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HB 4612: A “Dollars & Cents Plan for Lining the Pockets of Auto Insurance Industry Fat Cats”

August 6, 2013 by Steven M. Gursten

Already bursting profit margins for Michigan’s insurance companies will be the biggest winner of No Fault “reform”

auto insurance industry fat cats

Michigan’s already “highly profitable” auto insurance industry will get a whole lot  richer and more profitable if their plan to dismantle Michigan’s No Fault laws – being pushed by the insurance industry as their plan for No Fault “reform” – becomes law.

And the auto insurance industry is out aggressively trying to sell its plan, hoping to dupe the public into believing that what it’s calling No Fault reform is in the public’s best interests. The most brazen example of this is the  insurance industry’s mass mailings to hundreds of thousands of drivers earlier this summer.

Paid for by the auto insurance industry’s national trade and lobbying/propaganda organization, Coalition for Auto Insurance Reform, the junk mail purports to offer “A Common-Sense Plan for Reform.”

However, were the auto insurance industry even the slightest bit faithful to the notion of truth in advertising, this piece of junk mail would proclaim, “This is our wish list for Lining our pockets at your expense.”

The insurance industry’s No Fault “reform” plan as laid out in HB 4612 – and being aggressively lobbied  by the auto insurance industry and its trade/lobbying organizations – does next to nothing to reduce auto insurance premiums (a measly $150 savings, and this guaranteed only for one year).

But this subversion of the No Fault law would actually allow insurers to slash medical expenses and costs by shifting it to us – an estimated whopping $630 million to taxpayers in the first year.  The plan would reduce both the amount and the frequency of medical payouts on claims for No Fault medical benefits.  It would end forever the jewel of Michigan’s auto No Fault system: providing life-saving necessary medical care for catastrophically injured automobile accident victims.

And in its place?

A one year guarantee of $150.

Profit margins, already some of the nation’s highest, would be further boosted by the following three “reforms”:

  • Placing new, unprecedented and permanent limitations on No Fault benefits such as necessary medical care.
  • Implementing a new, unprecedented, permanent and extremely restrictive “eligibility” standard whose vague, inconsistent and confusing nature will make it more difficult for auto accident victims to prove they qualify for No Fault benefits.
  • Putting up new, unprecedented and permanent legal “roadblocks” that undermine victims’ rights and abilities to sue to recover unpaid and overdue No Fault benefits.

All that glitters: “Highly profitable” auto insurers

Like their profits, the evidence is abundant that Michigan’s auto insurance industry is rich and “highly profitable”:

  • Michigan auto insurance companies have been “highly profitable” and have been “significantly more profitable than the national average,” according to former state Insurance Commissioner Jay Angoff’s study, “An Analysis of the Profitability and Performance of the Michigan Auto Insurance Market.”
  • The Insurance Institute of Michigan and its Executive Director Pete Kuhnmuench have been emphatic and unequivocal about Michigan auto insurers’s profitability: “Recent profitability has enabled companies to decrease auto insurance premiums over the past several years. … ‘The insurance industry’s profitability also has a positive impact on the state of Michigan. … Michigan profits are comparable to other industries. … ‘The competitive market is working in Michigan. Insurance companies are profitable which allows them to reduce premiums …’” (Insurance Institute of Michigan, “Insurance Industry Stability Benefits Michigan,” 6/7/2007 press release quoting Executive Director Pete Kuhnmuench)
  • Michigan auto insurance companies collected more than $2 billion more in auto premiums in 2011 than they paid out in claims, according to data and statistics from the National Association of Insurance Commissioners (NAIC).
  • Michigan No Fault auto insurance companies collected more than $673 million more in No Fault premiums in 2011 than they paid out on No Fault claims, according to data and statistics from the National Association of Insurance Commissioners (NAIC).

For more information, please check out Michigan Auto Law’s blog post, “Michigan Millers gets it wrong on No Fault insurance company unprofitability.”

Michigan auto insurance premium revenue

To the extent that premium revenue will drop as a result of the one-year savings of $150 guaranteed by HB 4612, auto insurance consumers can bank on the fact that once the year is up, auto insurers can and most certainly will raise rates.

Thus, premium revenue goes back up to its previous levels.  If not higher.

And why wouldn’t they?  There’s nothing to stop them. HB 4612  doesn’t.

And there’s no governmental official, including our state’s  Insurance Commissioner who has the power under our law to  stop auto insurers from gouging consumers, even though most other statesempower their state insurance commissioners with this legal authority, and even though purchasing No Fault is mandatory under Michigan law.  We have to purchase this product, but there are no cost controls to protect consumers when the companies that are the only ones who can sell it to us charge an unreasonable amount.

Limitations on No Fault insurance (PIP) benefits

Paying less on No Fault insurance benefits, also known as PIP or personal injury protection benefits, is one way the insurance industry would like to boost profits. It allows insurance companies to dramatically cut expenses and costs.  But that is at all of our expense.  And those most catastrophically injured in automobile accidents in this state would bear the brunt of this cost cutting.

For example, under HB 4612 (Page numbers refer to pages of HB 4612):

  • There are new, unprecedented and permanent limitations on No Fault attendant care benefits. (Payments for attendant provided by a victim’s family member are limited to 56 hours per week and no more than $15 per hour “regardless of the level of care provided.”) (Pg. 38-39)
  • There are new, unprecedented and permanent limitations on the duration of No Fault rehabilitation benefits. (Pg. 36)
  • There are new, unprecedented and permanent limitations on medical fees and charges for allowable expenses. (The “reasonableness” of charges for medical services can be assessed through use of the Worker’s Compensation medical fee schedule.) (Pg. 46-47)

Higher No Fault insurance ‘eligibility’ hurdles

By creating a new and higher, albeit vague, confusing, inconsistent and contradictory, standard for No Fault “eligibility,” the insurance industry has  opened up another avenue for auto insurers to boost profits by cutting expenses and costs.

With the new “eligibility” standard, fewer car accident and truck accident injury victims will be able to prove they are eligible to receive No Fault medical care and medical benefits and, thus, less will  need to paid by the state’s auto insurers.

Currently, an auto accident victim is “eligible” to have her accident-related medical expenses covered by No Fault medical benefits if the “expenses” involve “reasonable charges” for products, services or accommodations that are “reasonably necessary … for an injured person’s care, recovery or rehabilitation.” (MCL 500.3107(1)(a))

If HB 4612 were passed into law, here’s what the new, unprecedented, permanent and extremely restrictive “eligibility” standard (which is also vague, inconsistent, and confusing) would look like (Pages 32, 35-37 of HB 4612):

  • Expenses must be for “medically appropriate” products, services and/or accommodations.
  • “Medically appropriate products, services and accommodations … are those that are medically necessary …”
  • Expenses must be for products, services and/or accommodations that are “medically appropriate and medically necessary … or … [are] reasonably likely to result in meaningful and measurable lasting improvement in the injured person’s functional status.”
  • Expenses must be for products, services and/or accommodations that are “provided for medical or rehabilitative reasons rather than primarily for the convenience of the individual, the individual’s caregiver, or the health care provider,” and the products, services and accommodations must be “provided in the most appropriate location where the service may, for practical purposes, be safely and effectively provided.”

Legal “roadblocks” at the courthouse – but only for injured accident victims, not for the insurance companies

Finally, by erecting new, unprecedented and permanent legal “roadblocks” that undermine victims’ rights and abilities to sue to recover unpaid and overdue No Fault benefits, the so-called “reform” contained in HB 4612 provides Michigan auto insurers yet another way to boost profits through cutting expenses and costs

For example, under HB 4612:

  • There are new, unprecedented and permanent restrictions on an auto accident victim’s ability to challenge an insurer’s denial of No Fault benefits. (Denials may, upon request, be “reexamined,” but only by a doctor of the No Fault insurer’s choosing.) (Pg. 35-36)
  • There are new, unprecedented and permanent restrictions barring claims processing evidence at a trial to recover No Fault benefits. (“Evidence of the manner in which an insurer processed a claim for benefits is not admissible at the trial of an action to recover benefits …”) (Pg. 45)
  • Unprecedented and permanent denial of auto accident victims’ right to trial by jury. (“Whether a charge is reasonable or whether a product, service or accommodation is medically appropriate and medically necessary is a question of law to be decided by the court.”) (Pg. 47)

You can read all 7 reasons why this auto No Fault “reform” junk mail is trash here. 

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