24 Fla. L. Weekly Supp. 855a

Online Reference: FLWSUPP 2410UMBEInsurance — Personal injury protection — Coverage — Medical expenses — Where definition of “reasonable charge” in PIP policy is hybrid of factors found in reasonable amount method of reimbursement and provisions from fee schedule method of reimbursement, policy is ambiguous as to reimbursement method and did not specifically elect fee schedule method of reimbursement — Neither approval of PIP policy by Office of Insurance Regulation nor incorporation of OIR sample form in policy is dispositive as to whether policy makes proper election for payment under permissive statutory fee schedule

A-PLUS MEDICAL & REHAB CENTER a/a/o Jose Umbert, Plaintiff, vs. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a foreign corporation, Defendant. County Court, 11th Judicial Circuit in and for Dade County, General Jurisdiction Division. Case No. 15-405 SP 25 (2). December 23, 2016. Gina Beovides, Judge. Counsel: Walter A. Arguelles, Arguelles Legal, P.L., Miami, for Plaintiff. Jennifer White, Law Office of Julie Lewis Hauf, P.L., West Palm Beach, for Defendant.

ORDER GRANTING PLAINTIFF’S MOTION FORSUMMARY JUDGMENT AS TO THE APPLICATIONOF THE MEDICARE FEE SCHEDULE

THIS MATTER, having come before the court for hearing on December 13, 2016, on Plaintiff’s Motion for Summary Judgment regarding Defendant’s Use and Application of the Medicare Part B Fee Schedule, the Court having reviewed each party’s respective motions, read relevant legal authority, heard argument from counsel of each party, and been sufficiently advised in the premises, finds that State Farm Mutual Automobile Insurance Company did not properly elect the permissive payment methodology referenced in Fla. Stat. §627.736(5)(a)1 in the language of its policy of insurance form 9810A.

LEGAL ISSUE

The issue before the Court is whether State Farm’s language in its policy of insurance form 9810A permits it to limit reimbursement of a properly submitted bill for medical services pursuant to the schedule of maximum charges referenced in Fla. Stat. §627.736(5)(a)1 (2012).

ROCEDURAL HISTORY AND FACTUAL BACKGROUND

Pursuant to an assignment of benefits, the Plaintiff, A-Plus Medical & Rehab Center, submitted medical bills for services rendered to Defendant’s named insured, Jose Umbert, in connection with injuries sustained in an automobile accident which occurred on or about September 10, 2013. The Defendant tendered partial payment for three dates of service pursuant to 80% of the schedule of maximum charges set forth in Fla. Stat. §627.736(5)(a)(1). Specifically, the Defendant issued payment pursuant to Explanation Codes 305 and 681, which indicates payment based upon 200% of the Participating Level of Medicare Part B fee schedule for the locale in which the services were rendered and 200% of the 2007 Limiting Chagres of Medicare physician fee schedule for the locale in which the services were rendered.

The Plaintiff filed suit and contends that the Defendant did not properly elect the Medicare fee schedule methodology in its 9810A policy, and as a result, was prohibited from using the “fee schedule” limitations to reimburse the Plaintiff’s bills.

ANALYSIS

The Florida “No-Fault” law (PIP statute) requires insurers to pay a “reasonable” amount of an insured’s medical treatment for lawfully rendered services. In 2008, the Legislature amended the “PIP Statute” and created a second payment methodology which is a permissive method of calculating PIP benefits (commonly referred to as the “Medicare Fee Schedule”). The statutory amendment still required insurers pay 80% of reasonable charges, but if elected in its policy, an insurer may utilize the Medicare fee schedule. The Florida Supreme Court in Virtual III explained that there are two different payment methodologies for calculating reimbursements to satisfy the PIP statute’s reasonable medical expenses coverage mandate. The first “default” payment methodology is a “fact-dependent inquiry determined by consideration of various,” and the second “permissive” payment methodology relies merely on the application of the “schedule of maximum charges” to the charges submitted for a particular service or supply. However, in order to avail itself of the option in (5)(a)2, the insurer must provide notice in the policy of its election to use the fee schedules. Virtual, at 159.

The Court essentially found, consistent with Kingsway Amigo Ins. Co. v. Ocean Health, Inc., 63 So.3d 63 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D1062a], that the PIP statute:

“offered insurers a choice in dealing with their insureds as to whether to limit reimbursements based on the Medicare fee schedules or whether to continue to determine the reasonableness of provider charges for necessary medical services rendered to a PIP insurer based on the factors enumerated in section 627.736(5)(a)(1) (emphasis added).

The Defendant argues that the holding in Virtual is not applicable to policies issued after the enactment of the 2012 version of the PIP statute. Although the Supreme Court declared that the holding applies to policies that were in effect from the 2008 amendment through July 1, 2012 (the effective date of the current PIP statute), Virtual continues to be good law and is applicable in this matter. The notice requirement established in Virtual is codified in the enactment of Fla. Stat. §627.736(5)(a)5(2012), which states: “Effective July 1, 2012, an insurer may limit payment as authorized by this paragraph only if the insurance policy includes a notice at the time of the issuance or renewal that the insurer may limit payment pursuant to the schedule of charges specified in this paragraph.” By virtue of the existence of a “choice,” there are clearly two separate methodologies available to the insurer when addressing reimbursements. The “policy must make it inescapably discernable that it will not pay the “basic” statutorily coverage and will instead substitute the Medicare fee schedules as the exclusive form of reimbursement.” See, Orthopedic Specialists v Allstate Ins. Co., 177 So.3d 19 (Fla. 4th DCA 2015.) [40 Fla. L. Weekly D1918a] Nothing in the 2012 amendments to the PIP statute reverses the Florida Supreme Court’s ruling that the PIP statute establishes two distinct methodologies that PIP insurers may choose to incorporate in their insurance policies. The fee schedule was, and still is, permissive, and is only available who unambiguously elected it to the exclusion of the reasonable method. See, Geico Gen. Ins. Co. v. Virtual Imaging Serv., Inc. 141 So. 3d 147 (Fla. 2013) [38 Fla. L. Weekly S517a]; Kingsway Amigo Ins. Co. v. Ocean Health, Inc.,63 So. 3d 63 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D1062a]; A-Plus Med. & Rehab Ctr. a/a/o Cesar Acevedo v. State Farm Mut. Auto. Ins. Co., 2014-15200-SP-25-2; June 9, 2016 [24 Fla. L. Weekly Supp. 159b].

The Defendant next argues to the Court that it has incorporated the Office of Insurance Regulation’s Informational Memorandum (OIR-12-02M), dated May 4, 2012, into its 9810a policy and as such it conclusively established that the Defendant may utilize the fee schedules set forth in §627.736(5)(a)(1). The Court disagrees with Defendant’s position as mere incorporation of the OIR sample form is not sufficient notice to permit the usage of such limitations. “In construing an insurance policy, Courts should read the policy as a whole, endeavoring to give every provision its full meaning and operative effect.” Auto-Owners Inc. Co. v. Anderson, 756 So.2d 29, 34 (Fla. 2000) [25 Fla. L. Weekly S211a]. As stated in Virtual, “even if the Medicare fee schedules are incorporated into the insured’s policy, neither the insured nor the provider knows, without the policy providing notice by electing the Medicare fee schedules, that the insurer will limit reimbursements.” Virtual at 159.

Moreover, the OIR’s Informational Memorandum, disclaims its proposed text before the sample endorsement by stating that:

“Depending upon the existing language, the same language maybe suitable to address the notice requirement of House Bill 119 or the insurer may already have approved language that satisfies the notice requirement. Ultimately, it is the insurer’s responsibility to develop its own language after researching the law, reviewing its contacts forms, and conferring with its legal staff.” (emphasis added)

Immediately after the sample endorsement language in the memorandum, the OIR once again disqualifies its form by including the same disclaimer. “The OIR directs insurers to review its forms, research the law and confer with its counsel in addition to using its “sample form” as a notice mechanism.” New Life Med. & Rehab Ctr. a/a/o Francisco Martinez v. State Farm Mut. Auto. Ins. Co., Order of Judge Lourdes Simon, Miami Dade County Court, Case Number 2014-05263-SP-05-04, dated April 6, 2016. As such, Defendant’s argument must fail as inclusion of the sample endorsement is not dispositive as to whether a policy contains a proper election for payment under the permissive payment methodology.

The Defendant next argues that the policy at issue was approved by the Office of Insurance Regulation and thus such approval constitutes a finding of compliance with the notice requirements set forth in Virtual and Fla. Stat. §627.736(5)(a)5(2012). ¹ This Court is not in agreement with Defendant’s notion. Mere approval by the OIR does not automatically validate the contents of an insurance policy. Gonzalez v. Associates Life Insurance Company, 641 So.2d 895 (Fla. 3d DCA 1994) As stated by Judge Lee, “any letter merely stating that a form is “APPROVED”, without more, would result in a finding that the insurer has automatically invoked the fee schedule limitations, even if the insurer decided that the traditional “reasonableness” analysis might be more advantageous. And because no insurer may issue a policy until it is approved by the OIR, any new policy would automatically incorporate the fee schedules once approved. This is clearly not the result the legislature intended.” MR Services I, Inc. a/a/o William White v. Allstate Insurance Company, Order of Judge Robert Lee, Broward County Court, Case Number 13-12538 COCE (53), dated November 4, 2015) [23 Fla. L. Weekly Supp. 637b].

The Defendant further argues that the policy at issue was approved by the Office of Insurance Regulation and thus such approval constitutes a finding of compliance with the notice requirements set forth in Fla. Stat. §627.736(5)(a)(5) (2012). This argument has been considered and rejected by the Third District Court of Appeal. As held in Gonzalez v. Assoc. Life Ins. Co., 641 So. 2d 895, n.1 (Fla. 3rd DCA 1994) “mere approval by the Department of Insurance (OIR’s predecessor agency) does not automatically validate the contents of an insurance policy.” See also, Kaufman v. Mut. of Omaha Ins. Co., 681 So 2d. 747, n.4 (Fla. 3rd DCA 1996) [21 Fla. L. Weekly D1716b]. (Department of Insurance approval of a policy form does not override the explicit terms of a statutory requirement). As stated by Judge Lee, “any letter merely stating that a form is “APPROVED”, without more, would result in a finding that the insurer has automatically invoked the fee schedule limitations, even if the insurer decided that the traditional “reasonableness” analysis might be more advantageous. And because no insurer may issue a policy until it is approved by the OIR, any new policy would automatically incorporate the fee schedules once approved. This is clearly not the result the legislature intended.” MR Services I, Inc. a/a/o William White v. Allstate Insurance Company, Order of Judge Robert Lee, Broward County Court, Case Number 13-12538 COCE (53), dated November 4, 2015) [23 Fla. L. Weekly Supp. 637b].

The Defendant next argues that the OIR has exclusive jurisdiction over the compliance provision of Fla. Stat. §627.736(5)(a)5. Contrary to the Defendant’s assertions, while “the OIR is entrusted with the responsibility to regulate insurers and enforce statutes, interpretation of statutes is within the purview of the Court.” Neurology Partners, P.A. d/b/a Emas Spine & Brain a/a/o Willie Brown v. State Farm Mut. Auto. Ins. Co., Order of Judge Scott Mitchell, Duval County Court, Case Number 14-SC-5472, dated July 28, 2015, [23 Fla. L. Weekly Supp. 550a]. Assuming arguendo, that section 627.736(5)(a)5 did purport to delegate authority to the OIR to determine the validity of the insurance policy, such determinations would always be subject to judicial review. The Courts have full jurisdiction to determine if the administrative agency has performed in accordance with the legislature’s mandate. New Life Medical & Rehab Center, Inc. a/a/o Martinez, Francisco v. State Farm Mut. Auto. Ins. Co., Order of Judge Lourdes Simon, Miami Dade County, Case Number 14-05263-SP-05, dated April 7, 2016. See also Rembrandt Mobile Diagnostics a/a/o Maria Cepero v. State Farm Mut. Auto. Ins. Co., Order of Judge Donald J. Cannava, Miami Dade County Court, Case Number 15-1657-SP-24, Dated April 20, 2016 holding that the Court would still retain jurisdiction to review the policy to ensure it “. . .does not conflict with the plain and ordinary intent of the law.”

The Court finally addresses the Defendant’s policy language and finds that it has incorporated an unauthorized “hybrid methodology” for calculating PIP reimbursement. Defendant’s policy provides for “No-Fault Coverage” and states:

“We will limit payment of the Medical Expenses described in the Insuring Agreement of this policy’s No-Fault Coverage to 80% of a properly billed and documented reasonable charge, but in no event will we pay more than 80% of the following No-Fault Act “schedule of maximum charges” including the use of Medicare coding policies and payment methodologies of the federal Centers for Medicare and Medicaid Services, including applicable modifiers:

***

f. For all other medical services, supplies and care, 200 percent of the allowable amount under:

(l) The participating physicians fee schedule of Medicare Part B. . .

The definition of “Reasonable Charge” is found on page five of the subject policy of insurance. The term “Reasonable Charge” is defined as follows:

Reasonable Charge, which includes reasonable expense, means an amount determined by us to be reasonable in accordance with the No-Fault Act, considering one or more of the following:

1. usual and customary charges;

2. payments accepted by the provider;

3. reimbursement levels in the community;

4. various federal and state medical fee schedules applicable to motor vehicle and other insurance coverages;

5. the schedule of maximum charges in the No-Fault Act;

6. other information relevant to the reasonableness of the charge for the service, treatment, or supply; or,

7. Medicare coding policies and payment methodologies of the federal Centers for Medicare and Medicaid Services, including applicable modifiers, if the coding or payment methodology does not constitute a utilization limit.

The Defendant argues that it is required to define the term “Reasonable Charge” based on basic coverage mandate of F.S. 627.736 of paying eighty percent of reasonable expenses. The Defendant’s analysis is misplaced as “the mechanism for calculating reimbursements changes from considering the “reasonableness” of the submitted charge to the “limit of the reimbursement” upon notification from the insurer of a proper election. Therefore, upon properly amending its policy, the subjective analysis of the “reasonableness” of a submitted charge is mooted and replaced by an objective reimbursement based on the application of the Medicare fee schedule.” Dr. Rubin Thompson, D.C. a/a/o Monique Forbes v. State Farm Mut. Auto. Ins. Co., Order of Judge Ivonne Cuesta, Miami Dade County Court, Case Number 14-12595-SP-05-08, dated November 28, 2016.

By opting to include, in clear and unambiguous language, the fact-dependent factors in its definition of “Reasonable Charge” while also attempting to reimburse pursuant to the permissive payment methodology, the Defendant impermissibly commingles F.S. 627.736(5)(a) and F.S. 627.736(5)(a)(1). “Such commingling runs afoul of F.S. 627.736(5)(a)5(2012) and Virtual and is incongruous with the Virtual mandate of placing an insured on notice with language conveying a “Clear and unequivocal election.” First Coast Med. Ctr. a/a/o Kevin Adams v. State Farm Mut. Auto. Ins. Co., Order of Judge Dawn Hudson, Duval County Court, Case Number 16-2014-SC-3619, dated January 15, 2016. [23 Fla. L. Weekly Supp. 943a].

The Defendant relies on Florida Wellness & Rehab. et. al. v. Allstate Fire & Cas. Ins. Co., 41 Fla. L. Weekly D1619c (Fla. 3d DCA 2016), which found that the policy language in Allstate’s policy placed its insured on notice that it would tender reimbursement pursuant to the permissive payment methodology. The Court found that the statement that reimbursement “shall be subject to the limitations in F.S. 627.736, including all fee schedules” was sufficient notice.² The same rationale cannot apply to State Farm’s policy as its inclusion of the default methodology factors in its definition of “Reasonable Charge” results in a commingling of payment methodologies. An insurer may not alternate between the two payment methodologies at its whim. As such, because State Farm has not clearly and unambiguously elected a single payment methodology, State Farm is not lawfully authorized to rely on the permissive methodology.

Therefore, it is ORDERED and ADJUDGED that Plaintiff’s Motion for Summary Judgment is hereby GRANTED.

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¹“Effective July 1, 2012, an insurer may limit payment as authorized by this paragraph only if the insurance policy includes a notice at the time of the issuance or renewal that the insurer may limit payment pursuant to the schedule of charges specified in this paragraph. A policy form approved by the office satisfies this requirement.” Fla. Stat. §627.736(5)(a)5(2012).

²The Defendant also relied upon Virga v. Progressive Ins. Co., Order of Judge Bloom, Case Number 16-cv-60329, dated June 28, 2016, which found that the policy language in Progressive’s policy allowed it tender reimbursement pursuant to the permissive payment methodology. This Court applies the same rationale in its analysis of Florida Wellness & Rehab. et. al. v. Allstate Fire & Cas. Ins. Co., 41 Fla. L. Weekly D1619c (Fla. 3d DCA 2016), as the policy does not commingle payment methodologies unlike State Farm’s 9810A policy.