Sal Nuzzo, Christian Camara: The fleecing of Floridians

Recently, I went down a rabbit hole on Twitter.

An account that showed up in my feed tweeted a screenshot of their latest auto insurance premium with the words, “no tickets, no claims, 21% hike in premium.” I don’t know why, but the claim intrigued me, and I began to scroll down through the replies and comments. What transpired was a flurry of similar declarations from people all over Florida. There was even a screenshot from someone in Illinois showing how much cheaper insurance was there.

Now, taking individuals at their word on Twitter (I realize, a dubious idea), one has to wonder what in the world is going on in the insurance arena causing such a drastic situation. Robert Reich and his ilk would have us all believe that corporate greed is driving this train and we must use government power to tax, regulate, and rein in those awful insurance industry executives. Well, if this were the case, why aren’t we seeing the same in 49 other states? Why are policyholders in Illinois and California bragging to Florida residents about how inexpensive (and comprehensive) their auto insurance is?

A recent LendingTree study shows that Floridians have the second-highest auto insurance premiums on average, trailing only Michigan. Other states ranking in the bottom 10 include Rhode Island, Massachusetts, Connecticut, and Delaware. Within the area of economic policy, there is very little Florida shares with Connecticut and Massachusetts. So, why are our insurance costs reflective of high-tax, high-regulation states that consistently rank at the bottom of the “best states to live” lists?

The answer lies in Florida’s consistently atrocious litigation environment.

Drive down any interstate in Florida and roughly every third billboard advertises an attorney promising riches for those injured in auto accidents, slip and falls, and other incidents. I’ve even seen ones with people smiling as they hold up big six-figure checks like they’ve won the lottery. “Billy got me $375,000!” The billboards, radio spots, and other ads paint an extremely enticing picture, especially for those struggling with prolonged inflation, wage challenges, and other socio-economic challenges. I am fortunate to travel around the country, and no other state possesses the mass quantity of ads for personal injury attorneys as Florida. And while it may be tempting to place the blame on that, the truth is that this is a problem Florida has been experiencing for decades.

The problem is the gaming of Florida’s tort rules.

The problem is out of control.

Like many policy challenges, it’s far simpler to create a bumper sticker headline and offer up easy-to-read catchphrases that don’t amount to anything resembling a solution. This issue is no different. The truth of the challenge lies deep in the rules governing how personal injury cases are litigated, how they are presented to juries, and what data are used to determine costs and damages. It isn’t exciting or “sexy” in the media sense, but if policymakers want to address it at its root, they must get at the issue of transparency in damages.

We all know that health care costs and pricing are about the most confusing thing on the planet to decipher. Walk into a radiology clinic and ask how much an MRI is and you’ll experience it for yourself. There are prices, allowed fees, negotiated rates, Medicare reimbursement, Medicaid reimbursement, charity care, uncompensated care, and a host of other ways that the “cost” of every single function performed in health care delivery is determined. It’s a maze of spaghetti.

Nefarious personal injury attorneys have turned this opaqueness, along with Florida’s litigation rules, into a cash cow, fleecing Floridians and lining their own pockets with millions.

Here’s how it works. Your neighbor is injured via the negligence of some other party. They contact an attorney for representation. The attorney tells them to see his hand-selected doctor — not theirs — and NOT to use their insurance.  He tells them not to worry — they won’t pay a dime until the case is finished. That doctor then proceeds to run up tens, and in many cases hundreds, of thousands of dollars to “treat” them for the accident. As the bills run up, the attorney is getting ready to take this case to trial because they’ve been “wrongfully injured.” Two or three years (and $250,000 in medical fees) later, the case is heard by a jury who only sees these inflated medical bills and decides to make an award to your neighbor, plus a multiplier for their pain and suffering.

What’s missing from this is where the scam lies. Under Florida’s litigation rules, the jury is only allowed to see, and must take as gospel, the charges the attorney’s hand-selected doctor says are incurred. They don’t get to see what an individual’s health insurance would have paid, what Medicare would have paid, or what Medicaid would have paid.

Consider this real-life example. An injured woman “incurred” more than $80,000 in medical costs that were presented to a jury. What the jury wasn’t allowed to see, however, was that she was on Medicare, which would have paid $7,000 — for EXACTLY the same procedures and services.  She didn’t use Medicare at her attorney’s insistence.

But wait — it gets worse. The doctor in question did perform services and entered into an agreement with the attorney to forgo payment until the case was heard. The doctor is now owed a debt for the two years of “free” service. He then sells that debt under what’s called a Letter of Protection — so the medical services became collateralized by a financial company owned by, yep, another trial attorney’s practice.

Insurance companies recognize they are at a financial disadvantage to take many cases to trial. Without any semblance of actual transparency in damages in court, they settle thousands upon thousands of nuisance lawsuits. Wash, rinse, repeat. It’s a cottage industry in Florida that doesn’t exist anywhere else to this degree.

In the end, lawsuit abuse gets baked into the premiums for every Floridian with a policy.

If your head is spinning and trying to make sense of all of this, well that’s the point of the scam. And make no mistake, fixing it isn’t difficult, but it isn’t easy either. It means taking on two of the most influential special interest groups in the state (doctors and lawyers) and standing up for Floridians. The rules governing medical damages transparency can be solved — this is assured.

Credit is due to Florida policymakers — after many years of trying to address this on the margins they are taking Florida’s litigation challenges head-on. The December 2022 special session went a long way toward righting the issues — again caused by greedy plaintiff attorneys — within the property insurance arena. While relief will take some time to work its way to homeowners, the path is much better. With HB837, lawmakers can do what every other state in the U.S. does in litigation rules and stop the fleecing of Floridians.

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Sal Nuzzo is senior vice president of The James Madison Institute.

Christian Camara is an adjunct fellow and scholar for The James Madison Institute.

This is Part I of a series of articles outlining the policy challenges within Florida’s civil litigation environment.