Power and Responsibility

A subtle, but important change was read into Ontario’s Statutory Accidents Benefits Schedule (SABS) on July 1, 2011, allowing insurers to battle fraud. Basically, insurance companies were given the ability to say no to treatment plans they feel are suspicious. Given that Ontario’s accident benefit loss ratio is well over 160%, this change might have a significant impact.  

Will this work? In the short term, I think it is safe to say yes. However, I believe the one-million-dollar question is: ‘Will this work in the long term?’ The answer to this question depends on how the industry implements these changes into their claims process.

How the Changes Work

To be clear, insurers have always had the ability to say no to suspect treatment plans. However, they had a tight timeline in place – 10 business days – to render their decision.  For example, a rehab clinic would typically submit a treatment plan. If an adjuster disagreed with the recommendations, the insurer had 10 business days to reassess the consumer and decline the treatment plan. If unsuccessful in its first attempt, the rehab clinic could always resubmit the treatment plan with minor changes and the whole process would start all over again. However, if at any point an adjuster failed to respond within 10 days, the treatment plan was automatically deemed approved and the insurer was left with no choice but to cut the cheque. In a system geared toward getting an injured person treatment as quickly as possible, this seems to be a sensible consumer protection measure. However, as files began to pile high, an interesting game of cat and mouse emerged: it became clear the clinics that submitted lots of paper had a distinct advantage.

The changes made on July 1, 2011 do not eliminate the 10-day window, but they do make other important changes. Among them, once an insurer has declined a treatment plan, it can continue to refuse any subsequent presentations based on the medical evidence of their original assessment, avoiding the need for reassessments.  This eliminates assessment costs and frees up time to address ongoing files.

A second major amendment is that an insurer now has the right to ask a clinic to furnish any information that will help the insurer to determine its liability for payment. This includes inspecting originals of assessments and requesting a statutory declaration from the clinic regarding goods and services provided. Last, but not least, an adjuster can request confirmation of the identity of every provider involved in the delivery of such good or services for care.

Great Power, Great Responsibility

This past August, you may have read an article in the Toronto Star that ran alongside a picture of Dr. Danny Grossi getting into his Maserati. The article publicized allegations of a $1.3-billion scam involving some 300 clinics working the system by allegedly “borrowing” the credentials of medical professionals who were unaware of the patients’ existence. The article cites a lawsuit being commenced by The Economical against Grossi, who is the director of the Toronto Regional Medical Assessment Centre. The Economical is one of four companies alleging that Grossi and the operators of assessment clinics cheated them, according to an April 2011 post on the Insurance Bureau of Canada (IBC)’s Web site. The insurers allege Grossi and other defendants used the information of 55 car accident victims to submit fake invoices to three insurance companies. Grossi denies the accusations against him, which have not been proven in a court of law.

It is encouraging to see FSCO laying more charges in connection with auto insurance fraud. Politicians are getting involved as well, with the Ontario Conservative and Liberal Party election platforms also addressing the issue. Auto insurance fraud is similarly gaining the attention of an honest public looking for ways to reduce insurance costs.

With all of that being said, the insurance industry must be aware of risks associated with the new reading of the SABS. I cannot help but remember the line in the blockbuster movie Spiderman, in which the young hero Peter Parker is warned by his uncle: “With great power comes great responsibility!” While I am not a big comic book fan, this warning seems all too fitting for our industry. I’d be lying if I said I was not a little skeptical of how our industry will respond to these changes over time.  The risk is as follows: either the industry will use its new-found powers responsibly or, alternatively, it might ultimately fall into the trap of viewing each and every claim and clinic as suspicious.

If the industry falls into the trap of unwarranted suspicion, it certainly would not be the first time the industry’s inability to uphold the intent of a regulation invites something more restrictive. For example, consider the priority of payment rules within the SABS (the rules that dictate which insurer is responsible to pay for a person’s treatment). In this area of the law, it has always been the intent of the SABS that consumers receive fast and efficient treatment for their injuries. As such, the first insurer to receive an application for SABS was to respond to treatment. If later it was determined that another insurer was responsible to pay for the treatment, a process would facilitate the transfer of the file to the appropriate carrier. All the while, the transfer would appear seamless to the injured party.

But for some reason, a few carriers adopted a variety of techniques to discourage a consumer from submitting an application for accident benefits to them, pointing them to other carriers instead. As a result, consumers’ treatment would get stuck in the midst of disputes between insurers.  This is an example of how what was originally thought to be a clear policy eventually invited tighter regulation. Now, new priority of payment regulations threaten fines or penalties for insurers attempting to direct insureds to different companies, labeling these as unfair or deceptive acts or practices.

Making the Changes Work

Perhaps the million-dollar question I should have asked earlier is: What will the industry do to ensure that these changes do work in the long term? As the ability to refute suspicious claims becomes more widely known, will insurers implement clear processes and procedures to help identify when they might use their new authority or, alternatively, when to pay the claim? Or will they leave these decisions to the discretion of individual adjusters, who may apply these new rules in a variety of ways, thus inviting further clarity (if these tools are not ultimately rescinded altogether)? I guess time will tell.

The success of these changes rests not only with the industry, but also FSCO, which is sometimes accused of applying the rules inconsistently. These changes will require quicker access to mediation, which has taken up to nine months in the past. To be fair, FSCO has added a number of new mediators and has automated its booking process. Early indications show a reduction in wait time, which can be as quick as 60 days. If these changes create difficulty for fraudsters, we might also see a reduction in the number of mediated files. This in turn may speed up the process even further.

It is not my intent to criticize the changes. In fact, like many others, I welcome them. However, I do want to point out a few risks in the hope that the industry will engage in thoughtful discussion, so that we as an industry can maximize the opportunity these changes present.