(July 2 marks the beginning of a concerning new paradigm in Michigan auto insurance and healthcare)
When the Michigan Legislature passed Senate Bill 1 in 2019, they began a process which would result in profound changes to the state’s automobile insurance landscape. The legislation, which was criticized for its confusing and even contradictory language, was a gift to insurance lobbyists. Passed literally overnight, the bill would dramatically alter Michigan’s unique No-Fault automobile insurance law.
Some of the earliest changes went into effect almost immediately—on June 11, 2019. Additional changes became official on July 2, 2020, the date when Michigan residents were able to choose from a new selection of coverage levels. A new (and potentially more dramatic) series of changes is set to take effect on July 2, 2021.
The goal of the 2019 legislation was (supposedly) to lower Michigan’s auto insurance premiums. While premiums have decreased somewhat, Michigan motorists have lost critically important legal, financial and medical protections—a poor and potentially catastrophic trade-off. The revised law now includes new consumer options for Personal Injury Protection (PIP) coverage: Michigan residents can now select what level of personal protection insurance to purchase. While this new flexibility and personal choice was presented as a positive development by the bill’s supporters, far too many Michigan drivers are now entirely unprepared and under-covered for a worst-case scenario. Even a modest accident can have devastating economic consequences, and a serious accident can be a ruinous and life altering event, even if the injured party recovers.
One of the most contemptible aspects of these changes is that Michigan’s most vulnerable—the tragically long and growing list of the 18,000+ residents who have suffered catastrophic, life-changing injuries in an auto accident—who rely on the sometimes life-sustaining medical or therapeutic care they receive could see the quality of that care degraded and the availability of that care reduced or eliminated.
• Big changes
Under the original language of Michigan’s No-Fault Act, those who have been injured in an auto accident can recover “allowable expenses” based on “reasonable charges” for “reasonably necessary” care. While the “reasonableness” standard still applies under the revised version of the legislation, the addition of onerous new price controls and seemingly nonsensical caps on the amount that medical, therapeutic and rehabilitative care providers can charge cuts the legs out from under the clear intent of the original bill.
After July 2, many healthcare providers will be restricted to charging a maximum of 55% of what they charged for the exact same services in 2019. That massive change is only the beginning: that 55% limit is scheduled to drop even lower in the future. Factoring in additional Medicare fee schedule controls, and the fact that the median operating margin for hospitals is less than 3%, and it doesn’t take a CFO to recognize that the numbers simply don’t add up. Like most businesses, many of Michigan’s healthcare institutions simply won’t be able to accommodate a cut that dramatic and continue to operate.
July 2 also marks the day when new rules about attendant care go into effect. As of that date, anyone who had a pre-accident relationship with the patient (typically family members and close friends) can only be reimbursed for a maximum of 56 hours of weekly attendant care. This directly targets patients who have been catastrophically injured in an auto accident—and the families that so often care for them. Many of them require 24/7 care, and these new reimbursement limits don’t make sense either medically or financially.
• Lasting impact
Whether it was the speed with which it was passed or the haphazard way it was written, the legislative revisions to the No Fault Act have created several potentially serious problems, as well as some unintended consequences that could further impact Michigan residents and healthcare providers.
First, because the attendant care provided by family members tends to cost less and be of a higher quality than similar care provided by outside parties, the total cost of care and the burden on families is certain to increase. It’s important to note that it is the families of accident victims who will be bearing that burden—and not the insurance companies celebrating their record 2020 profits. And, because an overall lower quality of care invariably leads to complications and additional (and often expensive) treatments, the already significant projected cost increases are almost certainly too conservative.
The damage won’t be limited to patients and their families. Michigan’s healthcare industry will also take a significant hit. Many providers—including some who have been a national model for rehabilitation and care of traumatic injuries—will be forced to shut their doors.
One of the most frustrating (and transparently cynical) characteristics of the new revisions to the existing law is the conspicuous absence of any kind of retroactive protection or grandfather clause. Starting on July 2nd, future auto accident victims will lose the critical medical and financial protections that have been available to them in the past. But existing patients and care recipients will also lose the coverage they paid for and have relied on. Keep in mind, insurance companies structured past premiums based (in part) on the old version of the law. Policy holders paid those rates in exchange for promised protections—and now that is being stripped away from them. In that context, the decision to further enrich insurance companies by retroactively canceling agreed-upon conditions and penalizing some of the state’s most vulnerable residents is heartless, heartbreaking, and frankly infuriating.
Beyond the potential damage to individuals and institutions, the fact of the matter is that the narrative surrounding the revisions to the law has never squared with the numbers. Higher risk, poorer care and fewer options have been repackaged and sold as choice and personal freedom, and the promise of big savings for individuals has been overstated. Premiums have decreased a modest amount (for now), but Michigan drivers still pay one of the nation’s highest auto insurance rates—only now the protections those rates were designed to put in place have been stripped for parts. It’s both clear and unsurprising that insurance companies haven’t passed their higher profits and reduced exposure on to policyholders in any meaningful way.
The result of all of this is that the looming July 2nd deadline is an ominous one for many Michigan residents and businesses. Drivers will be at higher risk. Accident victims will get poorer care. And the Michigan healthcare industry will be dramatically impacted. That date might be the start of a holiday weekend, but this unfortunate legislation is certainly nothing to celebrate.
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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. A graduate of the Michigan State University College of Law, Andrews is a relentless litigator who is uncompromising when it comes to delivering meaningful results for clients and plays a critical role in shaping Michigan’s No-Fault auto laws.
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