsaid, of course, was that helping the consumers and doctors translates into helping the plaintiffs’ bar as well.

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