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New study highlights dangers of so-called No-Fault ‘reform’

September 21, 2011 by Steven M. Gursten

Proposed changes of Michigan’s No-Fault law will eliminate thousands of jobs, increase costs, and deprive 800 car accident victims of necessary medical care every year

The giant boondoggle to the state’s auto insurance companies, disguised as “PIP Choice” has been obvious to many insurance lawyers and consumer protection groups from the beginning. But a recent Anderson study shows just how costly and harmful No Fault ‘reform’ actually is.

Entitled “Impact of Proposed ‘PIP Choice’ Law in Michigan,” the study, which was commissioned by the Coalition Protecting Auto No-Fault (CPAN), reaches four fact-based conclusions about what will happen if the Legislature enacts the proposed insurance company wish-list of Michigan’s No-Fault insurance laws:

1. Approximately 800 seriously injured Michigan auto accident victims will be deprived of necessary medical care each year.

2. The medical costs of providing lifetime care will be shifted to the taxpayers as these catastrophically injured accident victims are shifted to Medicare.

3. Michigan will lose between 2,500 to 5,000 jobs.

4. Profits for Michigan’s auto insurance companies (already some of the nation’s highest) will skyrocket because, with little or no change to the amount of premium dollars collected, Michigan’s auto insurance companies will pay out nearly $100 million less per year in claims.

The insanity of “PIP Choice” auto insurance

Currently, under Michigan’s No-Fault Law, seriously injured auto accident victims are guaranteed unlimited, lifetime medical coverage for all of their accident-related medical needs, so long as those needs are reasonably necessary for the victim’s care, recovery and/or rehabilitation.

Every year, between 850 and 1,200 car accident victims in Michigan suffer catastrophic injuries, such as a traumatic brain injury. A catastrophic injury involves medical expenses that exceed $500,000 per year.

PIP Choice will change all of this, of course. According to the CPAN study, it is estimated that 75 percent to 90 percent of Michigan drivers will cease to elect and pay for unlimited, lifetime medical coverage and instead, will opt for the new and cheaper medical insurance plan, which carries a $50,000 maximum coverage limit.

As an insurance attorney who helps people injured in car accidents, I see most people with serious injuries go through this in two days of emergency room care after a serious car crash.

Woefully inadequate auto insurance coverage

Again, $50,000 is nowhere near enough to cover expenses associated with any serious Michigan auto accident.

The inadequacy of the $50,000 medical coverage limit is even more obvious for catastrophically injured auto accident victims.

The CPAN study estimates that with 75 percent to 90 percent of Michigan drivers opting for the minimum medical coverage, approximately 638 to 765 Michigan residents a year who suffer catastrophic injuries in car accidents will be devastated by this change.

As such, they will be forced to:

1. Go without needed medical care and treatment because of no insurance coverage.

2. Pay out-of-pocket and, ultimately, face personal ruin and bankruptcy.

3. Mistakenly rely on health insurance that does not exist (a growing number of private health insurance plans now have specific auto accident-related exclusions).

4. Get shifted to the taxpayers, in the form of Medicare (also problematic because Medicaid and Medicare are limited in terms of what medical services they’ll cover).

Additionally, the CPAN study reports that the funding for present and future catastrophically injured Michigan auto accident victims will be endangered, because as fewer people opt for unlimited, lifetime medical coverage, fewer people will be paying into the Michigan Catastrophic Claims Association fund, which pays for victims’ injuries that exceed $500,000.

Michigan jobs killer

Approximately 2,500 to 5,000 jobs will be lost if so-called No Fault ‘Reform’ passes, predicts the CPAN study.

This is trickle-down economics in reverse:

As fewer people opt for unlimited, lifetime medical coverage, there will be fewer unlimited, lifetime medical claims, i.e., catastrophic injury claims, to be paid.

And, as there are fewer claims and less money being paid to the healthcare providers, demand for and the ability to pay for the same number of employees will drop, thereby resulting in terminations and lay-offs.

This is true because even though there will continue to be approximately 850 to 1,200 catastrophic claims per year, between 75 percent and 90 percent of those claims will no longer be covered by the victims’ No- Fault insurance.

Michigan auto insurance company profits, profits, profits

As if all of that were not disturbing enough, consider how much the CPAN study estimates that Michigan’s auto insurance companies will profit from so-called No Fault “reform.”

Setting aside the fact that there are no guarantees in writing that Michigan drivers will actually save money (or how much) as a result of the dismantling of Michigan’s No Fault system, the CPAN study shows that Michigan’s auto insurance companies will experience little to no change in the amount of premium dollars they collect from Michigan drivers.

But they will experience seismic changes on the other side of the balance sheet.

According to the CPAN study, so-called No Fault “reform” will allow Michigan’s auto insurance companies to “pay out between $91 and $109 million less in claims each year …”

All of this is poetry for Michigan’s auto insurance industry.

Protect Michigan drivers and families

There is only one way to avoid real harm to Michigan residents, and that is to prevent dismantling of Michigan’s No-Fault Law in the first place.

Call your State Representative and State Senator and tell them about this important study from CPAN.

Ask why we are dismantling the nation’s best insurance system to give an unnecessary boondoggle to insurance companies that are already making more money in Michigan than in any other state.

Ask, if lowering auto insurance premiums is truly the goal, aren’t there far better ways of achieving this rather than savaging No-Fault benefits for those who will need them most, such as regulating the amount of profits that insurance companies can make in Michigan for a product (auto insurance) that residents are required by state law to purchase?

Ask, why is Michigan one of the only states where the insurance commissioner does not have the power to regulate insurance company profits?

Steven Gursten is recognized as one of the nation’s insurance attorneys handling serious auto accident lawsuits. He frequently writes about Michigan No-Fault, and is available for comment.

Related information to protect yourself:

Michigan doctors and hospitals against No-Fault “reform”

No-Fault “reform” – bad for drivers, great for insurance companies

Your Michigan No-Fault insurance benefits

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights to better serve you. Call (248) 353-7575 for a free consultation with one of our Michigan insurance attorneys.

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