House Democrats Proposal on Auto Insurance Reform
April 2, 2003

Representative Jennifer Veiga and House Democrats have come up with an alternative Auto Insurance Reform Proposal that Consumers United Association can, for the most part, support. We are very grateful to the House Democrats for listening to the many concerns we have had and for coming up with a plan that accomplishes many things.

WHAT CUA LIKES ABOUT THIS ALTERNATIVE PROPOSAL

The House Democrats Proposal…

Addresses root causes of high insurance rates not caused by good drivers in new ways by:

• Increasing penalties for uninsured drivers.
• Providing discounts for anti-theft devices.
• Requiring insurance companies to report fraud.
• Adding no-fault property damage coverage.

Maintains important consumer benefits such as:

• Existing caps on medical benefits and the time in which a claim is covered.
• Alternative types of care that are proven to reduce pain and rehabilitation time.
• PIP coverage.

Provides consumer protection by:

• Requiring clear, understandable, consumer disclosures about the policy.
• Prohibiting credit scoring to calculate insurance premiums.
• Requiring prompt payment of direct benefits.
• Mandating a low-income policy option.
• Adding a consumer council within the insurance division.

Considers insurance company's needs to offer marketable products in Colorado:

• By allowing insurance carriers to utilize managed care options.
• By offering copays and deductibles that give consumers options that can reduce premiums.
• Providing new policy options in addition to our current direct access system.
• Making wage loss and service benefits optional to consumers.

Medically Necessary Care and Treatment
The proposal adopts the description used in HB 1225 to change the wording "reasonable and necessary care" to "medically necessary care and treatment." We didn't like this in 1225 because it named the types of treatment. This bill does not do that. What is good about this is that it targets system abuse.

WHAT WE ARE NEUTRAL ABOUT

Internal/External Review
The proposal calls for an internal and external review process. Without seeing the language of this yet, we are neutral about this issue. This was one of the problems we had with HB 1225. The process itself would not be a problem if insurance companies don't make the decisions. We don't think this is a necessary change at the point. The IME (Independent Medical Examination) system we currently have would work provided they had better guidelines.

Binding Arbitration on First Party Claims
This means you must go to binding arbitration if you have a claim against your own insurance company before you can take any further action. We would have serious issues with binding arbitration for claims against another person's insurance company (third party claims) but on first party claims, we are neutral. We don't find it necessary, however, to introduce binding arbitration.

WHAT WE CAN'T SUPPORT

Changing the $2,500 threshold
The threshold is the dollar amount of damages you have to reach before you can file a lawsuit. This proposal increases the amount to $5,000 and Rep. Veiga is even considering $10,000. We are against any increase in the threshold because we feel it unnecessarily changes the rights of consumers who do not abuse the system.

Rep. Tambor Williams is maintaining her support of what is called a verbal threshold. A verbal threshold is a written standard that has to be met before a lawsuit is filed (and HB 1225's threshold was extremely stringent). We are opposed to a verbal threshold because it leaves out very important coverage and because verbal thresholds are known to increase rates.

CUA is a nonprofit association with a mission to improve the financial lives of consumers through education and advocacy. For more information visit www.cuacolorado.org.