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Crack down on fraud; New York drivers pay steep price as con artists milk no-fault system

Insurance fraud is on the upswing and is costing drivers in Buffalo and all of New York State millions of dollars each year. That is why legislation by Sen. James L. Seward and Assemblyman Joseph D. Morelle should be quickly approved by the Legislature and signed by the governor.

Health care costs related to automobile accidents have rocketed past other medical costs in this state over the past few years, largely due to fraud by medical providers, according to an analysis of car industry claim costs by the Fraud Costs New York Coalition and the Property Casualty Insurers Association of America. Drivers in this state pay the third-highest auto liability premiums in the nation, after Florida and New Jersey.

Putting it in plain terms, each one of us paying car insurance in this state, and especially Buffalo and Lackawanna, has probably noticed higher than normal bills compared to other portions of upstate New York.

The reason for this is largely due to an out-of-control personal injury reimbursement system estimated to be 36 percent higher than that of other no-fault states and largely due to consumer fraud, overcharging of provider fees and high levels of attorney involvement.

Meanwhile, trying to get any kind of reform passed in Albany with state legislators heavily lobbied by lawyers -- and, by the way, with its own healthy number of attorneys-turned-lawmakers (see Assembly Speaker Sheldon Silver) -- reform has been difficult to nearly impossible. And that's even with support for reform by then-State Attorney Gen. Andrew M. Cuomo.

The no-fault system has a checkered past. During the early- to mid-1970s several states, including New York, enacted no-fault laws to help control the rapid growth of bodily injury-related claims and legal costs that often drive up automobile insurance premiums. The no-fault system is still supposed to provide quick and fair compensation after an auto accident, regardless of fault.

But from the beginning, the system encouraged abuses in health provider services and charges, which prompted the introduction of fee schedules in 1977 to cap provider charges and control costs. The law was revised in 2002 to shorten the time frames in which insurers must receive written notice of claims and medical bills. It helped a little, but not enough.

According to the insurance industry, no-fault fraud investigations were at an all-time high in 2004 and personal injury protection fraud arrests increased 52 percent in 2008, due to increasing over-utilization of medical services, staged accidents, "jump-ins" -- people who jump into a vehicle after a crash, claiming to be injured -- and a litany of other schemes.

Part of the solution involves amending the statutes so that unethical lawyers cannot file and receive excessive payment for false claims. Also, there needs to be a burden-of-proof requirement to ensure that medical charges are appropriate, in addition to assignment of benefit rights to medical providers, in order to protect consumers. Other steps also need to be taken, including decertification of health care providers who take part in fraud.

Such true reform would be a start down a better road for New York State drivers. Lawmakers need to take this on before the session ends.

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