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No Fault reform will increase consumers health insurance costs

Health insurance costs are already on the rise and they will likely continue going up in response to the requirements of the federal Affordable Care Act.

But that’s just the tip of the iceberg.

Once health insurance companies realize the extent of the new obligations that No Fault reform is sending their way, health insurance costs are going to take off.

Whereas the Michigan Catastrophic Claims Association currently pays for the unlimited, lifetime No Fault medical benefits of catastrophically injured auto accident victims (using funds paid for by auto insurance consumers through assessments), No Fault reform will shift that responsibility to the health insurance companies.

Specifically, an auto accident victim’s health insurance company will be responsible for paying the victim’s $1 million-plus, unlimited, lifetime No Fault medical benefits as soon as the victim’s medical costs exceed HB 4612’s proposed $1 million cap.

Given the hundreds of millions of dollars paid out on catastrophic claims every year ($947 million in 2012 and $927 in 2011, according to press releases on the MCCA’s web site, http://www.michigancatastrophic.com/) and the fact that those catastrophic claims costs will now be the responsibility of health insurers, it is reasonable expect that No Fault reform will increase consumers’ health insurance costs in two ways:

  1. Health insurers who specifically exclude auto coverage now, but choose to extend coverage post-reform coverage will naturally increase rates to account for new auto claims – for victims who have opted to coordinate medical coverage and for catastrophically injured victims whose accident-related medical costs have exceeded the $1 million cap.
  2. Health insurers who currently cover auto-accident-related injuries will increase rates in order to have the reserves to cover the claims of catastrophically injured victims whose accident-related medical costs have exceeded the $1 million cap.
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