NJM News

November 27, 2007

Contact: Patrick W. Breslin, 609-883-1300, ext. 7070

NJM Urges Policyholders to Oppose Efforts to Repeal PIP Fee Schedule

WEST TRENTON, N.J. — New Jersey Manufacturers Insurance Company, New Jersey's largest insurer of private passenger vehicles, has asked its approximately 400,000 Personal Auto policyholders to oppose a bill pending in the State Legislature that would repeal reasonable controls on medical cost increases for the treatment of automobile accident injuries.

Some charges that insurers regularly receive are severely inflated, particularly concerning "facility fees'' when surgery is performed in a non-hospital setting. These surgical center facility fees typically range from 500% to 800% of the amounts paid for exactly the same services by Medicare, the federal government's health insurance program for senior citizens. At times, facility fees are even 1,000% of the amount that Medicare would pay, or higher. The New Jersey Department of Banking and Insurance's recently adopted Personal Injury Protection (PIP) Medical Fee Schedule caps these fees for surgical centers at three times the Medicare rate, which is more than reasonable compensation while keeping costs under control for policyholders.

The PIP Medical Fee Schedule also adds a measure of predictability to the amount auto insurers will pay for approximately 1,500 procedures. These reimbursement levels should be considered more than adequate by medical practitioners — approximately 100% higher than the fees paid for the same services by Medicare. By contrast, private medical plans on average pay about 20% to 25% higher than Medicare.

Legislation currently under consideration (A-3703/S-2402) would repeal the fee schedule, leaving auto insurers — and the policyholders they protect — without the benefit of these reasonable controls on ever-increasing PIP medical costs.

"Unchecked increases in medical costs erode the value of a policyholder's PIP coverage limit, and they force responsible insurance companies to litigate if they want to challenge excessive bills,'' said Anthony G. Dickson, NJM's President and CEO. "While we believe PIP charges should be more in line with those paid by private health insurers, the fee schedule is a good start toward maintaining prudent stewardship of policyholders' resources.''

NJM has sent the attached letter encouraging all policyholders to contact Legislative leaders now, while special interests are trying to push through A-3703/S-2402 during the final weeks before a new Legislature is seated in January.

NJM operates strictly for the benefit of policyholders and has a long history of advocating on their behalf. The Company has returned more than $4.5 billion in dividends to policyholders since 1918, including $132 million in Special Dividends being mailed at this time, an average check of $327 for each Personal Auto policyholder. Notably, this check and all Personal Auto dividends for the past four years have been calculated as a percentage of each policyholder's paid premium for all coverages except PIP because of rising medical expenses.

In addition to Personal Auto, NJM also is New Jersey's leading provider of Workers' Compensation coverage and fulfills a prominent role in writing Commercial Auto, Homeowners and other residential policies.

See attached letter to NJM policyholders.