By Nicholas Andrews
In early 2019, the Michigan Legislature passed Senate Bill 1, which made sweeping changes to the state's automobile insurance landscape. The controversial legislation - which has drawn justified scrutiny for its confusing and even contradictory language, its lobbyist-driven agenda, and for the speed and secrecy of its passage - fundamentally altered Michigan's signature No-Fault automobile insurance law.
The 2019 revisions were ostensibly designed to lower premiums for Michigan motorists, but what has happened instead is that they've lost vital protections - and are now exposed to potentially devastating financial outcomes.
Personal Injury Protection, or PIP, coverage "choice" was lauded by the bill's advocates as a positive development for Michigan residents. But many now simply don't have nearly the level of coverage they need to protect against crippling economic losses in the event of an accident.
The problems don't end there. Worst of all is the impact on Michigan's most vulnerable: the growing list of approximately 18,000 Michiganders who have suffered catastrophic, life-changing injuries in a motor vehicle crash and may now see the quality of their care diminished in concerning and even dangerous ways.
The changes in Senate Bill 1 were rolled out in stages. Portions of the law went into effect on June 11, 2019. The second milestone date was July 2, 2020, when consumers could begin selecting coverage levels and purchasing newly revised insurance policies. A new round of changes is set to take effect on July 2, 2021.
Upcoming changes
Section 3107 of the No-Fault Act famously affirms that injured parties in a Michigan auto accident are entitled to recover "allowable expenses" based on "reasonable charges" for "reasonably necessary" care.
While broad, this language has been critical in safeguarding those who have suffered catastrophic injuries, ensuring they receive the essential and often life-sustaining medical, therapeutic, and rehabilitative care they need.
Although the pricing guidelines of Section 3107 are still controlled by the "reasonableness" standard, the new legislation does an end run around the clear intent of the law by introducing strict new price controls and seemingly arbitrary caps on what care providers can charge for their services.
As of July 2, most medical services providers will be limited to 55% of what they charged in 2019. Shockingly, that number is slated to go even lower in the years ahead. Along with additional Medicare fee schedule controls, the result is a profit and loss calculation that simply doesn't add up. Given that the median operating margin for a hospital is less than 3%, it's difficult to imagine how the state's healthcare institutions - or any business - would be able to make that work.
Another significant July 2 change is that family members of an injured patient (or anyone who had a pre-accident relationship with the patient) will be limited to a maximum of 56 hours of reimbursable attendant care per week. This change specifically targets those who have been catastrophically injured in an auto accident. For those who quite literally need around-the-clock care, these weekly limits are a potentially enormous change with far-reaching economic and medical implications.
Impact and incidentals
Perhaps unsurprisingly for hastily cobbled together legislation that was introduced and passed in a matter of hours, it has created a long list of problems - and unintended consequences.
Given that the standard of care provided by family members tends to be both less expensive and of a higher quality than that provided by outside parties, the overall cost of care will increase. Only instead of the financial burden falling on insurance companies who saw record profits in 2020, it will fall on the families who have already sacrificed so much and had their lives irrevocably altered by tragedy. Worse, there will be additional secondary costs that come with a lower quality of care. Something seemingly as simple as a poorly treated bed sore, for example, can be a persistent problem requiring specialized wound care, surgeries and hospitalizations.
It isn't just patients and their families who will be hurt by this law: a huge segment of the healthcare industry in Michigan could be seriously and perhaps irrevocably damaged. Many care providers will be forced to close, including some rehabilitation facilities that were a model for the country.
Perhaps the most galling feature of the changed law is the lack of a grandfather clause. It isn't just future accident victims who will be forced to suffer under the new system, but existing patients and care recipients. Insurance companies rated the premiums those patients paid based on the price structure under the old version of the law. Accident victims paid into that system with the promise and expectation of receiving a certain standard of care. Retroactively invalidating the terms of that contract to help fund a generous giveaway to the insurance industry on the backs of some of the state's most vulnerable residents isn't just breathtakingly cynical, it's craven.
Even before July 2, the disconnect between the narrative and the numbers has become clear. Promises of choice and savings are giving way to the reality of more risk for drivers, poorer care for accident victims, and a diminished Michigan healthcare industry.
Frustratingly, this legislation hasn't even achieved its stated goal of significantly lowering insurance rates for Michigan drivers. The result: small premium reductions in exchange for a massive boost in profits for big insurance companies. The expectation that insurance companies would nobly pass their higher profits and lower liability along to policyholders in any meaningful way seems misguided - even naïve.
Unfortunately, the changes that officially go into effect on July 2 mean that many Michigan residents and businesses will find themselves headed into a holiday weekend with the prospect of greater liability, poorer care, and more economic exposure. And that's clearly not something worth celebrating.
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Nicholas Andrews is a partner at Bloomfield Hills-based Liss, Seder, & Andrews PC, a team of No-Fault attorneys and litigators specializing in representing auto accident victims with significant brain and spinal cord injuries.
