24 Fla. L. Weekly Supp. 857b

Online Reference: FLWSUPP 2410LHERInsurance — 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

ATLANTIC MEDICAL SPECIALTY, INC. a/a/o Jose Luis Hernandez, Plaintiff, vs. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a Florida corporation, Defendant. County Court, 11th Judicial Circuit in and for Dade County, General Jurisdiction Division. Case No. 14-011396-SP-25 (02). November 22, 2016. Gina Beovides, Judge. Counsel: Walter A. Arguelles, Arguelles Legal, P.L., Miami, for Plaintiff. Wicker Smith O’Hara Mccoy & Ford, P.A., Ft. Lauderdale, 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 November 2, 2016, on Cross Motions 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).

PROCEDURAL HISTORY AND FACTUAL BACKGROUND

Pursuant to an assignment of benefits, the Plaintiff, Atlantic Medical Specialty Inc., submitted medical bills for services rendered to Defendant’s named insured, Jose Luis Hernandez, in connection with injuries sustained in an automobile accident. The Defendant tendered payment, limiting payment to 80% of the schedule of maximum charges set forth in Fla. Stat. §627.736(5)(a)(1).

The Plaintiff filed suit and contends that the Defendant failed to properly elect the Medicare fee schedule methodology in its 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).

This Court finds that the Florida Supreme Court’s ruling in Virtual III continues to be good law and is controlling in this matter. The Court, in Virtual III, did acknowledge that its holding, requiring that notice of an election to utilize the Medicare fee schedules must be contained within the policy, applied only to policies in effect prior to July 1, 2012. The 2012 amendment to the PIP statute, however, codified Virtual III notice requirement through the enactment of §627.736(5)(a)(5). Florida’s well-settled rule of statutory construction [is] that the legislature is presumed to know the existing law when a statute is enacted, including judicial decisions on the subject concerning which it subsequently enacts a statute. Seagrave v. State, 802 So.2d 281 (Fla. 2001) [26 Fla. L. Weekly S481a](quoting Wood v. Fraser, 677 So.2d 15, 18 (Fla. 2d DCA 1996) [21 Fla. L. Weekly D1387c]. Regardless of whether required by statute or case law, an insurer’s obligation to provide in its policy unambiguous notice of an exclusive election to utilize the Medicare fee schedule remains a requirement. By virtue of the existence of a “choice,” there are clearly two separate methodologies available to the insurer when addressing reimbursements. 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 to insurers who unambiguously elected it to the exclusion of the reasonable method. See, e.g. Geico Gen. Ins. Co. v. Virtual Imaging Services, Inc., 141 So.3d 147 (Fla. 2013) [38 Fla. L. Weekly S517a]; Kingsway Amigo Insurance Company v. Ocean Health, Inc. 63 So. 3d 63 (Fla. 4th DCA 2011) [36 Fla. L. Weekly D1062a].

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 as there is only one payment methodology under said version. 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. 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 sample endorsement 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 is of the position that 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.

Further, the OIR’s Informational Memorandum, disclaims its sample form before the sample endorsement by stating that:

“Depending upon the existing language, the same language may be 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.”

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.” 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]. 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 then argues that the OIR has exclusive jurisdiction over the compliance provision of Fla. Stat. §627.736(5)(a)5. The Court disagrees with 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]. Even if 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 Cepro 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.”

STATE FARM relies on Allstate Fire and Casualty Insurance v. Stand-Up MRI of Tallahassee, 2015 WL 1223701 FLA. 1st DCA (Opinion of March 18, 2015) [40 Fla. L. Weekly D693b]. In Stand-Up MRI, the First DCA found the policy language in Allstate’s policy places the insured on notice of its reimbursement methodology with a “plain statement that reimbursement shall be subject to the limitations in §627.736, including all fee schedules.” This Court has likewise made the same finding regarding Allstate’s policy. However, unlike the Allstate policy, State Farm 9810A Policy contains an unauthorized “hybrid methodology” for calculating PIP benefit reimbursement. STATE FARM’s policy 9810A has incorporated both the “reasonableness” methodology and the “Medicare fee schedule” methodology. STATE FARM on page 5 of its policy, in defining the phrase “reasonable charge,” has chosen to comingle factors found within both §627.736(5)(a) and §627.736(5)(a)(1):

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 policy or payment methodology does not constitute a utilization limit.

On pages 15-16 of the policy, under the “Limits” section, STATE FARM lists factors found within the Medicare fee schedule methodology found in §627.736(5)(a)(1):

1. We will not pay any charge that the No-Fault Act does not require us to pay, or the amount of any charge that exceeds the amount the No-Fault Act allows us to be charged.

2. The most we will pay for each injured insured as a result of any one accident is $10,000 for all combined Medical Expenses, Income Loss, and Replacement Services Loss, described in the Insuring Agreement of this policy’s No-Fault Coverage.

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:

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

In this case, the definition of “reasonable charge” in the 9810A policy comingles some elements from the reasonable amount method, and some elements from the fee schedule method, and specifically says that State Farm will consider “one or more” of those various and conflicting factors. “Reasonable charge” is expressly referenced in the payment clause and the limitation clause. By its use of the definition of “reasonable charge,” STATE FARM permits itself discretion to pick and choose it method of reimbursement. This “hybrid methodology” for calculating PIP benefits is in violation of §627.736(5)(a)(5) and the Florida Supreme Court’s holding and rationale in Virtual III. Accordingly, this Court finds that STATE FARM’s policy 9810A does not clearly, unambiguously, and exclusively elect the Fee Schedule payment methodology.

Lastly, 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. The same rationale however, 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. 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 and Defendant’s Motion for Summary Judgment is hereby DENIED.

__________________

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).