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Why does an MRI cost more with No Fault insurance than Blue Cross or Medicaid?

March 18, 2013 by Steven M. Gursten

michigan insurance reform billboard

You’ve probably seen the billboards paid for by Michigan insurance companies that proclaim that  medical services like MRIs cost substantially more under Michigan’s auto No-Fault system than they do under Blue Cross Blue Shield, workers comp or Medicaid.

It’s an argument I’ve seen hundreds of times. I see it every time I go to court.  I see it at jury trials, where the insurance lawyers hired by AAA, State Farm or Allstate complain loudly that it is “unfair” that they have to pay so much more.

And then I read the open letter written by Oakland County Executive L. Brooks Patterson.  In his typical straight-talking way, his own explanation for why medical services cost more under No Fault makes a lot of sense.

This is what L. Brooks Patterson wrote:

Auto insurance providers also claim that they pay more for medical services than other providers such as Blue Cross and Medicare and further claim that they should pay the same rate.  Some simple facts are that Blue Cross and Medicaid represent a larger scale of business to the medical industry than auto insurance.  Also, Blue Cross and Medicare provide pre-approval for medical services, allow for electronic medical billing and provide payment within several days by direct deposit.  This gives the medical providers’ confidence that they will be paid in a timely manner and reduces the cost of doing business.

By comparison, auto insurance companies do not provide preapproval for medical services, do not allow for electronic medical billing and often refuse to pay their bills and/or force the medical provider to retain legal representation in order to get their invoices paid.  This causes great uncertainty by the medical providers that they will be paid at all for legitimate medical services that have already been rendered and increases the cost of doing business.

This topic is analogous to people with different credit scores wanting the same interest rate from a bank.  Blue Cross and Medicare have the equivalent of a great credit score and auto insurance has the equivalent of a poor or low credit score.  It’s unrealistic to think that these different entities could (or should) qualify for the same rate when one has a history of paying their bills promptly and the other has a reputation for slow payment at best and no payment without legal intervention in many well documented cases.

Mr. Patterson is right, of course.  Insurance companies in Michigan consistently engage in the 3 Ds strategy: delay, deny and defend. Insurance companies will delay your claim, deny you were hurt and defend aggressively.

When they are taken to court by auto accident victims who desperately need the medical bills that have been piling up because the insurance companies haven’t paid, the insurance companies then hire insurance lawyers to defend them from paying bills that should have been paid in the beginning.

Insurance companies do this because they know our legal system is geared toward finding compromised resolutions, whether it be when lawyers are required to attend mandatory case evaluation, at facilitation, at a judge’s settlement conferences, or as the parties are getting ready for trial and are spending money and incurring litigation costs taking doctor depositions to prove that these underlying medical bills are reasonable and necessary under the Michigan No-Fault law.

Auto insurance companies do all of this because their bean counters know that there is no reason to pay these medical bills right away, even if they should.  The morality of paying a bill on behalf of their own customer, who has paid the insurance company money in the form of premiums for years to insure against a car accident does not enter into these calculations. Instead, these bean-counters know:

  1. There is no “big stick” to deter unreasonable and abusive claims handling processes in Michigan for several reasons: Our Michigan Consumer Protection Act does not protect against insurance company abuse. Michigan has no bad faith law to protect the victims of insurance company abuse. And Michigan law also does not allow judges or juries to award  punitive damages to accident victims when these insurance companies act with extreme disregard and cause further harm to people.
  2. On a macro level, the hundreds or thousands of dollars insurance companies save on each legal claim becomes  tens of millions of dollars in additional savings every year.
  3. The costs and the process itself will further discourage thousands of people who have been harmed by insurance company neglect and indifference from ever bringing a legitimate claim.

Pot calls kettle black

But, when all else fails, there is the propaganda war for public opinion.  And these insurance companies have spent a lot of money on these “No Fault Reform” billboards.  They do this so that one day, they know that the lawyers representing these insurance companies can stand up before a jury and say it is “unfair” to have to pay a higher price for an MRI or an X-ray, and they deserve a break on what they owe.

They do this even when they are primarily the ones to blame for the reasons these auto insurers are charged a higher price to begin with!

Mr. Patterson’s analogy on this point to the person who has earned a terrible credit score complaining that he should be entitled to the same rate and treatment as someone with a great score is the perfect analogy that crystallizes the issue simply and succinctly.

For more information, click here to read a comprehensive analysis of Michigan No Fault reform and the latest developments.

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