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Lawmakers Renew Push To Overhaul Michigan’s No-Fault Insurance System

State legislators appear intent on once again trying to “reform” Michigan’s auto no-fault insurance system. Members of both the House and Senate have already introduced two proposals in the new 2019-20 legislative session, purportedly aimed at slashing auto insurance rates.

House Bill 4024, introduced January 10, 2019, would make insurance reform a 2020 ballot proposal, letting the state’s voters decide what changes should be made to the auto insurance system. The measure, which has been referred to the House Committee on Insurance, would:

  • Give insureds the choice of limiting (i.e., “capping”) their no-fault benefits at $250,000 or $500,000 or choosing a “no maximum limit” coverage (the current coverage for Michigan motorists). For those who choose to cap their benefits, the limited amount would apply not only to medical expenses, but also to attendant care, replacement services and wage-loss benefits.
  • Implement a medical provider fee schedule for Michigan car accident claims.
  • Mandate that insureds, including those who choose to cap their benefits, keep paying the annual fee to the Michigan Catastrophic Claims Association.

Senate Bill 1 was introduced January 15, 2019. The proposal, which has been referred to the Senate Committee on Insurance and Banking, would:

  • Give persons age 62 and older the choice of allowing Medicare (or other lifetime healthcare benefits) to cover medical costs after an auto accident.
  • Give insureds the option of choosing the amount of their no-fault insurance coverage; in other words, capping their benefits.
  • Purportedly offer “more transparency” in medical provider billing.

Meanwhile, House lawmakers have indicated they plan to introduce their own no-fault legislation (other than the proposed ballot measure) in the coming months. Until they do, a special nine-member House committee has been established to further examine the no-fault system.

House Bill 4024: Look Familiar?

House Bill 4024 – again, a proposal to put auto insurance reform on the statewide ballot in 2020 – mirrors prior failed attempts to overhaul Michigan’s no-fault system. In particular, the measure resembles House Bill 5013 (known as the Duggan-Leonard-Theis plan), which was resoundingly defeated by lawmakers in November 2017.

Let’s take a closer look House Bill 4024 and what it seeks to do.

  1. Caps no-fault personal injury protection (PIP) benefits.

Insureds could select a $250,000 limit or a $500,000 no-fault PIP insurance limit, nixing the unlimited catastrophic injury coverage they currently receive for themselves and their family members. The capped amount would not just pertain to medical costs, but would also be used for replacement services, attendant-care benefits and wage-loss benefits.

House Bill 4024 also offers the choice of a “no maximum limit.” Basically, this would provide the same unlimited catastrophic injury coverage that all Michigan motorists currently have under the existing no-fault insurance system.

What is the concern about limiting no-fault benefits to $250,000 or $500,000? When a person is injured in a Michigan auto accident, no-fault insurance does not only pay their medical expenses. It also pays for any replacement services and attendant-care benefits that are necessary for the injured person’s recovery. In addition, many car crash victims seek no-fault wage-loss benefits because they cannot work due to their injuries. However, a cap of $250,000 or $500,000 is likely going to be wholly insufficient to cover all these costs.

Capping benefits also has other negative consequences:

  • Forces many car crash victims to seek coverage from their health insurance plan or from Medicare/Medicaid. When this happens, coverage is uncertain because such plans often include coverage exclusions or limitations.
  • Increases the number of auto accident lawsuits. Injured parties will have no choice but to bring a claim against the at-fault driver for the additional money that is needed, beyond the $250,000 or $500,000 cap, to pay their medical bills.
  • Forces injured individuals to pay out-of-pocket, using retirement, savings or college education funds to pay for necessary medical care. For those persons who do not have the funds to pay, it forces them into bankruptcy.
  1. Purportedly lowers auto insurance rates.

House Bill 4024 says Michigan motorists should see the following “average” insurance savings:

  • 40 percent for policies with a $250,000 cap.
  • 20 percent for policies with a $500,000 cap.
  • 10 percent for policies with “no maximum limit.”

Is it possible to legislate insurance rate reductions? Yes. But when you dig deeper into the language of House Bill 4024, you will see this on page 23: “The premium rates filed, and any subsequent premium rates filed by the insurer for personal protection insurance coverage for automobile insurance policies effective before 5 years after 90 days after the effective date of the amendatory act that added this section, must reflect savings expected from the amendments to this chapter made by the amendatory act that added this section ….”

Similar “5 year” language can be found on page 25 of the bill. Basically, this means that any savings would only be temporary.

Further, House Bill 4024 appears to give insurance companies an “out” when it comes to achieving the required rate reductions. The measure says an insurer that does not reach the required rate reduction can provide “[a] detailed explanation of the reasons for the insurer’s failure to achieve the required reductions and a demonstration using generally accepted and reasonable actuarial techniques that the required reductions are not justified because of requirements under subsection (1) or 1 or more of the following: (i) expected losses of the insurer from the provision of automobile insurance. (ii) inflation …. (iii) a change in an assessment imposed on an insurer ….”

There is also the possibility that any savings witnessed by policyholders could end up being lost two ways: 1) in legal costs, when more lawsuits are filed to collect medical expenses not paid by capped policies, and 2) in out-of-pocket costs for medical care and services not covered by capped policies.

  1. Imposes a medical provider fee schedule for auto accident claims.

House Bill 4024 sets forth a medical provider fee schedule that is 100 percent of the workers’ compensation fee schedule. This schedule is insufficient to guarantee that auto accident victims will have access to the quality medical care they need to recover from their injuries.

In fact, the Coalition Protecting Auto No-Fault (CPAN) says of such a fee schedule: These substantially lower rates will cause a disincentive for the best medical providers to render care to auto accident victims and will cause the unreimbursed portion of medical care to be shifted to other health care payment systems, including employer-provided health insurance and other insurance plans.”

Senate Bill 1: Where’s The Substance?

Senate Bill 1 lacks any substantive information at this time – and that is on purpose. Lawmakers have said they want to basically mold and create the measure as they move throughout the legislative session.

Here is one portion of Senate Bill 1: “It is the intent of the Legislature … to bring much needed cost controls to the no-fault system, thereby providing rate relief for consumers, reducing the number of uninsured drivers in this state, and incentivizing more automobile insurers to write business in this state.” Other sections follow with the same vague language repeated over and over: “It is the intent of the Legislature ….”

There are, however, a few things that Senate Bill 1 does make clear.

  • Insureds would be able to “choose an amount of personal injury protection coverage that suits the individual’s needs, lifestyle, and budget,” allowing insureds to “enjoy a corresponding savings on his or her automobile insurance premium that corresponds with the chosen benefit level.”
  • An “annual utilization review” would be conducted to “reduce overutilization of medical treatments, products, and services related to no-fault insurance claims in this state.” The review would be conducted by an “independent third party” who would “identify utilization above the usual range for the treatment based on medically accepted standards, with consequences for providers that knowingly provide false or misleading information.”
  • Persons over age 62 with lifetime healthcare benefits could opt out of no-fault insurance coverage, “to enjoy savings … when they effectively already have coverage for injuries in automobile accidents.” Presumably, this language refers to Medicare benefits.

Special No-Fault Committee

A special no-fault committee has been formed that will be responsible for drafting the House’s legislative reform measure (again, different from the ballot proposal in House Bill 4024). The committee will reportedly have the authority to take legislation directly to the House floor for consideration.

According to Rep. Jason Wentworth (R-Clare), who chairs the special committee, the House does not plan to introduce no-fault legislation anytime soon. Rather, the committee will hold hearings so that legislators from both sides of the aisle can become better educated on the issue of auto no-fault insurance.

In addition to Rep. Wentworth, the committee includes: Rep. Daire Rendon (R-Lake City), vice-chair; Rep. Donna Lasinski (D-Scio Twp), minority vice-chair; Rep. Lynn Afendoulis (R-Grand Rapids Twp); Rep. Kyra Bolden (D-Southfield); Rep. Ben Frederick (R-Owosso); Rep. Beau LaFave (R-Iron Mountain); Rep. Terry Sabo (D-Muskegon); and Rep. Karen Whitsett (D-Detroit).

Meanwhile, Michigan Attorney General Dana Nessel is set on tackling the growing problem of auto insurance fraud. She has established a new Auto Insurance Fraud Specialist position within the AG’s Office. Keisha Glenn, a former Wayne County assistant prosecuting attorney and lawyer at Hackney Grover in Detroit, has been tapped for the position.

Stay with Christensen Law for updates on the renewed push to reform Michigan’s auto no-fault insurance system.

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If you have questions about your auto no-fault policy or have been injured in a motor vehicle crash, contact the experienced Michigan auto accident lawyers at Christensen Law today.