Legislature considers changing no-fault system

By: Eric Czarnik | C&G Newspapers | Published April 30, 2015

Michigan’s no-fault insurance law, which has existed for around four decades, could face significant changes if the state Legislature and Gov. Rick Snyder pass through pending legislation, according to activists on both side of the debate.

Senate Bill 248 passed the Senate April 16, and a state House version passed in a House committee April 23. A full House vote is expected to take place soon.

The Republican-led Legislature has advanced the proposal for making changes to the no-fault system. Supporters say the plan will reduce insurance fraud and save auto insurance customers money.

However, a bipartisan group of politicians, including Republican Oakland County Executive L. Brooks Patterson, have voiced opposition to the plan. They expressed concerns over how the changes might affect survivors of catastrophic auto accidents and their long-term treatment and care when that exceeds the limits of typical insurance plans.

Dave Murray, deputy press secretary for Snyder, said “this is an issue that the administration is interested in and will be watching closely.”

“We never comment on bills until they've been presented to the governor and the staff has an opportunity to review them thoroughly,” Murray said. “Only then can the governor decide whether or not he can sign it.”

Tom Shields, spokesman for the Coalition for Auto Insurance Reform, said a recent Insure.com survey concluded that Michigan has the highest auto insurance rates in the country.

“It’s the most generous auto insurance in the country. However, it’s also been very expensive,” he said. “What this legislation tries to do is to keep those benefits, protect those generous benefits, but try to deliver them at a cost they can afford.”

Shields said the legislation, if passed, would include the following:
• It would make a new Michigan Catastrophic Claims Association that would be a public corporation instead of a nonprofit, and that new entity would cover future catastrophic patients. The existing MCCA would be relabeled as a legacy fund for catastrophic injury survivors who already exist.
• A fee schedule would cut reimbursements to health care providers, capping them at 150 percent of what Medicare pays.
• It would guarantee that auto insurance customers get a cost cut in their premiums of $100 per vehicle for two years.
• It would cap hourly rates for at-home attendant patient care, particularly with family-provided care.

Shields said the MCCA’s fund gets its money from auto insurance customers. Patients who qualify for no-fault claims would remain uncapped on how much cost in benefits they may receive, he said.

He also said the proposed legislation establishes a fraud bureau, adding that Michigan is currently one of seven states that does not have one.
“Fraud may account for up to 10 percent of your premium,” he said.

In an emailed op-ed, AAA Michigan President Steve Wagner said the proposals would make it easier for people to afford auto insurance.

“Under the current system, Michigan residents pay up to three times more for medical services when their auto insurance pays the bill instead of their health insurance,” Wagner said. “These costs are eventually passed on to drivers in the form of higher auto insurance premiums.”

On the other side of the debate, Oakland County Executive L. Brooks Patterson recently joined a bipartisan group of lawmakers at an April 27 press conference held at Beaumont Hospital, Royal Oak. At the event, auto crash survivors and health care workers announced their opposition to the proposed overhaul.

Patterson, who was injured in a 2012 auto accident, disclosed that his medical needs have been covered by worker’s compensation and not the MCCA.

But he touted the importance of the no-fault system and said there is no public cry for reform. He added that lawmakers should not be allowed to “break the gate” and gain access to the no-fault fund, which he compared to a “$20 billion pot of gold.”

“If there was a billion dollars, $2 billion, we wouldn't be here today,” he said. “Ten, 15, all the sudden 20 — it gets the attention of everybody. It gets the attention of the legislators who would love to tap into it — not for any nefarious reasons. They’d love to tap into it and fix the roads.

“But that’s not what it’s there for. That fund was created to protect you and the services you need as you go through the rest of your life.”

According to Shields, the MCCA fund has an estimated $18 billion-$20 billion in it, and it pays out more than $1 billion per year. The idea of legislators using the no-fault fund as a piggy bank would make no sense, since the MCCA has a fiduciary responsibility to pay all medical bills, Shields said.

“(The Legislature) could potentially do that with the current fund. They could always change the law,” he said. “To do that is just a backdoor tax increase. The MCCA would then have to charge more money to pay the bills.”

At the April 27 press conference to oppose the deal, the Coalition Protecting Auto No-Fault defined the proposed changes as devastating and said any promised cost savings to motorists would be slim to none compared to the challenges that accident survivors could see if their care options are limited.

CPAN President John Cornack said his group is committed to improving Michigan’s no-fault insurance system. He said it agrees with reducing fraud, but added that scenarios of insurers purposefully denying valid claims are not addressed in the proposed legislation and should be viewed as “equally as fraudulent as the individual who files a false claim.”

“Our leadership was holding promising discussion with members of the insurance industry on measures that would increase accountability, cut costs and reduce fraud,” he said. “So we were there. We weren’t saying no. We were saying, ‘How do we make this better?’”

Cornack called the proposal as it stood “misguided” and said it “would undercut the state’s nationally recognized system of care for our accident victims” by drastically cutting reimbursements.

“The governor needs to listen to our words and understand that being a leader is not easy — it took 43 years to make this work,” Cornack said. “We’re doing a fantastic job, and we’d really like it to stay that way.”

Learn more about the Coalition Protecting Auto No-Fault by visiting www.cpan.us. Find out more about AAA Michigan by visiting www.michigan.aaa.com. Learn more about the Coalition for Auto Insurance Reform by visiting coalitionforautoinsurancereform.com.