18 Fla. L. Weekly Supp. 743c

Online Reference: FLWSUPP 1809CARR

Insurance — Personal injury protection — Coverage — Where effect of 2008 version of PIP statute is to provide less coverage to insureds by altering access to medical services, by modifying which services are compensable, by substantially revising reasonable charge method of reimbursement and by shifting payment obligations from insurer to insured, modification constitutes substantive change to statute and cannot be applied retroactively to policy executed prior to effective date of statute

MERCURY INSURANCE COMPANY OF FLORIDA, Appellant, v. OMEGA MEDICAL DIAGNOSTIC CENTER a/a/o ROBIN CARRIL, Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case No. 10-088 AP. L.C. Case No. 08-08510 SP 05. June 8, 2011. An appeal from the County Court of Miami-Dade County, Wendell M. Graham, Judge. Counsel: Scott W. Dutton, Dutton Law Group, P.A., for Appellant. Kelly M. Arias, The Arias Law Group, for Appellee.

[Editor’s note: Lower court order on rehearing was unpublished; initial lower court order published at 17 Fla. L. Weekly Supp. 34b.]

OPINION

(Before SCHUMACHER, FERNANDEZ and LANGER, JJ.)

(LANGER, Judge.) THIS CAUSE is before this court upon an appeal of a County Court order proscribing the retroactive application of the reenacted Personal Injury Protection (PIP) statute to an insurance policy executed prior to the effective date of the statute. Based on a de novo review, this court is affirming the Countys Court’s order, and awarding appellate attorney fees to the Appellee for the reasons set forth below.¹

This appeal originates from injuries sustained by Robin Carril in an automobile accident occurring on January 8, 2008. Mr. Carril was insured by the Appellant, Mercury Insurance Company of Florida (Mercury Insurance) under a policy spanning from August 29, 2007 through February 29, 2008. On January 9, 2008, Mr. Carril, who was treated by the Appellee, Omega Medical Diagnostic Center (Omega Medical), assigned his PIP claim for the payment of medical benefits to Omega Medical. On February 22, 2008, Omega Medical submitted to the Appellant, Mercury Insurance, its bill totaling $1250, and its application for the PIP benefits previously assigned by Mr. Carril. On March 4, 2008, Mercury Insurance paid Omega Medical only $284.85 (of the $1250 sought) in accordance with the Medicare Part B fee schedule. On April 24, 2008, Omega Medical filed suit seeking $715.42 as the balance alleged to be owed after reducing the total by 80% (to $1000), and deducting the amount paid ($284.85).

Shortly afterwards, Mercury Insurance filed its answer to the complaint, and ultimately filed a Motion for Final Summary Judgment. In support of the motion, Mercury Insurance contended that the 2007 repeal, reenactment and amendments to §627.736 of the Fla. Stat., governing PIP insurance, created a new rubric of reimbursable rates. Under the new PIP law, effective January 1, 2008, insurers may reimburse medical providers at Medicare Part B rates to claims arising after PIP’s re-enactment. Mercury Insurance further contended Omega Medical’s services were rendered on January 9, 2008, after the statute’s effective date. Therefore, Mercury Insurance was entitled to reimburse Omega Medical at the Medicare rate in lieu of the rate actually charged by Omega Medical. Mercury concluded that since Omega Medical was paid in full in accordance with the new law, Mercury was entitled to summary judgment.

In rebuttal, Omega Medical contended that the revised PIP statute applies only to insurance policies issued or renewed after the statute’s 2008 effective date, and not to claims arising after the effective date. Omega Medical noted, in this case, the insurance policy was issued August 29, 2007, before the effective date. Omega Medical further contended a retroactive application of the revised statute would impair contractual obligations under existing insurance policies in violation of Article 1, §10 of the Florida Constitution. Alternatively, Omega Medical noted that even assuming, arguendo, retroactive application is permissible, this does not resolve whether the payment made pursuant to the Medicare rate schedule correlates with reasonable charges for medical services rendered.

The trial court granted Final Summary Judgment in favor of Mercury Insurance. The court’s order adopted and mirrored Mercury Insurance’s analysis. Thereafter, Omega Medical filed a Motion for Rehearing/Reconsideration reiterating the above noted initial contentions and additional contentions not addressed in this opinion.

Mercury Insurance filed its response opposing the Motion for Reconsideration. In support of its motion, Mercury Insurance cited several 11th Judicial Circuit Court decisions, in accord with the trial court’s ruling, which (1) have determined the fee schedules in the revised and re-enacted PIP law are applicable to providers’ charges even when the policy was incepted prior to January 1, 2008; and (2) have distinguished protected vested rights from unprotected, speculative, expectant rights when conducting constitutional analysis of a retrospective application of the new PIP law.

The hearing on Omega Medical’s Motion for Rehearing/Reconsideration was held on February 8, 2010. On the date of the hearing, Omega Medical submitted supplemental authority consisting of a Florida Supreme Court decision issued just 4 days before the hearing. The decision, Louis R. Menendez v. Progressive Express Ins. Co. Inc., 2010 WL 375080 (Fla. Feb. 4. 2010) [35 Fla. L. Weekly S81a], held that an amendment to the PIP statute, which constitutes a substantial change to the statute, cannot be retroactively applied to insurance policies issued before the effective date of the amendment. Based on the Supreme Court’s February 4th decision, the trial court entered an order Vacating Final Judgment. The trial court’s order provided in pertinent part:

The court finds that because the policy issued was in 2007, the so-called “Fee Schedule” may not be used to reduce the amounts otherwise payable as reasonable amounts. Such conduct would constitute an impermissible, retroactive application of the newly enacted PIP statute. See Louis R. Menendez v. Progressive Express Insurance Co., Inc., __ So. 3d __, 2010 WL 375080 (Fla. Feb. 4. 2010) [35 Fla. L. Weekly S81a].

Based on this ruling, Mercury Insurance filed the pending appeal.

The issue before this court is whether to uphold or reverse the trial court’s decision which precluded a retroactive application of the new Medicare fee schedule to Omega Medical’s claim for medical expenses. Implicitly, at issue is whether (1) the new statute applied retroactively to the existing insurance policy issued in 2007, and (2) whether the retroactive application of the new PIP statute would alter substantive rights and impair existing contractual obligations in violation of the Florida constitution.

The Revised PIP Statute

Under Chapter 2007-324, Laws of Florida, the Florida legislature reenacted and revised §627.736, Fla. Stat. governing PIP insurance. The reenactment of §627.736, effective January 1, 2008, embodies several changes regarding what services are reimbursable under PIP coverage, as well as the allowable reimbursement amounts under the new law. While the reenactment still requires medical providers to bill their regular reasonable charge for medically necessary services, the reenactment now allows insurers the option to reimburse services at Medicare Part B rates, which may be less than that billed by medical providers.

The revised and added text regarding charges and reimbursement for medical service rendered reads, in pertinent part, as follows:

§627.736 (5) Charges for treatment of injured persons.

a) 1 Any physician, hospital, clinic, or other person or institution lawfully rendering treatment to an injured person for a bodily injury covered by personal injury protection insurance may charge the insurer and injured party only a reasonable amount pursuant to this section for the services and supplies rendered, and the insurer providing such coverage may pay for such charges directly to such person or institution lawfully rendering such treatment, if the insured receiving such treatment or his or her guardian has countersigned the properly completed invoice, bill, or claim form approved by the office upon which such charges are to be paid for as having actually been rendered, to the best knowledge of the insured or his or her guardian. In no event, however, may such a charge be in excess of the amount the person or institution customarily charges for like services or supplies. With respect to a determination of whether a charge for a particular service, treatment, or otherwise is reasonable, consideration may be given to evidence of usual and customary charges and payments accepted by the provider involved in the dispute, and reimbursement levels in the community and various federal and state medical fee schedules applicable to automobile and other insurance coverages, and other information relevant to the reasonableness of the reimbursement for the service, treatment, or supply.

2. The insurer may limit reimbursement to 80 percent of the following schedule of maximum charges:

f. For all other medical services, supplies, and care, 200 percent of the applicable Medicare Part B fee schedule. However, if such services, supplies, or care are not reimbursable under Medicare Part B, the insurer may limit reimbursement to 80 percent of the maximum reimbursable allowance under workers’ compensation, as determined under s. 440.13 and rules adopted thereunder which are in effect at the time such services, supplies, or care are provided. Services, supplies, or care that are not reimbursable under Medicare or workers’ compensation are not required to be reimbursed by the insurer.

5. If an insurer limits payment as authorized by subparagraph 2., the person providing such services, supplies, or care may not bill or attempt to collect from the insured any amount in excess of such limits, except for amounts that are not covered by the insured’s personal injury protection coverage due to the coinsurance amount or maximum policy limits.

(emphasis added)

Chapter 2007-324, §20 at 75, Laws of Florida.²

Pursuant to Section 21 of the enacting legislation, the new provisions apply to insurance policies in existence on or issued after the Act’s effective date of January 1, 2008. Ch. 2007-324, §21(2), at 86, Laws of Fla. Thus, by its terms, the statute is expressly retroactive in application. Therefore, according to the statute, insurance polices issued in 2007, and still in effect in 2008, are subject to the PIP revisions.

The Instant Case

In the pending case, the trial court determined the insurance policy issued by Mercury Insurance to Mr. Carril in August 2007 and still in effect in February 2008 is subject to the PIP revisions. This is consistent with the legislature’s directive. The trial court also determined that applying the 2008 provisions governing Medicare rates to an insurance policy issued in 2007, for purposes of reducing the amounts otherwise payable, “constitute[d] an impermissible, retroactive application of the newly enacted PIP statute.” This court concurs.

In making this determination, the trial court relied on Florida case law, and in particular Menendez v. Progressive Express Ins. Co. supra. Menendez³ involved the enactment of a new subsection to the PIP statute. The subsection required an insured, claiming overdue PIP benefits, to send a demand letter to the insurer as a condition precedent to an action to recover those benefits. Mr. Menendez did not send a demand letter believing the new subsection qualified as a substantive change that cannot apply retroactively to his PIP claim or existing insurance policy. On appeal, the Third District Court of Appeal determined the subsection does apply, finding its retrospective application procedural in nature, and not an impairment of Menendez’s contract rights under the existing insurance policy. The Florida Supreme Court reversed, holding “the pre-suit notice provisions constitute a substantive change to the [PIP] statute” . . . “that cannot be retroactively applied to insurance policies issued before the effective date of the amendment.” Menendez, supra at 875.

In reaching its decision, the Florida Supreme Court applied a two-fold inquiry for determining whether a statute enacted after the issuance of an insurance policy should be applied to the pre-enactment policy. The court considered the threshold question of whether the state legislature expressed its intent regarding retroactive or prospective application. If the legislature intended the statute to apply retroactively, the Court next determined whether a retroactive application would violate constitutional principles.

The Florida Supreme Court concluded the legislature intended a statutory presuit notice provision, enacted after the issuance of an insurance policy, be applied retroactively. However, the Court also concluded that its retroactive application was problematic. It impaired a vested right, created new obligations, and imposed a new penalty. The Court noted the new provision, in effect, substantively altered an insurer’s general obligation to pay, and an insured’s right to sue under the policy. These substantive changes to the statute, as it existed before the amendment, could not be applied retroactively.

The Court compared the statute as a whole, as it existed at the time the insured’s insurance policy was issued, with the revised statute, enacted after the issuance of the insurance policy. The Court ruled, “in our view, the statute, when viewed as a whole, is a substantive statute,” which should be applied prospectively. Id., at 879.

While Menendez concerned a statutory pre-suit notice provision enacted after the issuance of an insurance policy, the trial court was correct in citing and relying on Menendez as controlling authority. The Florida Supreme Court’s opinion is instructive on how to construe amended PIP provisions that are retroactively applied to insurance policies issued before the effective date of the amendment.

Pre and Post Comparison

Applying the Menendez standard to the pending case requires a comparison of §627.736 as it existed in 2007 versus the section as amended in 2008. The comparison discloses several substantive changes which appear to adversely modify contractual obligations between the insurer and the insured.

Specifically, prior to 2008, the PIP statute allowed physicians to be reimbursed for medical services at their “usual and customary” fee, provided the fee is reasonable. Contractual provision in most insurance policies expressly limited payments for medial service to 80% of the usual and customary fee charged for the particular service. Under the revised PIP statute, the insurer has the option of either paying claims for medical services based on the Medicare Part B fee schedule or the actual charge for the service. Thus, payment for medical services could be limited to 200% of the Medicare allowable amount for services. In some cases, this will mean that the physician’s reimbursement for services rendered will be less than the current reasonable charge. This revision decreases the level of payment, alters the manner in which reimbursements are calculated or deemed reasonable, and provides the insurer with considerable flexibility in determining reimbursement rates for health care. This revision could also result in the insured being required to pay the difference between the charge actually billed and the reimbursement made by the insurer, once PIP benefits are exhausted.

Second, prior to the PIP reenactment, most insurance policies merely required the insured to pay copayments assessed at 20% of the service cost which constitutes the balance of the medical bill which is not covered by the PIP insurance. 7 Fla. Prac. Motor Vehicle No Fault Law (PIP) §5:4 — Insurer Not Required to Pay Certain Claims (2010-2011 ed.). However, under the revised statute, insurance coverage will not be considered as satisfying the outstanding balance not covered by PIP insurance, if the insured’s medical expenses are payable from some alternative insurance such as co-insurance, health insurance or other supplemental gap insurance. In particular, paragraph (5) of §627.736 requires physicians to accept the Medicare Part B amount determination as payment in full. However, notably, that section also sets forth two exceptions: (1) when there exists co-insurance, or (2) the outstanding balance of the medical bills exceeds the amount of PIP insurance coverage. §627.736 (5)(a)(5), Fla. Stat. (2008). Thus, the insured is potentially responsible for any amount above the Medicare reimbursement rate.

Third, an insurer, who elects to reimburse medical charges under Medicare rates as set forth in § 627.736 (5)(a)(2)(f), may limit reimbursement to 80% of the maximum allowed under Worker’s Compensation if a particular service does not qualify as reimbursable under Medicare Part B. If the service also does not qualify as reimbursable under Worker’s Compensation, the insurer is not required to reimburse the healthcare provider. Thus, an insurer can now reduce even further payments to doctors under the revised PIP statute.

Fourth, the revised PIP statute now limits coverage for treatment to a select group of healthcare providers specifically licensed under specified Florida statutes. It also specifies the services for which compensation may be rendered. For example, the 2008 PIP statute excludes optometrists, acupuncturists, physical therapists, psychologists, podiatrist and other health care providers not licensed under one of the specified state chapters. 7 Fla. Prac. Motor Vehicle No Fault Law (PIP) § 13:3 — Summary of Key Changes to F.S. §627.736 (2010-2011 ed.). As a result, reimbursement for certain specialties and procedures previously allowed has been eliminated.

Various studies have examined the nexus between physician reimbursement under Medicare rates and the quality and availability of health care. Reimbursements under Medicare rates have been found to affect physicians’ decisions regarding treatment. Low reimbursement rates have resulted in some physicians refusing to treat patients. Some physicians have avoided complex and difficult cases. Some physicians have significantly increased the volume of patients and limited or reduced individualized care. This, in effect, adversely impacts an insured’s choice of physician and access to healthcare. John W. Hill, Law And The Healthcare Crisis: The Impact Of Medical Malpractice And Payment Systems On Physician Compensation And Workload, 2010 U. Ill. J.L. Tech. & Pol’y 91, 117-118, 120 (Spring 2010); James C. Dechene, Public Health Care Reimbursement Programs, 669 PLI/Comm 151 (September-October, 1993).

Thus, the notable effect of the statute, as amended, potentially provides less coverage to the insured by altering access to medical services, by modifying which health services are compensable, by substantially revising the reasonable charge method of reimbursement, and by shifting payment obligations from the insurer to the insured. In sum, the reenactment modifies contractual obligations between the insured and the insurer. This modification constitutes a substantive change to the statute as it existed at the time the insurance policy was issued.

Pursuant to controlling authority, a “statutory amendment cannot be applied retroactively” if it “constitutes a substantive change to the statute in effect at the time the insurance policy was issued. Menendez, supra, at 879. Based on the above analysis, this court finds the enactment of the Medicare fee schedule is a substantive change which created and reduced various obligations, and should operate prospectively.

Procedural v. Substantive

This court rejects Mercury Insurance’s contentions regarding procedural attributes and vested rights. Mercury Insurance contends the revised statute neither creates nor eliminates a vested right to receive PIP benefits for bodily injuries; nor does it affect the validity, construction or enforcement of the policy. It asserts that the statute merely outlines the method for calculating the reimbursement of reasonable charges presented by medical providers, which is consistent with the “reasonable amount” standard for services rendered. Thus, the Medicare fee schedule does not abrogate an insurer’s obligation to pay PIP benefits for medical services rendered, but simply adds fee schedules to control costs. Therefore, Mercury Insurance concludes, the retroactive application of the re-enacted statute does not impair a substantive contractual right in violation of the Florida constitution.

However, Mercury Insurance has erroneously intertwined substantive with procedural issues. There is a distinction between contesting an amount-determination, which challenges the statutes and regulations prescribing Part B payment criteria, versus contesting the method of computation, which challenges the application of such criteria. All challenges to Part B benefit determinations can be casted as challenges to methodology since all awards of Part B benefits or payments are based on a method of calculation. In this case, the challenge is whether limiting the amount of the reimbursement impairs certain benefits to which an insurer was entitled under the former statute. Subsection (5) of §627.736, Fla. Stat. altered certain contractual obligations between the insured and the insurer which did not exist at the policy inception. Therefore, the statutory revision is not, as purported, a clarification “which merely outlines the method of calculating reimbursements for reasonable charges.” (Appellant’s Initial Brief, at 26, ¶2). Rather the revision can be characterized as substantive.

Vested Rights

Notably, in Menendez, the Florida Supreme Court did not include an analysis of vested versus expectant rights in determining retroactive application. This may be due to its limited significance. Mercury Insurance contends Florida courts have distinguished vested rights from speculative expectant rights when analyzing retroactive statutes; and have held that statutory rights, upon which the insured rely, are always subject to repeal or modification. As a result, they generally do not rise to the level of a vested property right sufficient to preclude retroactive application.

While the Appellant cites case law which addresses vested rights, its reliance on this legal concept is somewhat problematic. There is no precise meaning of the term “vested rights.” More importantly, the attempt to distinguish between a vested right versus an expectancy, in the context of this case, fails to address the gravamen of the case. That is, whether the 2008 enactment impairs existing contractual obligations set forth in an insurance policy executed in 2007. Therefore, the analysis centers on “new and existing obligations” and not on whether vested rights have been divested retroactively. For that reason, this court has relied on the analysis applied in Menendez.

Summation

Accordingly, the trial court’s ruling will be upheld. This court finds the reenacted and revised PIP statute applies retroactively to insurance policies in existence prior to and after the enactment date. The new provisions constitute a substantive change to the former statute as it existed at the time the insurance policy was issued. These substantive changes adversely impair contractual rights in violation of the Florida constitution. Therefore, Mercury Insurance should be precluded from applying the Medicare rate to Omega Medical’s claim for medical expenses. As such, this court affirms the order on appeal.

Appellate Attorney’s Fees

Accordingly, Omega Medical, as the prevailing party, is hereby GRANTED attorney’s fees and costs incurred on appeal. This matter is remanded to the trial court to determine the amount of a reasonable fee. (SCHUMACHER and FERNANDEZ, JJ., concur.)

__________________

¹It has been brought to the court’s attention that one other appellate panel within the 11th Judicial Circuit of Miami-Dade County, Florida has ruled the reverse. However, the holding may be limited to the facts of that case. In addition, uniformity among the decisions of the appellate courts within the same jurisdiction is not required. Wood v. Fraser, 677 So. 2d 15, at 18 (Fla. 2d DCA 1996) [21 Fla. L. Weekly D1387c] (a trial court should not rely on a three-judge panel as a basis to conclude that a previous opinion of another three-judge panel no longer carries the force of law).

²Underlined text represents new provisions. See also CS/HB 13-C Engrossed/ Enrolled.

³The initial Menendez opinion, issued February 4, 2010, was revised and re-issued by the Florida Supreme Court on April 22, 2010. See Menendez, 35 So. 3d 873, 35 Fla. L. Weekly S222b (Fla. April 22,2010). This court applied the revised opinion in lieu of the February 4, 2010 version cited by the trial court. The revised opinion merely added a directive awarding attorney fees.