Governor offers plan to cut insurance costs To pay for reduction, his bill would limit claims in car crashes

January 14, 1996|By Peter Jensen | Peter Jensen,SUN STAFF

Gov. Parris N. Glendening is promising Maryland drivers a discount worthy of an automobile salesman -- a 10 to 20 percent savings in how much they pay for mandatory car insurance.

That is the goal of controversial legislation he is expected to submit to the General Assembly within 10 days.

The insurance proposal would limit how much accident victims, their lawyers and health care providers could receive from an accident claim.

But to sell the idea to lawmakers, Mr. Glendening will have to battle powerful special interest groups.

His toughest opponent: trial attorneys who have made killing the bill a priority of the legislative session.

The governor's office says the bill will benefit honest drivers anywhere in Maryland who are paying premiums swollen by fraudulent and inflated claims. It will be particularly welcome in urban areas where insurance rates are the highest, a spokesman said.

"In those jurisdictions where people pay high auto insurance rates, this is the equivalent of a tax cut," said Steven B. Larsen, a Glendening aide. "In Baltimore, someone who pays $3,000 a year could save $450. That's a huge savings."

Administration officials contend the proposal would extract most the savings by limiting payments in potentially fraudulent cases of sprains or strains, and by denying accident victims the opportunity to collect on the same claim from multiple sources.

Sprains and strains, or "soft-tissue injuries" as insurers often call them, are costly.

The medical and legal bills generated by such hard-to-disprove claims can be measured in the millions of dollars, insurance industry officials say.

To limit those costs, the bill would allow insurers to submit such claims to a panel of physicians for review.

The measure also would limit the fees paid to chiropractors and other health care providers.

Such limits on medical fees would lead to a corresponding reduction in the payments an accident victim could receive for "pain and suffering."

Multiple recoveries are alleged to have as big an impact on insurance rates as fraudulent claims.

Sometimes, a victim's medical bills are paid three times over -- by his health insurance, by automobile insurance and by suing the driver who caused the accident, Mr. Larsen said.

Under the governor's proposal, auto insurance claims would have to be reduced by whatever amount was paid by other sources.

This provision also would have the effect of limiting the damages that could be awarded in court.

The bill's provisions are based on the findings of a gubernatorial commission formed last year to study ways to help Baltimore drivers, who often pay two or three times as much for car insurance as drivers who live in suburban or rural areas.

Commission impact

Mr. Larsen said the bill will adhere to most of the recommendations of the 17-member commission, which was chaired by Baltimore lawyer David M. Funk.

That includes, Mr. Funk said, permitting drivers to waive mandated protection against uninsured motorists as well as personal injury protection, which covers medical bills and lost wages even if the policy holder caused the accident.

But the bill also will include a wrinkle that the insurance industry has promised to oppose: a requirement that insurers use the savings to reduce rates by at least 15 percent by the end of next year or prove to the state insurance commissioner why they can't.

"We heard that was a possibility, and we've expressed our concern to the governor's office," said Marta Harting, a lobbyist for State Farm Insurance. "We think the numbers the governor is using are too optimistic."

The numbers are supported by an independent actuary's study completed last fall.

The report found that the greatest savings would be felt by residents of urban areas and by drivers who elect only the minimum required levels of insurance.

The governor's bill is not expected to scrap territorial rating, the insurance industry's often criticized practice of setting rates by geographic region.

That is something most Baltimore legislators would like to end. But such a proposal is virtually impossible politically since it would result in higher rates for drivers outside the city.

However, the legislation will call for the state insurance commissioner to conduct a study to determine whether race is a factor in where boundaries are drawn, Mr. Larsen said.

Legislators predicted that the governor's entire proposal will face a difficult fight.

In the Senate, the bill likely will be reviewed by two committees -- Finance and Judicial Proceedings, with the latter a potentially tough obstacle for the measure's proposed limits on legal claims.

"There's no doubt that all the tort reform in that bill won't pass," said Sen. Thomas L. Bromwell, the Baltimore County Democrat who is chairman of the Finance Committee. "It's not going to be an easy walk in the park, but we can get something out of this."

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