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The very expensive dirty, multi-million-dollar secret of Michigan No Fault “reform”

August 5, 2013 by Steven M. Gursten

Dismantling No Fault will shift $639 million a year from auto insurance industry to accident victims & taxpayers for medical care

shhh dirty secret of Michigan No Fault reform

For the past week, I’ve been addressing point by point the the mail flyer that hundreds of thousands of Michigan drivers received from the auto insurance industry this summer (funded by its national lobbying and propaganda outfit, the Coalition for Auto Insurance Reform).  The propaganda piece is an aggressive attempt by the insurance industry to change people’s minds about the push to subvert the No Fault system that protects people.

Currently 83% of people said they don’t “trust the insurance industry to propose auto insurance reforms that are good for the people of Michigan.”

Well, if the facts don’t support your arguments, you can always make things up, which is exactly what the insurance industry did in its mass mailing that is laying waste to mailboxes all across this state this summer.

With its misleading title, “A Common-Sense Plan for Reform,” and its inaccurate and deceptive assertions, it’s a wonder the junk mail flyer hasn’t been flagged by federal authorities as “mail fraud.”  And it’s time to talk now about the inevitable financial disaster that this so called No Fault “reform” will, if it is passed, unleash on auto accident injury victims, their families, and the taxpayers of this state.

What has been conspicuously absent from the insurance industry’s junk mass mail piece – is the very, very expensive, dirty, multi-million-dollar secret of so-called No Fault “reform.”

Specifically, No Fault “reform” will cause as much as $630 million per year in medical care costs to be shifted from the auto insurance industry to accident victims and taxpayers as victims are forced onto Medicaid and into personal bankruptcy and other aspects of financial ruin.

The reality of the financially disastrous results of so-called No Fault “reform,” which the auto insurance industry has shamefully glossed over, was brought into sharp focus in the House Fiscal Agency’s “Legislative Analysis” of Rep. Pete Lund’s and Gov. Rick Snyder’s plan for No Fault “reform” in House Bill 4612.

The HFA determined that, if HB 4612’s proposed No Fault medical benefits cap had been in effect in 2012, approximately $639.4 million in catastrophic injury claim payments “would not have been made under the no-fault system.”

Tellingly, the HFA concluded:

“This is illustrative of the magnitude in cost-shifting under this legislative proposal.” [Emphasis added]

Although the HFA’s analysis didn’t get into the specifics, it’s clear who the nearly $640 million in catastrophic injury costs would have been shifted to and to whom they will be shifted in the future if the so-called No Fault “reform” plan in HB 4612 is passed into law:

Michigan’s seriously injured auto accident victims, their families, and the taxpayers.

In other words, us.

The fallout for victims, their families, and to the taxpayers  will be staggering:

  • Paying “out-of-pocket” will push many car accident injury victims and their families into personal bankruptcy.
  • For auto accident victims who are neither independently wealthy nor covered by a private health insurance plan, they will turn increasingly to Medicaid and/or Medicare, thereby adding to taxpayers’ already significant burden. As the HFA noted in its “Legislative Analysis”: “House Bill 4612 would have a significant … fiscal impact on the state budget, primarily on the state’s Medicaid program.”
  • Health insurance rates are bound to skyrocket in preparation of the $630 million in new, annual catastrophic claims liability they will be obligated to cover.
  • Auto insurance rates for uninsured-motorist, underinsured-motorist and liability coverage are certain to rise as accident victims rely on their UM or UIM coverage – or the at-fault driver’s liability coverage – to cover catastrophic claims that have exceeded HB 4612’s cap on No Fault medical benefits.

Tomorrow will be my last blog in the series, on auto insurance industry profit margins.

Related information:

No Fault reform’s cap on medical benefits could cause $630 million cost-shift to taxpayers, House report shows

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