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Michigan Insurance Companies Push Radical No-fault Auto Insurance Changes

— April 30, 2015
shutterstock_133129220Image: Shutterstock


Under the stated reason of lowering the state’s highest-in-the-nation rates, Michigan insurance companies push radical no-fault auto insurance changes. To that end, the insurance industry is generously donating to state legislators and it seems to be working. The controversial bills seem to have been fast-tracked having only one Senate hearing and three House hearings and a vote expected soon. I always get suspicious when major legislation gets fast-tracked.

Apparently, there’s a good reason to doubt the sincerity of the insurance industry in Michigan. The bills, if passed, would lower auto insurance rates by $100 per vehicle for only two years. First, let me point out the lack of logic in this move. Insurance companies have deep pockets and they love making them even deeper. Suddenly, we’re expected to believe they’ve had a change in heart and want to help their customers. Notice that the rate reduction is ludicrously low and only lasts for two years. What’s the catch?

The trade-off for this “generous” gift from the insurance industry comes in the form of radical and severe limitations that hit critically injured insureds hard in the healthcare. Hmmm. The smoke is clearing and what I see is a drastic reduction in the amounts Michigan’s “altruistic” insurance companies have to pay out under the current no-fault system.

At present, insurance companies pay for the first $535,000 of medical care for those injured in catastrophic accidents. Anything after that is covered by the Michigan Catastrophic Claims Association (funded by annual fees on car owners). This often means lifetime care for those with severe injuries, such as the young woman featured in the Michigan Health and Hospital Association’s TV commercial protesting the changes. The only reason she has even the limited mobility she has (after being paralyzed from the neck down) is the long-term rehabilitative care covered under the current system. Without it, she would be utterly unable to care for herself.

The MCCA currently pays for care for approximately 15,000 people. The proposed legislation would do away with the old MCCA; however, those 15,000 people would be grandfathered in under the old system for the rest of their lives. Gubernatorial appointees would run the new MCCA instead of the insurance industry.

The new fee schedule the legislation mandates covers payout rates to providers capped at 150% of the rates currently charged to Medicare. Area hospitals and providers are panicked as that means a reduction in annual insurance reimbursements of $1.2B. A counter-proposal of a 20% cut in reimbursement rates ($500M annually) was rejected.

In addition to these caps, the legislation calls for a cap on the hourly wage of family members who serve as home health care providers. Unless the family members are trained health care professionals, their pay would be limited to $15.00 per hour, possibly more if specialized care is required.

Many family members have to leave outside employment in order to care for critically injured loved ones. This egregious legislation not only creates a financial disaster for the state’s healthcare industry, but it puts a further burden on patients and their families. Capped rates could easily result in hospitals and private providers becoming unable to give the level of care needed by victims of auto accidents. This in turn, puts more of a burden on families of patients and, ultimately, the state itself.

If care is not available because providers can no longer afford to provide it or it’s so limited by caps that patients are not returned to the fullest extent of mobility and health possible under their individual circumstances, who steps in to help? Taxpayers, via state welfare agencies will have to come to the rescue. When family members who had to leave good jobs are limited in pay for caring for loved ones, programs such as food stamps and Medicaid must take up the slack.

Ultimately, the proposed changes cause far more damage than good. The only “good” I see is the ridiculous $100 per year premium reduction. Frankly, as a Michigan driver and taxpayer, I would rather pay the insurance rates I pay than see people receive limited services (or none at all) when they so desperately need the help.

The odd fast-tracking issue, the lack of logic behind the bills and the horrible impact on the people of Michigan apparently isn’t enough to satisfy the insurance industry and its paid-for political supporters. Just to make sure that Michiganders are well and truly shafted, the drafters added a $150,00 appropriation that will make the bills, if passed, immune to a citizen-led drive to repeal the law.

The final vote has yet been scheduled for the bills, SB 248-249. We’ll be following this issue as it unfolds.


No-fault auto insurance reform gets growing opposition

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