Insurance Blogs hosted by Canadian Underwriter
Insurance Blogs hosted by Canadian Underwriter
The Ontario government has finally amended the SABS definition of catastrophic impairment.
The government’s 2010 auto insurance reforms included recommendations most seriously injured accident victims. The government directed FSCO to consult with the medical community to amend the definition of catastrophic impairment as set out in the Statutory Accident Benefits Schedule.
In 2010 FSCO announced the appointment of Dr. Pierre Côté as Chair of the Catastrophic Impairment Expert Panel. The Panel submitted it’s recommendations to the FSCO Superintendent in the spring of 2011. In December 2011, the Superintendent submitted his report to the government.
The new definition is effective June 1, 2016.
Below is a chart that compares the current SABS definition, the Superintendent’s recommended definition and the new SABS definition that will be introduced next year.
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Current SABS
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Superintendent’s 2011 Report
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2016 SABS
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Paraplegia or quadriplegia;
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paraplegia or tetraplegia that meets the following criteria i and either ii or iii:
ii. The neurological recovery is such that the permanent ASIA Grade can be determined with reasonable medical certainty according to the ASIA and
iii. The permanent ASIA Grade is A, B, or C or,
iv. The permanent ASIA Grade is or will be D provided that the insured has a permanent inability to walk independently as defined by scores 0–5 on the Spinal Cord Independence Measure item 12 and/or requires urological surgical diversion, an implanted device, or intermittent or constant catheterization in order to manage the residual neuro-urological impairment.
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Paraplegia or tetraplegia that meets the following criteria:
i. The insured person’s neurological recovery is such that the person’s permanent grade on the ASIA Impairment Scale can be determined.
ii. The insured person’s permanent grade on the ASIA Impairment Scale is or will be,
A. A, B or C, or
B. D, and
1. the insured person’s score on the Spinal Cord Independence Measure, Version III, item 12 and applied over a distance of up to 10 metres on an even indoor surface is 0 to 5,
2. the insured person requires urological surgical diversion, an implanted device, or intermittent or constant catheterization in order to manage a residual neuro-urological impairment, or
3. the insured person has impaired voluntary control over anorectal function that requires a bowel routine, a surgical diversion or an implanted device.
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The amputation of an arm or leg or another impairment causing the total and permanent loss of use of an arm or a leg;
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Severe impairment of ambulatory mobility, as determined in accordance with the following criteria:
i. Trans-tibial or higher amputation of one limb, or
ii. Severe and permanent alteration of prior structure and function involving one or both lower limbs as a result of which it can be reasonably determined that the Insured Person has or will have a permanent inability to walk independently and instead requires at least bilateral ambulatory assistive devices [mobility impairment equivalent to that defined by scores 0–5 on the Spinal Cord Independence Measure item 12, ability to walk <10 m).
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Severe impairment of ambulatory mobility or use of an arm, or amputation that meets the following criteria:
i. Trans-tibial or higher amputation of a leg.
ii. Amputation of an arm or another impairment causing the total and permanent loss of use of an arm.
iii. Severe and permanent alteration of prior structure and function involving one or both legs as a result of which the insured person’s score on the Spinal Cord Independence Measure, Version III, item 12, and applied over a distance of up to 10 metres on an even indoor surface is 0 to 5.
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Total loss of vision in both eyes
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Legal blindness in both eyes due to structural damage to the visual system. Non-organic visual loss (hysterical blindness) is excluded from this definition.
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Loss of vision of both eyes that meets the following criteria:
i. Even with the use of corrective lenses or medication,
A. visual acuity in both eyes is 20/200 (6/60) or less as measured by the Snellen Chart or an equivalent chart, or
B. the greatest diameter of the field of vision in both eyes is 20 degrees or less.
ii. The loss of vision is not attributable to non-organic causes.
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Brain impairment that results in,
(i) a score of 9 or less on the Glasgow Coma Scale, according to a test administered within a reasonable period of time after the accident by a person trained for that purpose, or
(ii) a score of 2 (vegetative) or 3 (severe disability) on the Glasgow Outcome Scale, according to a test administered more than six months after the accident by a person trained for that purpose;
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Traumatic Brain Injury in Adults (18 years of age or older):
ii. Catastrophic impairment, based upon an evaluation that has been in accordance with published guidelines for a structured GOS-E assessment to be:
a) Vegetative (VS) after 1 months or
b) Severe Disability Upper (SD+) or Severe Disability Lower (SD -) after 6 months, or Moderate Disability Lower (MD-) after one year due to documented brain impairment, provided that the determination has been preceded by a period of in-patient neurological rehabilitation in a recognized rehabilitation center.
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If the insured person was 18 years of age or older at the time of the accident, a traumatic brain injury that meets the following criteria:
i. The injury shows positive findings on a computerized axial tomography scan, a magnetic resonance imaging or any other medically recognized brain diagnostic technology indicating intracranial pathology that is a result of the accident, including, but not limited to, intracranial contusions or haemorrhages, diffuse axonal injury, cerebral edema, midline shift or pneumocephaly.
ii. When assessed in accordance with the Glasgow Outcome Scale and the Extended Glasgow Outcome Scale, the injury results in a rating of,
A. Vegetative State (VS or VS*), one month or more after the accident,
B. Upper Severe Disability (Upper SD or Upper SD*) or Lower Severe Disability (Lower SD or Lower SD*), six months or more after the accident, or
C. Lower Moderate Disability (Lower MD or Lower MD*), one year or more after the accident.
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An impairment or combination of impairments that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, results in 55 per cent or more impairment of the whole person;
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A physical impairment or combination of physical impairments that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition 1993, (GEPI-4), results in a physical impairment rating of 55 per cent whole person impairment (WPI).
i. Unless covered by specific rating guidelines within relevant Sections of Chapters 3-13 of GEPI-4, all impairments relatable to non-psychiatric symptoms and syndromes (e.g. functional somatic syndromes, chronic pain syndromes, chronic fatigue syndromes, fibromyalgia Syndrome, etc.) that arise from the accident are to be understood to have been incorporated into the weighting of the GEPI-4 physical impairment ratings set out in Chapters 3 – 13.
ii. With the exception of traumatic brain injury impairments, mental and/or behavioural impairments are excluded from the rating of physical impairments.
iii. Definition 2(e), including subsections I and II, cannot be used for a determination of catastrophic impairment until two years after the accident, unless at least three months after the accident, there is a traumatic physical impairment rating of at least 55% WPI and there is no reasonable expectation of improvement to less than 55% WPI.
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A physical impairment or combination of physical impairments that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, results in 55 per cent or more physical impairment of the whole person.
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An impairment that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, results in a class 4 impairment (marked impairment) or class 5 impairment (extreme impairment) due to mental or behavioural disorde
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The post-traumatic psychiatric impairment(s) must arise as a direct result of one or more of the following disorders, when diagnosed in accordance with DSM IV TR criteria: (a) Major Depressive Disorder, (b) Post Traumatic Stress Disorder, (c) a Psychotic Disorder, or (d) such other disorder(s) as may be published within a Government Guideline.
ii. Impairments due to pain are excluded other than with respect to the extent to which they prolong or contribute to the duration or severity of the psychiatric disorders which may be considered under Criterion (i).
iii. Any impairment or impairments arising from traumatic brain injury must be evaluated using Section 2(d) or 2(e) rather than this Section.
iv. Severe impairment(s) are consistent with a Global Assessment of Function (GAF) score of 40 or less, after exclusion of all physical and environmental limitations.
v. For the purposes of determining whether the impairment is sufficiently severe as to be consistent to Criterion (iv) – a GAF score of 40 or less – at minimum there must be demonstrable and persuasive evidence that the impairment(s) very seriously compromise independence and psychosocial functioning, such that the Insured Person clearly requires substantial mental health care and support services. In determining the demonstrability and persuasiveness of the evidence, the following generally recognized indicia are relevant:
a) Institutionalization;
Repeated hospitalizations, where the goal and duration are directly related to the provision of treatment of severe psychiatric impairment;
c) Appropriate interventions and/or psychopharmacological medications such as: ECT, mood stabilizer medication, neuroleptic medications and/or such other medications that are primarily indicated for the treatment of severe psychiatric disorders;
d) Determination of loss of competence to manage finances and property, or Treatment Decisions, or for the care of dependents;
e) Monitoring through scheduled in-person psychiatric follow-up reviews at a frequency equivalent to at least once per month.
f) Regular and frequent supervision and direction by community-based mental health services, using community funded mental health professionals to ensure proper hygiene, nutrition, compliance with prescribed medication and/or other forms of psychiatric therapeutic interventions, and safety for self or others.
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An impairment that, in accordance with the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993 results in a class 4 impairment (marked impairment) in three or more areas of function that precludes useful functioning or a class 5 impairment (extreme impairment) in one or more areas of function that precludes useful functioning, due to mental or behavioural disorder.
A mental or behavioural impairment, excluding traumatic brain injury, determined in accordance with the rating methodology in Chapter 14, Section 14.6 of the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 6th edition, 2008, that, when the impairment score is combined with a physical impairment described in paragraph 6 in accordance with the combining requirements set out in the Combined Values Table of the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, results in 55 percent or more impairment of the whole person.
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if an insured person is under the age of 16 years at the time of the accident and none of the Glasgow Coma Scale, the Glasgow Outcome Scale or the American Medical Association’s Guides to the Evaluation of Permanent Impairment, 4th edition, 1993, referred to in clause (2) (d), (e) or (f) can be applied by reason of the age of the insured person.
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Paediatric Traumatic Brain Injury (prior to age 18)
i. A child who sustains a traumatic brain injury is automatically deemed to have sustained a catastrophic impairment provided that either one of the following criteria (a or b) is met on the basis of traumatic brain injury sustained in the accident in question:
a) In-patient admission to a Level I trauma centre with positive findings on CT/MRI scan indicating intracranial pathology that is the result of the accident, including but not limited to intracranial contusions or haemorrhages, diffuse axonal injury, cerebral edema, midline shift, or pneumocephaly; or
b) In-patient admission to a publically funded rehabilitation;
Paediatric catastrophic impairment on the basis of traumatic brain injury is any one of the following criteria:
ii. At any time after the first 1 months, the child’s level of neurological function does not exceed the KOSCHI Category of Vegetative.
iii. At any time after the first 6 months, the child’s level of function does not exceed the KOSCHI Category of Severe. (2) May be fully conscious and able to communicate but not yet able to carry out any self care activities such as feeding. (3) Severe Impairment implies a continuing high level of dependency, but the child can assist in daily activities; for example, can feed self or walk with assistance or help to place items of clothing.
iv. At any time after the first 9 months, the child’s level of function remains seriously altered such that the child is for the most part not age appropriately independent and requires supervision/actual help for physical, cognitive and/or behavioural impairments for the majority of his/her waking day.
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If the insured person was under 18 years of age at the time of the accident, a traumatic brain injury that meets one of the following criteria:
i. The insured person is accepted for admission, on an in-patient basis, to a public hospital named in a Guideline with positive findings on a computerized axial tomography scan, a magnetic resonance imaging or any other medically recognized brain diagnostic technology indicating intracranial pathology that is a result of the accident, including, but not limited to, intracranial contusions or haemorrhages, diffuse axonal injury, cerebral edema, midline shift or pneumocephaly.
ii. The insured person is accepted for admission, on an in-patient basis, to a program of neurological rehabilitation in a paediatric rehabilitation facility that is a member of the Ontario Association of Children’s Rehabilitation Services.
iii. One month or more after the accident, the insured person’s level of neurological function does not exceed category 2 (Vegetative) on the King’s Outcome Scale for Childhood Head Injury.
iv. Six months or more after the accident, the insured person’s level of neurological function does not exceed category 3 (Severe disability) on the King’s Outcome Scale for Childhood Head Injury.
v. Nine months or more after the accident, the insured person’s level of function remains seriously impaired such that the insured person is not age-appropriately independent and requires in-person supervision or assistance for physical, cognitive or behavioural impairments for the majority of the insured person’s waking day.
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On September 15, 1989, Murray Elston, Minister of Financial Institutions, announced the unveiling of a new plan to address rising auto insurance costs in Ontario. The plan would provide a “social safety net” where everyone injured in an auto accident would receive compensation without the need to sue. This trade-off between reduced tort access and enhanced accident benefits was meant to reduce costs in the system and stabilize premiums.
Move forward 25 years and the introduction of the Ontario Motorist Protection Plan (OMPP), the first no-fault auto insurance plan in the province, celebrates its silver anniversary on June 22, 2015.
The Ontario system is nothing like any other private system or no-fault system. It has a broad range of accident benefits, access to tort, complex entitlement rules and an overburdened dispute resolution process. It also has the highest rates in the country. At approximately 25% of Canadian property and casualty industry premiums, the health of the Ontario auto insurance product is important to the industry. Many ideas have been tried over the years, but none have addressed cost pressures in the system for anything more than a short period of time.
WHY WAS NO-FAULT INTRODUCED?
Following the 1985 Court of Appeal for Ontario decision, McErlean v Sarel et al., the insurance industry grew concerned about liability claims which, in turn, precipitated a liability crisis. Liability insurance costs shot through the roof and capacity was scarce. Little changed when the case was reversed on appeal in 1987, albeit on liability. Ontario had a serious liability problem that went beyond drivers. The crisis was affecting many institutions, including small municipalities and charities. In response, the Ontario Task Force on Insurance was appointed to study problems of availability, affordability and adequacy of general liability insurance in Ontario.
Although the focus of the task force report, released in May 1986, was not auto insurance, it did include some recommendations concerning auto insurance and tort reform.
A more in-depth analysis of the automobile insurance issues raised in the report were tackled by Mr. Justice Coulter Osborne, appointed in November 1986 to report on the tort system of compensation for injury by automobile accident, the consequences of the implementation of a no-fault automobile accident insurance scheme, and the merits of public versus private automobile insurance delivery systems.
Justice Osborne’s Report of Inquiry into Motor Vehicle Accident Compensation in Ontario, issued in April 1988, identified rapidly increasing loss costs for third-party liability bodily injury claims in the early 1980s without offsetting premium increases as the basis for the auto insurance “crisis.” The report recommended the following:
Faced with a continuing rate inadequacy problem, the Ontario government responded by introducing a no-fault product, believing it would be less costly. In September 1989, following extensive research and consultation, the government announced its intention to introduce the OMPP. Threshold/no-fault insurance came into effect June 22, 1990. Colleen Parrish, former director of policy for Ontario’s Ministry of Financial Services, says “it was hoped that the OMPP would be more consumer-friendly and many claims under the threshold could be settled with the involvement of just the claimant and insurer. Legislation addressed some of the volatility in the marketplace and went beyond the introduction of partial no-fault.”
WAS NO-FAULT A GOOD IDEA?
Despite current concerns, the ability to access accident benefits following an accident was an important feature and still is. Kathy Bardswick, president and chief executive officer of The Co-operators Group Limited, maintains that “the industry supported no-fault because they believed it would allow more money to flow to accident victims quicker, and more of each claim dollar spent on injury would actually go to rehabilitation and support the injured party rather than in support of the administration of the tort system. Too often in a pure tort system, it was taking far too long for many accident victims to see financial support for their recovery. In addition, a no-fault system would provide insurers with the opportunity to deal directly with their own clients through the claims process.”
So what went wrong? Bill 164.
The NDP government abandoned its initial intention to introduce a government-run auto insurance scheme in favour of another set of reforms. On January 1, 1994, Bill 164 replaced the OMPP with a complex no-fault schedule and eliminated the ability to sue for economic losses. Designed for a public insurer, the requirements could not realistically be delivered by the private sector.
That system lasted less than three years with the passage of Bill 59, launching Ontario’s third no-fault system within a decade. Although Bill 59 restored some of the balance that existed under the OMPP, it retained the broad range of accident benefits, complex entitlement rules, and the overburdened and protracted dispute resolution process introduced under Bill 164.
Further reforms rolled out from 2003 through 2010, including those relating to health care provider fees and assessment, pre-approved treatment guidelines and an increased deductible for court awards for pain and suffering, as well as introduction of additional “checks and balances” upon the elimination of the designated assessment centre (DAC) system.
In 2010, standard accident benefits were scaled back, optional benefits were expanded and a minor injury definition and treatment cap were introduced. Over the past three years, additional reforms have been introduced to address fraud, but even these measures have increased the complexity of the system.
Today, the system is overly complex and confusing. It is an entitlement system with far too much moral hazard. The problems first appeared under the OMPP, became worse under Bill 164 and have never been properly addressed.
Philip Howell, former Superintendent of Financial Services, accurately describes today’s system as “part insurance and part social program.”
Many people contend it is as adversarial as the tort system. Consequently, lawyers are heavily involved in the accident benefit system, something that was not contemplated when no-fault was introduced 25 years ago, and has led to more disputed claims and higher transactional costs.
There is little accountability within the system. As soon as there are adverse conditions, the insurance industry begins to pressure the government into make changes. Rather than force the industry to take more ownership, the government is inevitably co-opted into yet another round of reforms. This ongoing tweaking has only made things worse. Nick Gurevich, founder and past chair of the Ontario Rehab Alliance, suggests that “insurers are hooked on frequent government intervention. This removes insurers’ motivation to search and implement long-term internal system improvements.” Since 2010, there have been 31 new or amending auto insurance regulations.
WHY HAVE RATES REMAINED HIGH?
High auto insurance premiums in Ontario are driven by a number of factors. Some factors are unique to Ontario, such as urban density, weather and demographics, but many people believe the product largely contributes to stubbornly high rates. Ontario’s Insurance Act stipulates that auto insurance policies are second-payers to other public and private insurance plans, including the public health care system. However, the government has allowed the second-payer status to erode.
Eric Grossman, a partner at Zarek Taylor Grossman Hanrahan LLP, says “the public health care system has been downloading costs to auto insurance for years.” Not only public insurance, but private insurance plans have been allowed to write in auto accident exclusions in their policies.
Rob Sampson, a former Ontario minister with responsibility for auto insurance, agrees. “It is easier for insurers to pass on costs to drivers or persuade the government to make further changes than to address problems on their own. The product has become over-regulated and there is no confidence in the marketplace to manage costs,” Sampson contends.
Bardswick says she believes “there has been too much tinkering and not enough fundamental and significant change to improve the overall cost benefit equation long term. With each tinkering, the system has become more complex, more costly to administer, with any immediate cost savings quickly disappearing as players in the system adjust to the changes implemented. The regulatory burden has also driven out much of the ability or desire to innovate.”
The high cost of handling claims has become a serious problem. Greg Somerville, president and CEO of Aviva Canada, indicates that 48% of accident benefit costs are for non- treatment related activities.”
Grossman notes “the irony of the system is that the high cost of fighting claims encourages settlements which are incentive for more disputes.”
Finally, fraud, something no one is able to either accurately quantify or define, continues to place cost pressure on the system. While everyone agrees a staged accident is fraudulent activity, not everyone is prepared to accept the notion of opportunistic or soft fraud.
HOW DO YOU FIX THE SYSTEM?
Many people would welcome a system that was simpler and would allow most accident victims to navigate the system without a representative. There is a lot of nostalgia for the OMPP because stakeholders remember it as a system that had few rules and procedures and fewer disputes.
However, it would be naïve to think that the OMPP would not have evolved. It would not have necessarily developed into the existing product, but there would have been pressure to reform the system as a result of growth in the rehabilitation sector, adverse arbitration and court decisions, increased involvement of lawyers, pressure for more consumer protection provisions and fraud.
The accident benefits system has been eroded over the past few years, but it must be acknowledged that eliminating these benefits does not eliminate those costs from the system. Some stakeholders would like to see a system with quite modest accident benefits and any additional compensation provided through tort. However, that would bring the industry full circle to the pre-OMPP, which experienced significant cost pressures.
It is the concept of using an insurance system to provide a social safety net that is flawed. The current no-fault system resembles a government program with special compensation and eligibility rules for caregivers, retirees, the unemployed and students. Bryan Davies, former CEO and Superintendent of Financial Services, says he believes that “if the government wants to provide a social safety net, then it should be delivered by government.”
So what is the answer? The Ontario product has always been different than what exists in other jurisdictions, but looking at elsewhere may not provide an answer. A made-in-Ontario solution should include private insurance companies continuing to provide third-party liability coverage and physical damage coverage, while the government creates a not-for profit Crown corporate to deliver accident benefits.
A single adjudicative body would introduce significant efficiencies, standardize claims practices and eliminate the adversarial nature of the product. Insurers would collect premiums on behalf of the Crown corporation, which would inform insurers how much to charge for accident benefit coverage based on accident benefit and overhead costs. This system would require reduced advocacy and a scaled down dispute resolution process, there would be no settlement of accident benefits, and claims would remain open as long as there were insurable losses to pay.
It is time for the government to get away from tinkering with the system and eliminate the existing design flaws. A public debate is badly needed. The past 25 years has not been a total failure, but it is not working.
*Published in the June 2015 issue of Canadian Underwriter
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