No-Fault Insurance in Debate

More and more is being written about the battle in Michigan over the unlimited no fault benefit.  This article addresses how rates are impacted by this lifetime benefit under automobile insurance.

Joan Liebrock, CISR

The debate about whether to end Michigan’s lifetime medical benefit on auto insurance policies rages on, and has led to dueling billboard messages, a lawsuit and a flurry of differing reports from advocacy groups.

Legislation that would end the unlimited, no-fault benefit has stalled since October, however.

State Sen. Joe Hune, R-Hamburg Township, has been at the center of the debate — and the recipient of heated criticism — for his bill that would end the lifetime benefit and allow customers to choose up to $5 million in medical coverage.

Ending Michigan’s unlimited no-fault insurance benefit “without a doubt” would lower rates because it would boost competition, Hune, chairman of the Senate Insurance Committee, said in a recent interview at the Daily Press & Argus offices.

Hune’s Senate Bill 649 was introduced in September but hasn’t moved since that time.

Hune called claims that insurers wouldn’t pass along savings to customers “absolute hogwash,” noting that the state has the ability to declare rate increases unfair.

He said auto insurance rates are going up due to medical costs.

“Allowing customers and my constituents a choice in what they’re buying, particularly to let them save a few bucks, is, I think, paramount. My whole philosophy is to give people their own power to choose instead of the long arms of government holding you by the neck, saying, ‘This is what you have to buy,’ ” Hune said.

House Bill 4936 has made the most progress in Lansing. That bill would end the unlimited benefit but give customers a choice of medical coverage ranging from $500,000 up to $5 million.

The House bill was approved in the House Insurance Committee last October.

It includes a $50,000 appropriation from the state’s general fund to produce informational pamphlets and issue a report to the Legislature.

Bills signed into law with appropriations are not subject to referendum because appropriations cannot be contested by voters — something that, on its own, has enraged critics.

AAA Michigan said it raised its premium rates an average 20 percent in the current six-month coverage period based on an increase imposed by the Michigan Catastrophic Claims Association and an increase in the cost of medical services, said Nancy Cain, AAA Michigan spokeswoman.

The MCCA reimburses companies that provide no-fault insurance for automobiles for each personal injury claim paid in excess of $500,000.

The assessments are passed on to policyholders.

The current assessment is $145 per vehicle. That rate, in effect through June 30, was a $1.91 increase over the prior rate, according to an MCCA release.

The Coalition Protecting Auto No-Fault, or CPAN, said there is no way to know if insurance increases are due to the no-fault medical benefit because the MCCA doesn’t make its balance sheet public.

CPAN has filed a Freedom of Information Act lawsuit in Ingham County Circuit Court seeking access to the MCCA’s financial data.

“There’s still no proof that we even have a problem,” said CPAN President John Cornack, CEO of the Eisenhower Rehabilitation Center in Ann Arbor.

“For the most part, they’re spreading rhetoric at some level, and we’re trying to get the transparency issues fixed to see how are they actually projecting their money,” Cornack added.

Hune said the lifetime medical benefit has become a “cash cow” to the medical industry, which he said overprescribes and overcharges when patients use no-fault coverage.

“They’ve readily admitted, ‘This is our cash cow. This is where we’re making all our money. This is where we make up the bulk of our additional revenue,’ ” Hune said.

Cornack said physicians bill for services under the no-fault benefit the same as they would under private policies, and that the no-fault system has the same checks and balances.

“We’re health-care providers. We have to do the best we can for people,” he said.

Michigan is the only state that provides unlimited no-fault medical benefit on insurance policies.

Hune said New Jersey has the next-highest medical coverage on insurance plans at $250,000, and that other states have created cost-effective systems for covering catastrophic injuries from car accidents.

Several other states, including New Jersey, charge more for personal injury coverage but provide less coverage than Michigan policies do, the opponents argued.

Hune singled out Brighton-based WillowBrook Rehabilitation Services for what he said is a $350 round-trip fee the rehabilitation center charges its patients. He said the Livingston Essential Transportation Service can provide the same service for patients for a few dollars.

“It was 80 times more than what you have to pay for at LETS with the same service,” Hune said.

WillowBrook provides transportation for inpatients to and from the center for appointments as part of room-and-board costs, explained Kathy Coll, WillowBrook’s admissions director.

WillowBrook’s transportation system is specially equipped to handle patents’ needs, something a bus system open to the general public cannot provide, Coll added.

“I can’t imagine a trip costing $350. I can imagine it maybe if somebody’s physician was in Traverse City,” she said.

Under the no-fault legislation, insurers would no longer have to pay into the MCCA fund on behalf of clients, putting lifetime coverage for existing medical claims for catastrophic injuries in jeopardy, a recent Anderson Economic Group study found.

The study estimated between 638-765 catastrophic claims each year would have insufficient coverage if the legislation becomes law.

An October report by the Coalition for Auto Insurance Reform, meanwhile, found the current personal injury system financially “unsustainable,” and that revamping the law would result in savings to consumers and boost the state economy.

The coalition’s report said medical costs account for 40 percent of car insurance premiums.

Contact Daily Press & Argus reporter Christopher Behnan at (517) 548-7108 or at cbehnan@gannett.com.

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