Good news for drivers! New Jersey implements PIP fee schedule

New Jersey drivers have finally caught a break. A recent decision by New Jersey's Appellate Division has ruled in favor of the New Jersey Personal Injury Protection (PIP) fee schedule, which was sitting in legal limbo for nearly two years after the Department of Banking and Insurance (DOBI) made it effective in late 2007. This decision will help keep insurance costs down for New Jersey drivers for decades to come, and may even allow New Jersey to lose the title of having the highest auto insurance rates in the country.

Originally adopted to go into effect on October 1, 2007, the PIP fee schedule was appealed by the medical community, chiropractors, and surgery centers citing that physicians wouldn't receive adequate payment for services most related to auto insurance accidents. The Appellate Division granted a "stay" and issued an injunction while they reviewed the legal challenges set forth by the appellants. On August 10, 2009, the court addressed each of the challenges and validated the methodology used by the Department of Banking and Insurance in deriving the PIP fee schedule.

Drivers should understand that New Jersey operates as a "no-fault" PIP state, which means when people are injured in a car accident their auto insurance pays for their treatment for injuries. This includes anything from chiropractor care to surgeries. When treatment is rendered, auto insurers are billed and must by law pay the medical providers for each treatment. If the treatment is listed on a set "PIP fee schedule" the rates paid are indisputable and not legally challengeable. However, if the treatment is not listed on the schedule auto insurers are obligated to pay the "usual, customary, and reasonable" rates by law. The ambiguity of what is considered "usual, customary and reasonable" has clogged up and raised costs for auto insurance for decades in New Jersey resulting in higher rates for drivers.
Neighboring no-fault PIP states like Pennsylvania and New York have over a thousand procedures listed on their fee schedule, while until recently New Jersey had less than 100 procedures on the list. As a result, certain surgery centers which were created as a low cost alternative to hospitals, routinely over-billed auto insurers for simple procedures cashing in on millions in fees. For example, a surgery center recently charged over $24,000 per procedure for three, 30 minute back manipulation procedures. However, the vast research by DOBI has yielded that this procedure should receive a prevailing cost of $190 per procedure. The costs to litigate this severely inflated claim by auto insurers results in millions of dollars annually.

In late 2007, after years of studies conducted by DOBI, in accordance with legislation passed years earlier, the list of procedures was expanded to over 1,400 of the most common procedures. The amounts paid were based upon comprehensive studies from Medicare, Medicaid and prevailing fees paid for these procedures.

Through the expanded fee schedule, reimbursement of medical costs can be controlled and the old standard of long, drawn out, expensive litigation over payments can finally come to an end. Claims will be processed more efficiently under these new guidelines. DOBI has truly been fundamental in its research of this issue and of adopting the fee schedule, enabling insurers to keep costs down.

This isn't just a victory for the auto insurance industry. Every driver in New Jersey has been impacted by the spiraling costs of surgery centers and certain abusive chiropractor practices. The expanded fee schedule finally puts auto insurers in a position to control costs and pass along savings to our policyholders.


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