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July/August 2003

Independent's Day
an iga viewpont

Mirroring Industries
by Tim Smale

“Underpayment” by insurance companies has long been a rampant problem in the auto glass industry. (I’m borrowing the term “underpayment” from the medical industry. We often call them “short pays.”)

Just before I wrote this, Aetna Inc., a large national health insurer, announced that it was the first of nine insurance companies to settle a class-action claim with nearly all the doctors in the United States. The suit was worth an estimated $470 million. The suit charged the insurance companies with underpayments to doctors and interfering with doctors’ recommendations for patient treatment. 

Just as Aetna settled this landmark litigation with doctors, dozens of Blue Cross/Blue Shield insurance companies were named in a lawsuit that alleges insurers denied and delayed payments to physicians improperly. The complaint alleges that Blue Cross insurers did this systematically, using automated systems to defraud doctors of payments and save the insurers money.

Many auto glass retailers have tried legislative lobbying and small claims court actions to get paid for auto glass jobs, but have had little success. Perhaps they should consider their legal options as doctors have. After all, auto glass technicians are also in the business of saving lives and, according to many, are underpaid as well. A few analogies can be drawn regarding underpayment in the auto glass industry.

Extra Services
Many insurers typically do not pay for extra services required for some jobs, such as installing rain sensors or treating corrosion. NAGS recognized the need to bill for these services and added service part numbers to its database for items such as mobile service, removal and inspection, rust work and others. Some independents have told me that they can obtain approval from insurers for certain extra work from time to time and have been able to invoice and get paid for what they call “exceptions.” Glass shops should receive hassle-free approval and be allowed reimbursement for necessary work performed on vehicles.

Parts Markup
To make matters worse, insurers in the auto glass industry do not allow markups typically found in other automotive service industries. If you buy an automobile water pump or a starter, the service station typically will mark the part’s price up 40 percent or more and charge for labor to install the part. It is not so in the auto glass industry, though, where a markup of only 20 percent is allowed on a net part, and, even so, the insurer usually requests a copy of your invoice in order to verify the price you paid for the part. The current parts-pricing system in use today does not reflect the cost structure glass shops actually face, let alone mirror profit margins typically found in other automotive industries. 
More and more glass shop owners are turning to small claims and regular court to collect short payments. Perhaps the medical community can give us a clue as to what can be done. 
The Aetna case was ten years in the making, which is just about the same amount of time we have experienced similar problems in our industry. I have been frustrated in my conversations with insurers regarding the underpayment concern I have for glass shop owners today, especially when consumer safety is calculated into the mix. While I do not believe that litigation is an easy answer, perhaps we can find solutions that create a necessary balance between underpayment to glass shops and excessive payment by insurers before it comes to litigation in our industry. 

Tim Smale is the chief executive officer of the Independent Glass Association. Smale serves on the Auto Glass Replacement Safety Standards (AGRSS) Council and chairs three AGRSS subcommittees.


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