As Michigan legislators push for a no-fault auto insurance system in the state, various interest groups in the region have taken sides on whether the proposal should be passed.
While healthcare services and trial attorneys in the region that serve car crash victims have stood up against the proposal – which they believe could drastically reduce how much they can charge - the auto insurance industry and the state Chamber of Commerce have praised House Bill 5013, which was proposed by Detroit Mayor Mike Duggan and House Speaker Tom Leonard.
The Duggan-Leonard plan suggests the creation of a three-tier system of coverage for personal injury protection. The first tier retains Michigan’s current unlimited medical benefits, while the second tier allows drivers to purchase a lower level of coverage capped at $250,000 or $500,000. Purchases exceeding the caps would be shifted to the third tier – private or government health insurance. Hearings are set to begin tomorrow in the House Insurance Committee on the bipartisan plan proposed last week. The plan was put forward as a way to moderate Michigan’s high auto insurance rates.
“At $250,000, you’re never going to touch the health carrier,” Insurance Institute of Michigan executive director Pete Kuhnmuench told Crain’s Detroit Business. “. . . There would be a cost shift, but you’re paying that health care premium anyways.”
The $250,000 cap is further divided into two coverage caps – $225,000 for “an emergency medical condition and related emergency medical care only,” and $25,000 for all other personal injury benefits, the bill stated.
“There is no such thing as a $250,000 lower cap — it’s really just $25,000,” commented Michigan Auto Law attorney Steven Gursten. “For Duggan, that is going to kill his constituents.”
Gursten believes that once the House Bill is passed, it would result in an “enormous” cost shift to employer-provided health insurance plans and Medicaid.
“If you don’t have great health insurance, which many people don’t, then you’re going to be blowing through personal savings, declaring personal bankruptcy and ending up on Medicaid,” he explained.
Duggan stated that the cost-containment measures in the bill will lower expenses, which should lead to a “minimal impact” on employer-provided plans. He then cited other states, wherein “auto accidents are a very small piece of any employer’s overall health care cost.”
HB 5013 also sets a Medicare fee schedule for auto insurance, which could considerably lower costs in the system – it could achieve as much as 20% in cost reductions. This plan to set medical expenses at the Medicare payment level seeks to rectify Michigan’s lack of government-mandated and health insurer-negotiated pricing within its healthcare system.
Under the current system, a neck MRI in Detroit can cost auto insurers $3,258 – the same medical procedure claimed under the workers’ compensation system costs $770 and Medicare pays $484, the Insurance Institute of Michigan said.
“Why should an X-ray for a broken arm be any different if you got it from falling off your roof compared to an auto accident?” Kuhnmuench said.
The Michigan Health & Hospital Association (MHA), however, begs to differ on the matter. The industry’s lobbying arm opposes the bill, reasoning that medical providers would be paid “substantially less” for treating auto accident victims.
Duggan pointed out that Michigan is the only state that does not legally allow seniors to use the Medicare health insurance to cover the costs of their auto accident-related injuries.
“You’re forcing them to buy medical coverage they don’t need at $800 to $1,000 a year,” he said.
The plan Duggan and Leonard are proposing will allow Medicare recipients or retirees over 62 years of age with lifetime retirement health insurance to drop personal injury protection coverage.
Appel warned that swapping no-fault coverage for Medicare is not a fair trade.
“If you’re in a serious auto accident ... Medicare is not going to pay for your family to take care of you,” Appel pointed out. “If Medicare paid for long-term care, we wouldn’t need Medicaid the way we do.”
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