UPDATE: REVISED 2/18/2014!! No Fault: DOI Bulletin 2013-04, dtd 10/4/2013 Addresses PIP Carriers Who UNILATERALLY reduce Provider Bills

Update!   The DOI Bulletin previously addressed inthis post back on Oct. 10, 2013 was revised Feb. 18, 2014 and no longer provides the protection previously afforded the insured.   Their guidelines are more akin to “ask, but don’t yell” which means if the provider says no, then the no fault insurer can unilaterally pay a reduced amount and the provider balance bill the insured.

Pardon me for posting an update by simply adding the revision and reposting the old post to a new date, but I wanted you to see the analysis, have the statute, and compare the revised bulletin with the old bulletin.  I have posted the comment from a reader who brought this change to my attention, and if I had his or her full name and link to his or her web site, I would include that as well because without the assistance of my readers, this blog would be a lot less than what it is.

And here is the first of the two “gut bustin'” revisions disguised as clarifications.  Shame on the DOI, and a warning to the citizens of this state that the insurance lobby is alive, well and kickin’ guts and buts.  To throw this back into the courts is a cowardly way to resolve the problem and an abandonment of the Department of Insurance’s statutory and regulatory responsibilities.

Q: What is the purpose of Bulletin 2013-4?
A: The Kentucky Department of Insurance issued the bulletin to explain its position that under the Kentucky Insurance Code (KRS 304.39-245), if the insurer reduces a provider billing in reference to Kentucky No-Fault benefits, then the insurer must demonstrate to the Department that a negotiation with the provider has been attempted. The Department does not require that the
negotiation be successful, only that it has been attempted, and the attempt has been documented. If an insurer and a provider do not reach an agreement on a reduction of charges, the dispute over a provider’s charges becomes a matter for the courts.

By throwing it back into the “courts”, the DOI has basically thrown it back to the insured who did not have his or her health insurance bill paid with no obligation on the no fault carrier other than making the attempt and documenting the attempt.  The result is that the no fault carrier was obligated to pay, did not pay, and does not promise to indemnify or hold harmless it’s insured for non-payment when sued over the bill by the provider who did not reduce the bill.  Take a look at Neurodiagnostics vs. KFBM where the SCOKY held there is no direct action by a provider against the no-fault insurer for nonpayment of the charges.

I stand by my earlier analysis regarding the need for negotiation reductions and adding muscle to the statute, but if the reparations obligor fails in its attempt to reach a negotiated amount and does not pay the charge, then the reparations obligor should hold their insured harmless should the provider sue the insured.  Not leave them at the mercy and expense of the legal system, bad credit, and questions over continued treatment for injuries.  Not all insureds are represented by legal counsel for their personal injury claim since the payments for reparation benefits proceed without fault and/or the representation may have ended with settlement with the tortfeasor but continuing to treat.


The following bulletin from the Kentucky Department of Insurance addresses a recurring problem when a reparations obligor (aka PIP carrier) decides to reduce a doctor or medical provider’s statement of services without obtaining an agreement.  Although negotiated reductions seem reasonable and is a normal practice in the medical/insurance arena, it needs to be done the correct way.

The underlying premise is that medical providers charge different amounts for the same service, depending on the patient or his/her insurance.  For example, each health insurer had a payment schedule for approved amounts which affect the write-off, co-pay deductible, or prohibition against balance billing; other insurers or agencies have approved payment schedules, eg., Medicare, Medicaid, Passport, Workers Compensation, Federal Government Plans which are controlled by statute; and automobile insurance to name a few.

Unfortunately, the approved rate of payment for the service seems to follow  the bargaining power of the person paying, with an uninsured patient at the bottom of the totem pole of payments, only (for some unexplained reason) the no fault car insurance not far behind.  Large health insurers and government provided insurance rules the roost on their payment schedules.

The net result is the person least able to afford it (the uninsured) pays the most, and in effect subsidizes everyone else, to include other uninsureds who do not pay.

Now what about no-fault (PIP)?  With mandatory PIP coverages, this means the ONLY insurance to pay medical bills for those with no health insurance who are hurt in a car accident is no fault.  Thus, these individuals need to be good stewards of their limited insurance funds for medical and wage loss.  If their no fault carrier permits the provider to charge more than it charges everyone else, then guess who gets screwed?  Yes, the person at the bottom

I can only assume this is the reason behind the legislative change – provide some parity and muscle for those who need the help the most.

To that end, some no fault carriers do step up to the plate and are participants in groups which have reduced payments or actually request and obtain a negotiated reduction. This works fine.

Others take the next step and conduct peer reviews of the providers medical or chiropractic services and may then disallow the amount, in whole or in part, based upon reasonableness and necessity of the service provided.  Now this raises a whole new area of concern about the propriety of the no fault carrier’s actions which I will address another day.

Personal injury lawyers can also help maximize their client’s no fault insurance benefits by reserving or designating payments among elements of loss or even attempting to restrict the PIP benefits to cover the client’s out of pocket medicals after using their health insurance to pay first and obtain the benefits of the reduced payments per the payment schedules will encounter the stiff arm of the health insurer who will refuse to coordinate the benefits and shift the loss to their insured.  And, the personal injury lawyer’s attempts to protect their client then can come under the threat of a bar complaint when the provider has obtained an assignment against their patient’s personal injury settlement recovery.

It is hard to bargain from strength when the ethical rules for lawyers in Kentucky convert a legal professional representing the interests of their injured client into a “bill collector” for the provider based upon a piece of paper.  In due time, I will address this issue too.

The purpose of the above is to first thank the Department of Insurance for their efforts to add some muscle behind the statute (KRS 304.39-245) on negotiated reductions, but also to share my concerns about the hazards, risks and unfairness of the system.

Based upon the statute and the DOI Bulletin, I would like anyone’s comments on the liability of a no fault insurer not complying with Section 245 or other provisions regarding the payment of medical bills since the no fault act prescribes the procedures for honoring a PIP claim?

With that said, thanks for the help, and I hope and expect the automobile insurers will not capitulate and ignore their opportunity to address the inequitable billing rates and thus pursue a rule of convenience and pay the stated amounts and close the file.

One avenue of attack for the health insurer would be to obtain the payment schedule from a government agency and based upon the CPT billing codes etc. seek a reduction accordingly.  If the provider refuses, then coordinate with the Department of Insurance and the Attorney General’s Office to address the disparate billing rates using the insurance and consumer protection code as their slingshot and stone against Goliath.

Bulletin AND KRS 304.390-245 are below:

Download (PDF, Unknown)


Download (PDF, Unknown)

Here is the revision which essentially “guts” the insured’s protections previously recognized.

Download (PDF, 240KB)

Please note: I reserve the right to delete comments that are inappropriate, offensive or off-topic.

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One thought on “UPDATE: REVISED 2/18/2014!! No Fault: DOI Bulletin 2013-04, dtd 10/4/2013 Addresses PIP Carriers Who UNILATERALLY reduce Provider Bills

  1. Initially I thought the bulletin really clarified the law and demonstrated that the department of insurance was finally doing their job and enforcing the statutes. However the revised bulletin that came out in February 2014 quickly put that thought to rest. The Q & A section states the request for negotiation of a providers fee does not have to be successful only an attempt was made. This is a joke and does nothing to address the problem. In fact it gives the insurance companies more reason to deny and reduce payment to providers due to the DOI failure to enforce the law. More and more providers are not accepting MVA patients without payment up front. I thought the MVRA and department of insurance were supposed to protect the people not the insurance companies.