A New York insurers’ group plans to tell a legislative panel that bogus medical mills and unscrupulous medical providers, mostly in the New York City area, are inflating no-fault auto insurance costs.

The New York Insurance Association Inc. will say in testimony it will deliver to a Senate Insurance Committee hearing in Albany, N.Y., tomorrow that the no-fault system’s “costs are spiraling out of control to nearly unprecedented heights.”

Meanwhile, Robert Hartwig, an economist and president of the Insurance Information Institute, issued a statement estimating that,  “Fraud and abuse in New York’s no-fault auto insurance system cost consumers and insurers nearly $230 million in 2009, constituting a “fraud tax” of $1,561, or 22 percent of every no-fault claim.”

NYIA said Phony medical operations are billing for treatments that were never performed, unnecessary or excessive, NYIA President Ellen Melchionni is due to testify.

Speaking on behalf of auto insurance companies doing business in New York State, she will say that extensive and comprehensive legislative and regulatory solutions need to be put into place to even begin to address the moving target of no-fault fraud.

“The state needs to be committed to truly cracking down on criminals committing fraud if there is going to be any real impact in decreasing the rampant abuse of the no-fault system in the state,” her statement says.

“And once better laws are in place to successfully arrest and prosecute offenders, we need to be vigilant in monitoring the activities of fraudsters to be sure additional loopholes are not found to further exploit New York drivers,” she adds.

Among the recommendations NYIA is offering to legislators are giving carriers the necessary time to determine whether a no-fault claim is fraudulent, bundling and processing individual medical bills as one claim, reforming the dispute resolution system to get the more minor cases out of the overburdened court system, decertifying medical providers who engage in fraudulent activities from receiving no-fault reimbursements, creating guidelines for medical treatments similar to workers’ compensation claims, and making the practice of recruiting claimants to medical mills a felony.

Mr. Hartwig, at I.I.I. said  since 2005, no-fault fraud has cost the state’s consumers and insurers more than $600 million and the average cost of a no-fault auto insurance claim in New York State has soared 55 percent between 2004 and 2009 “as dishonest medical providers submitted inflated and sometimes bogus bills for services rendered to insurers.’

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