Colo. No-Fault Reform Needs Work, Alliance Says

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A bill aimed at reforming Colorado’s no-fault auto insurance system is poised to pass the House, but misses the mark for significant reform, according to the Alliance of American Insurers. The bill, HB 1225, has passed the House Business Affairs Committee.

“While the Alliance supports many of the measure’s major points, the reforms set forth in HB 1225 still fall short of what is needed to make a meaningful, positive, impact on the Colorado no-fault insurance system,” said Peter Gorman, vice president of the Alliance’s western region. “The Alliance is committed to full-fledged reform, and will work to get further amendments as the bill progresses.”

According to Gorman, positive changes included in HB 1225 would remove certain coverages from mandatory first-party benefits, such as the mandate that consumers purchase and pay for essential services coverage and wage loss coverage. “It also strengthens the threshold for bringing third-party liability lawsuits and would eliminate mandatory coverage for non-medical treatments, such as massage therapy, aromatherapy and hot tub installation, thus reforming the most liberal ‘open checkbook’ insurance system in the country,” he said.

“Unfortunately, these cost savings are undercut by the fact that insurers must still provide, and policyholders must still pay for, extremely high benefit levels – more than $100,000 of mandatory first-party benefits,” Gorman said.

For the past few years, some Colorado legislators and insurers have become increasingly frustrated with the state’s no-fault law, as escalating personal injury protection (PIP) costs have led to lagging rates and fast-rising premiums. The primary weakness of the Colorado system is skyrocketing PIP costs. Since 1999, the amounts paid by insurers for injuries have been substantially higher in Colorado than elsewhere. The dramatic increase in costs is due, at least in part, to more expensive medical costs and higher average payments to health care professionals. Statistically, PIP claimants in Colorado also tend to report more injuries per claim, visit more health care providers, and have longer recovery times on average than claimants in other parts of the country.

This is because the existing law requires consumers to buy $100,000 of first-party medical benefits, and includes a low monetary threshold of only $2,500. Unlike the state’s workers compensation and health care insurers, auto insurers are required to cover alternative treatments, including chiropractors, massage treatment and holistic medicine.

Last year, the state’s no-fault law was extended for an additional year with the understanding that a task force of insurer representatives (including the Alliance), department of insurance representatives, legislators and medical providers would either agree on meaningful reform measures or back a return to a tort system.


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