Monday, 20 May 2019

New no-fault auto insurance bill would allow complete opt-out of medical coverage – Crain’s Detroit Business

Senate Republicans on Tuesday plan to introduce a new no-fault insurance reform bill that would fundamentally change the 45-year-old system, allowing motorists with health insurance that covers auto accident injuries to opt out of personal injury protection altogether.

An amended Senate Bill 1 set to be introduced Tuesday in the Senate Insurance and Banking Committee would require insurance companies to sell at least three levels of medical coverage in auto no-fault policies:

  • $250,000 in personal injury protection (PIP) coverage.
  • $50,000 of PIP coverage paired with $200,000 of trauma coverage for emergency room critical care.
  • No PIP coverage as long as the driver has a health insurance plan that covers injuries sustained in an auto accident.

“They can buy any number of options above ($250,000). If an auto insurer wants to offer an unlimited (medical) plan, that would allowed under the bill,” said Sen. Aric Nesbitt, a Lawton Republican and sponsor of the bill.

The Republican-controlled Senate insurance committee has scheduled an 8:30 a.m. hearing Tuesday on Nesbitt’s amended bill, which was not yet available on the Legislature’s website Monday evening.

In an interview with Crain’s, Nesbitt outlined the broad outlines of legislation — the latest attempt in an years-long effort by state lawmakers to rein in Michigan’s highest-in-the-nation auto insurance premiums.

The legislation takes aim at the medical costs that Crain’s has documented are driving up premiums each year by capping costs for auto insurers and lowering their exposure to medical claims, while seeking to curtail the escalating number of lawsuits brought by injured drivers and their medical providers against insurance companies seeking payment.

Nesbitt equated the ala carte options for medical coverage to shopping for life insurance.

“Just like with life insurance, you can decide if you want a million dollars, $500,000 or $50,000 coverage,” Nesbitt said. “You see a lot of citizens — seniors — who are really paying for health insurance twice.”

The legislation also would impose the workers’ compensation fee schedule on hospitals, rehabilitation clinics and doctors who treat injuries sustained in an auto accident, curtailing the current system that allows them to seek reimbursement from insurance carriers for their highest rates.

Dearborn attorney Jarrod Anthony, who represents medical providers that routinely must sue to get paid by insurance companies, said a workers’ comp-level fee schedule is “price-fixing” that would put “a ton of doctors” out of business.

“These doctors are pretty much going to be done — and no one’s going to be there to treat (injured motorists),” said Anthony, a partner at Anthony Paulovich & Worrall PLLC in Dearborn.

The ability for motorists to choose not to carry unlimited medical coverage mirrors Detroit Mayor Mike Duggan’s “driver’s choice” legislation that was defeated in the Michigan House in November 2017.

But unlike Duggan’s bill, Nesbitt’s legislation does not include guaranteed reductions in insurance premiums.

Nesbitt said current law should be sufficient to drive down rates because insurers will have to justify their premiums to the Michigan Department of Insurance and Financial Services based on losses from medical claims data.

Under current law, with these reforms, auto insurance companies would be forced to reduce their current rates,” Nesbitt said. “If you have full comp and collision and a $250,000 PIP option, I’d say your savings are going to be lower.”

Other cost-containment measures in the bill include creation of an auto insurance fraud task force within the Michigan State Police and prohibiting personal injury attorneys from having an ownership stake in medical clinics to which they send clients. The bill also would outlaw a practice known as “attendant care annuities” where attorneys get a percentage of a severely injured motorist’s hourly attendant care benefits for the rest of the client’s life, Nesbitt said.

“Our current system has been a trial attorney’s dream, particularly in the southeast corner of the state,” said Nesbitt, who represents Van Buren and Allegan counties and part of Kent County.

The legislation also does not address the use of non-driving factors such as ZIP code, creditworthiness, gender and education level that insurance companies use to assess risk and set premiums for each driver.

Democratic Gov. Gretchen Whitmer has called non-driving rating factors a form of “discrimination” and said as a candidate for governor that outlawing them “has got to be part of the solution.” Last week, Whitmer ordered the state insurance department to study how insurers use non-driving factors to set insurance prices.

Nesbitt said eliminating mandatory PIP will eliminate the full annual assessment each vehicle is charged for the Michigan Catastrophic Claims Association, which reimburses insurers for claims exceeding $550,000.

“The goal would be to wind it down,” Nesbitt said.

The MCCA’s annual per-vehicle assessment of $192 is set to rise to $220 on July 1, an increase that’s been attributed to a “volatile investment market” and rising medical claims. Under state law, the threshold for insurers to seek reimbursement from the MCCA is set to rise to $580,000 on July 1.

Under Nesbitt’s bill, motorists would still be required to pay the MCCA’s annual shortfall in liabilities exceeding assets. For the upcoming $220 assessment, the debt amounts to $43 per vehicle, according to the Livonia-based MCCA.

“The fee schedule should lower that liability quite significantly,” Nesbitt said.

The legislation would require the MCCA to issue rebates to motorists if its assets ever exceed 120 percent of the liabilities, Nesbitt said.

The Coalition Protecting Auto No-Fault (CPAN), a group representing medical providers and personal injury attorneys, blasted Nebsitt’s bill as “an insurance industry giveaway” that has no guaranteed rate relief for motorists.

“The auto insurance industry in Michigan is weakly regulated compared to other states — until that changes, drivers will continue to pay exorbitant rates with no relief in sight,” said John Cornack, president of CPAN and founder of the Eisenhower Center brain injury rehabilitation center in Ann Arbor. “Instead of rushing to eliminate essential care for critically injured accident victims, Michigan legislators should be looking at increasing consumer protections and holding the auto insurance industry accountable for its discriminatory practices.”


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