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Detroit drivers deserve better than D-Insurance

Mayor Duggan’s D-Insurance includes woefully inadequate caps, managed care and insurance companies ‘playing doctor’ by requiring ‘preauthorization’ for medical care and treatment

Detroit drivers pay too much – way too much – for Michigan auto No Fault insurance.

But Mayor Mike Duggan is intent on pursuing plans that will make things far worse for Detroiters, and especially for those seriously injured in automobile accidents.

Detroit deserves – and desperately needs – better.

As readers of my auto lawyer blog know, I have been a very vocal and serious critic of the D-Insurance proposal.

I thought the proposed low-cost auto insurance plan was dangerous and a bad deal for Detroit for the following reasons:

  • Car accident victims who are seriously and/or catastrophically injured will be denied the medical care and treatment they need because all medically necessary – and unlimited – medical benefit coverage they’re currently legally guaranteed under Michigan’s No Fault Law will be replaced by woefully inadequate caps, managed care and insurance companies playing doctor by requiring “preauthorization” for necessary medical care and treatment.
  • Where is the promised savings? There is currently no guarantee of meaningful, long-term savings for Detroit drivers. Plus, with all of the enormous cost shifts that will occur as a result of the new and very low caps on No Fault medical benefits, there’s a good chance the D-Insurance plan will do more financial harm than good.
  • With all its misguided focus on recklessly capping No Fault medical benefits and forcing managed care on auto accident victims who should be able to choose their own doctors, the D-Insurance plan inexplicably ignores the most effective solution for the issue Mayor Duggan has repeatedly insisted is driving the Detroit automobile insurance problem: Implementing a truly fair No Fault medical-provider fee schedule to substantially lower No Fault medical claim costs. This will do far more to reduce high auto insurance prices for Detroit consumers.

I recently read The Detroit News’s reporting that Mayor Duggan is “not giving up on” his “D-Insurance program” – and given rumors that the mayor will address the issue in his upcoming State of the City address –  I think now’s the time to restart the conversation about what Detroit drivers truly need – and deserve – in a plan that would actually fix the problem.

Today, I will discuss the first two of my points and, tomorrow, I’ll address why No Fault medical-provider fee schedules are an effective solution that will make auto insurance more affordable for Detroit residents.

Why D-Insurance leaves Detroit drivers dangerously underinsured, without adequate No Fault coverage and protection in the event of a car accident

 In April and May 2015, Detroit Mayor Mike Duggan started to publicly roll out details about his D-Insurance Plan.

However, the specific terms did not become official until they were made part of a formal piece of legislation, which came to be known as “Substitute for Senate Bill 288,” which was voted out of the Senate Insurance Committee on June 9, 2015.

Using the specific terms of the official version of Mayor Duggan’s D-Insurance plan, I discuss below the reasons why the proposal leaves Motor City drivers dangerously underinsured, without adequate No Fault coverage and protection in the event of a car accident (page #s below refer to the Committee’s “Substitute for Senate Bill 288”):

  • No ‘full, unlimited No-Fault benefits.’ Under the D-Insurance Plan, an automobile accident victim is entitled to “only limited [No Fault] benefits and not full, unlimited No-Fault benefits.” (Page 7)
  • No catastrophic coverage. Under the D-Insurance Plan, an auto accident victim who suffers a catastrophic injury will not be covered by the Michigan Catastrophic Claims Association. But, instead, he or she will need to rely on his or her health insurance company, on Medicaid/Medicare, on his or her personal services, resources and/or assets, on lawsuits against the at-fault drivers and/or go without the treatment and services they need for their care, recovery and rehabilitation.
  • $25,000 cap on all No Fault benefits for non-critical medical care, wage loss AND replacement services. Under the D-Insurance Plan, an auto accident victim’s combined No Fault medical, wage loss and replacement services benefits would be capped at $25,000 (page 20). In other words, if after leaving the hospital, a crash victim needs an MRI, a back or neck surgery, requires physical and/or occupational therapy, attendant care post-surgery, replacement services and reimbursement for lost wages, then his or her auto insurer will be required to pay only $25,000 of those costs. After this, it is essentially financial ruin, personal bankruptcy and Medicaid for any injured Detroit auto accident victim who did not have great private health insurance beforehand – this includes most of the people in Detroit struggling to pay high car insurance prices and find good jobs.
  • $250,000 cap on “critical care” medical costs. Under the D-Insurance Plan, an injured auto accident victim’s “critical care” coverage (i.e., emergency room and/or trauma center until the point that the victim is stabilized) is capped at $250,000 (page 20). Significantly, the $250,000 in coverage does not transfer over to and/or cover non- “critical” medical care or “charges relate[d] to post-stabilization services.” Once an auto accident victim is “stabilized,” i.e., the “individual can safely be discharged or transferred to another acute care hospital or trauma center or to a rehabilitation or other facility,” then the $250,000 in “critical care” coverage terminates – regardless of how much of the $250,000 may have gone unspent.
  • No choice of doctor for auto accident victims under D-Insurance’s “managed care” system. Under the D-Insurance Plan, an auto accident victim could be forced into an auto insurer’s “limited provider network,” i.e., managed care, where “the insurer may require an injured individual … to obtain” treatment and care “from a provider … that is part of the [insurer’s] limited provider network” (page 25). As an auto accident attorney, I believe this is one of the ugliest and nastiest parts of this plan. I see the doctors that are routinely selected by insurance companies already and the harm they do finding nothing wrong with even the most seriously injured when they perform compulsory insurance medical exams. As an attorney, I have every reason to believe these doctors will do anything they can to keep people within the $25,000 total No Fault cap, even when diagnostic testing and referral to medical specialists is desperately needed.
  • Car insurance companies “playing doctor”: No medical care without ‘preauthorization.’ Under the D-Insurance Plan, an auto accident victim could be required “to obtain preauthorization from the insurer” before receiving treatment and care – even from “an in-network provider.” Significantly, when an insurer requires “preauthorization,” the insurer “shall only grant preauthorization if medical necessity has been demonstrated.” (Page 26)
  • Pay if you don’t play: Car accident victims could financially responsible for their own medical bills if they fail to first seek “preauthorization” from the car insurance company. Under the D-Insurance Plan, if an auto insurer requires “preauthorization” before an auto accident victim/insured receives medical treatment and/or care, but the crash victim fails “to obtain written preauthorization,” then that “renders a claim for payment [for the victim’s treatment or care] void,” which means the victim will become financially liable for the bill. (Page 26)

Why D-Insurance is likely to leave Detroiters worse off financially

There are two overarching ways in which D-Insurance will fail to provide the financial relief to Motor City drivers that the plan’s proponents suggest:

  • No guaranteed savings. The Senate Insurance Committee’s version of the D-Insurance Plan (“Substitute for Senate Bill No. 288”) contains no guarantee of meaningful, long-term savings for consumers. Considering the incredibly important legal rights that will be taken away from Detroiters, this failure to guarantee savings on auto insurance is unconscionable.  I would oppose this plan regardless, but if there were truly massive savings available under D-Insurance, I could at least see the argument as to why it is necessary to help Detroit. Without these savings guarantees, it is simply an insurance company’s wish list, being forced down the throats of those who depend on auto No Fault insurance the most, and who are least able to manage without it.
  • Financially-adverse side effects of capping No Fault medical benefits. Contrary to the perception advanced by the advocates of D-Insurance, capping No Fault medical benefits (especially at the abysmally inadequate levels proposed in the D-Insurance Plan) does not occur in a vacuum. The cost of providing medical care to car accident victims – including for catastrophic injuries – doesn’t just disappear with the imposition of caps. Those costs go elsewhere. They shift. And it’s the adverse financial impact of that cost shift – which the D-Insurance proponents conveniently fail to address – that has the potential to be financially crippling for automobile accident victims. As former Michigan Insurance Commissioner Thomas C. Jones said, in the early days of Michigan No Fault, when the insurance companies began pushing to eliminate No Fault’s guarantee of unlimited medical benefits in favor benefit caps: Capping No Fault medical benefits would cause the cost of paying for auto accident-related medical benefits to “be shifted forward to the injured individual through inadequate medical care, through inadequate rehabilitation, through increased health insurance costs, or through total financial ruin of some individuals, and finally onto public assistance programs.” Moreover, he said, capping No Fault medical benefits “would simply result in a renewed increase in tort cases as people were required to sue for benefits denied by a limitation on medical and rehabilitation expenses.” (“No-Fault Insurance In Michigan: Consumer Attitudes And Performance,” Thomas C. Jones, Michigan Insurance Commissioner, April 10, 1978, Pages 76-77)

Below are examples of the adverse side effects that capping No Fault medical benefits will have on consumers, taxpayers and auto accident victims:

  • Increased health insurance costs: Good jobs is the #1 issue for Detroiters.  Good jobs are hard to find in Detroit.  D-Insurance will make them harder to find. Injured auto accident victims will be turning to their health insurance for coverage of their motor vehicle crash-related medical expenses (which will run into the millions of dollars), health insurers will be increasing their prices to adjust to the increased risk they face.  That increases the costs of providing health insurance on employers, and makes good jobs harder to find.
  • Increased Medicare and Medicaid tax burdens for taxpayers. As more people will be turning to Medicaid and/or Medicare for coverage of their crash-related medical expenses (which could run into the millions of dollars), the burden on taxpayers could increase by the hundreds of millions of dollars. Consider that when a statewide $1 million cap on No Fault medical benefits was proposed in 2013 in House Bill 4612 (which still allowed $725,000 more in medical benefits coverage than does the D-Insurance plan), the House Fiscal Agency estimated that the cost for just the catastrophic claims over $1 million would result in an approximate $630 million cost shift to Medicaid (Page 10 of the House Fiscal Agency’s 10/22/2013 “Legislative Analysis” of HB 4612). Significantly, Medicaid won’t cover many of the necessary products, services and accommodations that are covered by Michigan’s No Fault Law. “[T]he state’s Medicaid program does not provide coverage for bill review, home purchase or modification, replacement services, van purchase or modification, wage loss or survivor’s loss, and various other products, services, and accommodations covered under the current no-fault law …” (Page 16 of the House Fiscal Agency’s 10/22/2013 “Legislative Analysis” of HB 4612)
  • Increased out-of-pocket costs for automobile accident victims. Crash victims and their families will have to pay out-of-pocket for crash-related medical expenses, which will have the following adverse consequences: Draining personal savings, resources and assets; taking on debt; declaring bankruptcy. Notably, the medical bankruptcy rate in the U.S. is already approximately 57% (i.e., approximately 57% of all bankruptcies are based on medical debt).
  • Increased legal costs. More people will be forced to hire auto accident lawyers like myself and more lawsuits will be filed, clogging the courts unnecessarily. When a crash victim’s crash-related medical expenses exceed the D-Insurance plan’s cap, the auto accident victim will be forced to sue the at-fault driver for coverage of the victim’s medical expenses that are in “excess” of the cap.
  • Increased auto insurance costs. As litigation over medical benefits in “excess” of the D-Insurance plan’s medical-benefits cap increases, drivers will protect themselves against “excess” medical liability by purchasing liability policies and uninsured and underinsured motorist policies with higher limits – and thus, with higher auto insurance price tags to plug the huge gaps that D-Insurance will create. Additionally, as medical bills and medical debt grows, this will affect and lower car crash victims’ credit ratings, which – because of the ugly, but quite legal way, in which auto insurance companies now use credit-scoring – will again ultimately lead to higher auto insurance prices. As noted above, the medical bankruptcy rate in the U.S. is already approximately 57% (i.e., approximately 57% of all bankruptcies are based on medical debt).

Tomorrow, I’ll discuss how implementing a No Fault medical-provider fee schedule to lower No Fault medical claim costs and, thus, reduce prices for consumers.  D-Insurance is not the solution Detroit needs to lower auto insurance prices.

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