Michigan House Republicans are planning a vote, perhaps as early as today – but I’ve just heard it is more likely to take place tomorrow – on new No-Fault reform legislation in lame duck. It is anticipated that lawmakers in the Michigan House of Representatives’ Insurance Committee will introduce a substitute bill for the No-Fault reform plan contained in Senate Bill 1014, which had been gathering dust since it passed the Senate earlier in June.

At the time, I denounced the proposals in SB 1014 – as well as those in its companion bill, Senate Bill 787 – explaining:

“The full Michigan Senate has passed two No-Fault bills – Senate Bill 787 and Senate Bill 1014 – which, if passed by the House and enacted into law, will substantially alter the rights and benefits guaranteed to car, truck and motorcycle accident victims.”

I fear the same is true, but even more so, if House Republicans get their way now and they’re able to ram through this next round of insurance-company sponsored No-Fault “reform” proposals onto an unsuspecting public in the lame duck legislative session.

Specifically, according to a draft of the anticipated, 58-page “House Substitute for Senate Bill No. 1014,” that I just finished reviewing, House GOP lawmakers aim to make these changes to the Michigan No-Fault system:

• Capping No-Fault benefits: Never ones to let a horrible, terrible, unpopular idea go by the wayside, the GOP is recycling the cornerstone of the failed Duggan-Theis-Leonard plan (House Bill 5013)(which was emphatically rejected in a 63-45 House vote) which is the $25,000 cap on all No-Fault insurance benefits.
• While most of the news media that is reporting on this bill calls this a $250,000 lower cap on No-Fault benefits, this is clearly incorrect. For the overwhelming majority of people who are seriously hurt in car accidents, $25,000 is all that they will have available to them for No-Fault PIP benefits. The remaining $225,000 is only for emergency room care, in a crass political effort to sway the powerful hospital association to support the legislation.
• That $25,000 in PIP No-Fault benefits is intended only as a “bridge” (Rep. Lana Theis’s words, not mine) from No-Fault insurance to private health insurance or to Medicaid and Medicare.
• Additionally, this draft bill is hugely punitive to innocent car accident injury victims if it turns out that an innocent and severely injured car accident victim is UNABLE to sue the wrongdoer, negligent driver who causes the car crash for medical expenses in “excess” of the $25,000 No-Fault cap. In other words, the innocent victim could be left to financial devastation and bankruptcy under the weight of hundreds of thousands of dollars in medical bills, while the at-fault driver who caused the crash gets full immunity and protection from the harms and medical bills that he or she caused.
• There is still the same games being played on promised savings – as in, there aren’t any. The savings will be temporary and uncertain (with a built-in loophole for auto insurers). For what Michigan motorists will be giving up, this lack of guarantees of savings is woefully inadequate, especially when compared with the massive profits that auto insurance companies will enjoy by unloading most of their No-Fault liability onto Medicaid or Medicare.
• Even drivers who choose to forfeit catastrophic injury coverage by voluntarily agreeing to cap their No-Fault benefits will still have to pay into the Michigan Catastrophic Claims Association (MCCA).
• New and unprecedented restrictions on family provided attendant care. (Draft page 40)
• Duping older drivers (62 years of age or older) into believing it’s safe to give up all of their No-Fault benefits and going onto Medicare (despite its inability to cover the treatment and care that car crash victims need) in return for an indefinite assurance of a “reduced automobile insurance premium rate.” Again, there is no guarantee of savings.  (Draft pages 40-42)

Dan Gilbert’s Grand Compromise on No-Fault Isn’t Much of One

The bill is being brought to a vote in lame duck largely through the efforts of Dan Gilbert, who senses that Republicans in lame duck might be more willing to take a vote on a bill that heavily favors the insurance companies over people.

But, on the bright side, the draft bill is expected to outlaw insurers’ use of non-driving-related factors such as sex, occupation, education level attained marital status and credit score in setting auto insurance prices. (Draft pages 6-8)

These are all things that I have been writing about for the last several years on the pages of this auto law blog.

Replacing catastrophic injury coverage with caps on No-Fault benefits

The most significant and most damaging aspect of the proposals in the draft substitute bill for SB 1014 is its proposal to allow drivers to forfeit their catastrophic injury coverage in return for No-Fault benefit caps that will result in shifting their medical care and costs to private health insurance, Medicaid and Medicare – or just going without necessary care and treatment.

Here are the caps on No-Fault benefits (“coverage levels for the personal protection insurance benefits”) that are expected to be proposed:

• $250,000 limit ($225,000 for emergency room medical care and $25,000 “for all other personal protection insurance benefits,” i.e., medical expenses, wage loss and replacement services. (New MCL 500.3109B(1)(A))
• $250,000 limit “on personal protection insurance benefits,” i.e., medical expenses, wage loss and replacement services. (New MCL 500.3109B(1)(B))
• $500,000 limit “on personal protection insurance benefits,” i.e., medical expenses, wage loss and replacement services. (New MCL 500.3109B(1)(C))
• “No maximum limit . . . on personal protection insurance benefits,” i.e., medical expenses, wage loss and replacement services. (New MCL 500.3109B(1)(D))(Draft pages 37-38, 43)

Promise of savings? Not a guarantee of savings that you can take to the bank

Below are the proposed “savings” that drivers will receive depending on what level of No-Fault benefits they choose:

• Average premium savings of 40% or greater for drivers who opt for $25,000 cap on post-ER benefits.
• Average premium savings of 30% or greater for drivers who opt for $250,000 cap on No-Fault benefits. (Presumably, even though it’s not stated in the draft.)
• Average premium savings of 20% or greater for drivers who opt for $500,000 cap.
• Average premium savings of 10% or greater for drivers who opt for no cap.

Significantly, the savings are “guaranteed” for only 5 years and auto insurers can squirm out of having to provide savings they can convince the Insurance Commissioner that the “required reductions in premiums . . . are not justified.”

(Source: Draft pages 55-56, 58)

Lest there be any confusion about the significance of the amount of savings being promised, the savings to drivers needs to be considered in light of what they’re giving up.

It also needs to be contrasted with the savings to auto insurers.

For instance, even if a driver saves 40%, he or she is still paying 60% of his or her current bill, yet he or she will have next to no coverage because they will be limited by the $25,000 post-ER cap on ALL No-Fault benefits (which means for the next three years and beyond, all medical bills and wage loss and replacement services will have to be paid for out of that $25,000 – which anyone and everyone knows is utterly impossible).

Additionally, the inadequacy of the 40% in savings for drivers becomes clear when one realizes that the No-Fault cap that triggers those savings allows an auto insurer to jettison approximately 95% of its No-Fault liability for benefits (e.g., No-Fault coverage liability dwindles from the $555,000 retention rate down to the measly $25,000 cap).

Still paying the Michigan Catastrophic Claims Association

Although there will be no more catastrophic coverage for drivers who opt for No-Fault caps, they will continue to have to pay money to the MCCA for that portion of the annual assessment that is “attributable to an adjustment for a deficiency in a previous period.” (Draft pages 26-27, 33-34, 36)

No-Fault medical-provider fee schedule

I’ve supported this idea for a long time. Not only will it do wonders in terms of reducing auto insurance rates by reducing No-Fault medical claim costs, but it will work miracles in terms of eradicating the out-of-control fraud that’s rotting the No-Fault system from the inside out.

In particular, I’ve agreed with the proposal from CPAN that a fee schedule pegged at 185% of the Workers’ Compensation fee is optimal.

Although the proposed draft bill to replace SB 1014 proposes a fee schedule, I believe it’s overly restrictive and unrealistically frugal.

Specifically, the draft bill provides that doctors, hospitals, medical providers who treat and care for car accident victims cannot be paid or reimbursed for “more than 100% of the amount for treatment, training, product, service or accommodation” under the Workers’ Compensation fee schedule.

However, the fee schedule will not apply to “trauma care” provided at a “Level I Trauma Care Center,” city hospitals in some communities and “emergency medical services rendered by an ambulance operation.”

(Source: Draft pages 38, 52-54)