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Part II: What’s so bad about capping No Fault benefits?

April 10, 2014 by Steven M. Gursten

My response as an insurance attorney helping car accident victims

Attorney Steven Gursten Michigan Auto Law

Those who disagree with me often accuse me of bias. Perhaps this is true. After all, I help the people who depend on No Fault. For nearly 20 years, I’ve seen firsthand the consequences of what happens to people and their families after serious automobile accidents. And as President of the Motor Vehicle Trial Lawyers Association for the last two years, I’ve traveled around the nation educating lawyers who handle car accident litigation; so I’ve been able to compare Michigan to many other states.

As I stated yesterday in part 1 of this blog, the question we received on Facebook that prompted me to sit down and write this blog is as follows:

“In your opinion would many of the Catastrophically Injured [auto accident victims] not survive if they were in a different state with a $10,000 or a $50,000 PIP limit [on No Fault medical benefits]? Would they have a lower quality of life?”

Below is my answer to the question:

It’s Michigan Auto Law’s position that capping No Fault medical benefits, as proposed in current No Fault “reform” plans, will not guarantee savings for auto insurance consumers for several reasons.

1. As I’ve stated,  despite having capped No Fault medical at $50,000, $15,000 and $10,000, respectively, consumers in New York, New Jersey and Florida pay more for auto insurance than do consumers in Michigan (according to data from the National Association of Insurance Commissioners and the Insurance Institute of Michigan) where No Fault guarantees reasonably necessary and reasonably priced lifetime No Fault medical benefits. Here’s a link to the blog post, “Capping No Fault to $10 million in medical is no guarantee of savings”

2. A $10,000 or $50,000 cap on No Fault medical benefits is nowhere near enough to cover the medical claims costs associated with the No Fault claim of a catastrophically injured auto accident victim. A catastrophic claims case is a perfect example. With medical claims costs having reached $900,000 and still ongoing, a car accident victim would likely have exceeded your proposed caps decades ago. The same is true for the cases that reach the catastrophic claims threshold  under existing No Fault law, $530,000. The Detroit Free Press confirmed the inadequacy of such caps when, in 2011, the paper said the following about Sen. Virgil Smith’s (D-4th District) proposal for a $50,000 cap on No Fault medical benefits: “To be sure, a $50,000 minimum for medical care might be irresponsible and unrealistic, given today’s medical costs.”

3. A $10,000 or $50,000 cap on No Fault medical benefits jeopardizes the physical and financial well-being of catastrophically injured auto accidents and all Michigan citizens and taxpayers. Under your proposed caps, every year, there would be hundreds of millions of dollars in catastrophic claims costs that would no longer be covered (According to press releases on the Michigan Catastrophic Claims Association, $947 million was paid out on catastrophic claims in 2012 and $927 million in 2011).

That means the catastrophically injured would have to find other ways to pay for their much-needed care and treatment or go without.

This harkens back to what former Michigan Insurance Commissioner Thomas C. Jones said a few years after the passage of No Fault, when auto insurers were pushing to set caps on No Fault medical benefits:

The cost of paying for medical benefits that will no longer be covered by No Fault “will simply be shifted forward to the injured individual through inadequate medical care, through inadequate rehabilitation, through increased health insurance costs, or through total financial ruin of some individuals, and finally onto public assistance programs.”

Additionally, as a result of the shift of hundreds of millions of dollars every year out of the No Fault system, people’s health insurance costs will rise dramatically as will taxpayers’ Medicaid and Medicare burdens.

Effects of the caps on No Fault medical benefits

Paying out-of-pocket for catastrophic claims costs  will likely result in financial ruin and/or bankruptcy for most, if not, all catastrophically injured victims and their families. Plus, victims will be put at risk of being totally or partially denied much-needed medical care and treatment.

Health insurance:
For catastrophically injured auto accident victims who are not independently wealthy, they may have to turn to their health insurance for coverage of their catastrophic claim to the extent it exceeds the cap on No Fault medical benefits.

Consequently, the catastrophically injured will run the likely risk that their much-needed medical care and treatment will not adequately be covered by health insurance.

Additionally, all health insurance consumers will face the inevitable and substantial rate increases that health insurers will enact in order to account for their new and increased liability for the catastrophic claims costs that were previously covered by No Fault.

Medicaid & Medicare:
Catastrophically injured auto accident victims who are neither independently wealthy nor covered by health insurance, may have to resort to Medicaid or Medicare for assistance with obtaining necessary medical care and treatment.

In addition to increasing taxpayers’ burdens for Medicaid and Medicare, the catastrophically injured will be unable to obtain many of the much-needed medical services and treatments that are currently covered by No Fault.

For example, in a 5/30/2013 analysis of House Bill 4612, the House Fiscal Agency noted:

“[T]he state’s Medicaid program does not provide coverage for bill review, home purchase or modification, replacement services, van purchase or modification … and various other products, services, and accommodations covered under the current no-fault law …”

As former Michigan Insurance Commissioner Thomas C. Jones said in 1970s when auto insurers were pushing to cap No Fault medical benefits:

  • “[L]imiting first party benefits … would simply result in a renewed increase in tort cases as people were required to sue for benefits denied by a limitation on medical and rehabilitation expenses.”
  • But that’s precisely the reason No Fault was enacted in the first place: To eliminate the injustices and inefficiencies of Michigan’s former “tort liability,” lawsuit-based system.
  • The failings of Michigan’s tort liability system, as noted by former Commissioner Jones, included:
  • The lawsuit-based system is “incomplete, inequitable, inefficient and slow” and it does “a poor job of providing for seriously injured auto accident victims.”
  • It had an “inequitable payment structure” because a “high percentage of persons injured in automobile accidents received no reparations under the tort system” and the system “systematically undercompensated the most seriously injured” victims.
  • “[L]engthy delays existed under the tort system in compensating those injured in automobile accidents — often in cases where the need for prompt compensation was strongest.”
  • Given the “long payment delays,” “[s]everely injured people [were forced] to bear devastating financial burdens while waiting for lawsuits to be settled.”

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