Keep No Fault insurance benefits intact and save money – Let’s do both!
D-Insurance is a bad idea. Really bad. Last week, I wrote about the eight reasons Mayor Mike Duggan’s D-Insurance Plan is terrible. I also wrote about how it will actually further drive Detroiters out of the Motor City (remember, Mayor Duggan has tackled the issue of No Fault insurance in large part because he believes the high cost of auto insurance in Detroit is one of the reasons why people are leaving the city).
So how do we save D-Insurance? How do we make it work?
As an attorney, I write often on the subject of No Fault insurance, and I’ve previously written on what needs to happen in order for Michigan, as well as Detroit, to actually have lower car insurance prices.
How to save D-Insurance for Detroiters
I’ve always maintained we can have the best of both worlds: We can meaningfully lower the price of auto insurance for Detroiters and keep critical No Fault protections intact.
Below I will discuss my own solutions.
First, a quick recap. Under Duggan’s D-Insurance plan, Detroiters lose (and lose big) in the following ways:
- $25,000 No Fault cap: For all No Fault medical care, wage loss AND replacement services – combined.
- No choosing their own doctors: Auto accident victims would no longer be able to choose their own doctors. Instead, they would be required to see a doctor in their insurer’s “limited provider network.”
- Pre-authorization based on necessity: The D-Insurance plan will require “preauthorization” for medical treatment and care based on what the insurer determines is a “medical necessity.” This is an incredibly high threshold, and much higher than the “reasonably necessary” threshold that already produces so much litigation. As an auto attorney, I fear what this really means is that critical medical treatment can now easily be refused since pre-authorization is now required.
- No guarantee of long-term savings: Even though savings have been “promised,” none are guaranteed long-term by the D-Insurance Plan.
- And Detroiters are still paying more than everyone else: Duggan says he wants to keep people in Detroit, but his D-Insurance plan still leaves Detroiters paying more, even though they lose nearly everything that makes our current No Fault insurance system in Michigan so valuable.
With that being the case, the D-Insurance plan should be focusing on solutions that most directly and efficiently address the underlying problems that are driving up costs. Not imposing ugly and oppressive caps that effectively obliterate all meaningful No Fault benefits for critically injured automobile accident victims who need and depend upon No Fault most.
And certainly not by implementing an ugly managed care system that allows insurance companies to deny critical medical care by requiring pre-authorization.
In his press release announcing the results of the “D-Insurance: City of Detroit Insurance Company Feasibility Study,” Mayor Duggan said the cause for Detroit’s high auto insurance prices is the high number of No Fault medical claims filed and the costliness of those claims.
Specifically, the press release stated:
“[T]he predominant cause of the higher [auto insurance] premiums charged to Detroiters was expense associated with medical usage from Detroit [No Fault] policy holders. … [T]he higher rate of [No Fault] medical claims filed and the higher cost of these claims are the primary cause of the higher premiums paid by Detroiters.”
The press release went on to explain that the number of No Fault “medical claims” filed in Detroit was double the claims filed “in the suburbs” and that Detroit No Fault “medical claims” were “almost 70% more expensive” than “in the suburbs.”
The first thing we do, let’s kill all the lawyers
First, not all personal injury lawyers are bad or committing fraud. But a small number are giving the entire profession a black eye. Duggan has publicly talked about the problem Detroit has with certain “billboard lawyers.” And as much as I hate to write this, he’s right. There are some lawyers and law firms that are driving up the price of auto insurance and committing insurance fraud.
There is one thing we can do that will stop this, much more effectively than D-Insurance:
Focus on implementing a truly fair No Fault medical-provider fee schedule.
A truly fair No Fault fee schedule helps doctors, accident victims, and lowers costs
A truly fair fee schedule, combined with my 14 ideas to lower the price of auto insurance in Michigan, would give us the best of both worlds. It would meaningfully lower the price of auto insurance for Detroiters and it would keep the critical legal protections and insurance benefits of our No Fault system intact.
As I noted in a recent blog post, a fair No Fault medical-provider fee schedule may be just the compromise we need to accomplish the following important goals:
- Lower auto insurance prices.
- Preserve and protect the No Fault benefits that auto accident victims need;
- Remove a lot of the ugliness and PIP fraud that we all see from a small but growing number of lawyers and law firms.
- Streamline billing for medical providers, doctors and hospitals; facilitate prompt payment and eliminate the need for costly litigation.
- Eliminate most of the lawyer provider lawsuit industry entirely, as doctors and medical providers would be paid reasonably charges promptly.
The work has already been done to show how fee schedules could address one of the “primary cause[s]” of high Detroit auto insurance prices: “the higher cost” of No Fault medical claims.
Both the recently released D-Insurance Feasibility Study and previous No Fault plans show that No Fault medical-provider fee schedules could yield significant savings on No Fault medical costs.
Presumably, auto insurers would be expected to pass along these significant savings to consumers in the form of lower auto insurance prices. That said, I’d certainly feel more comfortable with legislation and with empowering our state’s insurance commissioner to ensure this happens.
Specifically, the studies mentioned above have found:
- Under a previously proposed No Fault medical-provider fee schedule, No Fault insurers stood to save 55%-64% annually on their No Fault medical benefit costs. For more, please check out Michigan Auto Law’s blog post, “Who will cash in on No Fault ‘reform’ fee schedule?”
- Based on the “Medical Procedure Reimbursement Amounts” calculations in “Attachment 1” of the recently release D-Insurance Feasibility Study, it’s clear that a No Fault medical provider fee schedule based on the reimbursement levels in the workers comp fee schedule would yield overall average savings of 53.45% on auto insurers’ No Fault medical benefit costs.
- Additionally, a truly fair No Fault medical fee schedule could address the other “primary cause of the higher [auto insurance] premiums charged to Detroiters”: the “higher rate of [No Fault] medical claims filed …”
- A truly fair fee schedule could remove the financial incentive that drives many “billboard lawyers” and “ambulance chasing” lawyers that are currently violating Michigan law and committing insurance fraud by participating in medical-legal referral services that drive up medical costs unnecessarily, with the lawyer then taking a one-third attorney fee on the medical bills.
- It would also end the networks of runner, cappers, soliciting “case managers” that are currently camped out in many Detroit-area hospital waiting rooms and who walk into patient’s rooms handing out lawyer business cards.
- It ends the misuse and abuse of our No Fault system by “ginning” up costly PIP claims and flooding the courts with needless first-party no fault lawsuits.
Mayor Duggan’s proposed D-Insurance solution to cure the “ailment” in Detroit also kills the patient. I submit that a truly fair fee schedule fixes the problem of “billboard lawyers” that Duggan has identified as a driver of costs far more effectively than the ideas Duggan has proposed. In fact, it is precisely the right cure for the “ailment” that Mayor Duggan described recently for MLive:
“I will take you up the street,” he told reporters, “and we will count the number of billboards we see in Detroit: ‘Have you had an accident? 1-800-Call This Number. Are you in pain?’ … There is a whole industry in this community that has figured out how to maximize the treatment. And I’m not saying it’s just Detroit. There are some other urban areas where the same thing is there. We are treating the problem. When you’re capped at $25,000, you’re no longer motivated to do it up to $200,000 because after $25,000, you’re going to get your standard Blue Cross or Medicare reimbursement.”
How a truly fair No Fault medical provider fee schedule could lower
Detroit auto insurance prices