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Is the Affordable Care Act going to kill Michigan’s No Fault Laws?

May 30, 2014 by Steven M. Gursten

Musings about how  auto insurers may use the ACA to shift auto accident medical coverage from No Fault onto health insurance companies

Affordable Care Act

It’s certainly ironic. Could Obama’s  Affordable Care Act (also known as Obamacare) do something that the powerful insurance industry lobby, the Republican Party, House Speaker Jase Bolger, Rep. Lund, Gov. Snyder, and Sen. Pappageorge have all tried to do and thus far failed? Could the ACA kill the medical benefits coverage provided by Michigan No Fault?

It  looks that way, says Profession Nelson P. Miller of Thomas M. Cooley Law School.

In his article, “The Affordable Care Act’s Uncertain Impact on Michigan’s No-Fault Act,” in the March 2014 edition of the Michigan Bar Journal, Professor Miller explains that by using the “Affordable Care Act’s individual mandate requiring the purchase of health insurance” and the “set off” provision under Michigan’s No Fault law, Michigan auto insurance companies can do the following:

  • Refuse to pay No Fault medical benefits to auto accident victims on the grounds they have “no responsibility to pay for an expense covered by” another source, i.e., the Affordable Care Act.
  • Shift the responsibility for providing and paying hundreds of millions of dollars in auto accident victims’ medical benefits to the government and the ACA’s health insurance companies.

If Professor Miller is correct, that will create a seismic change in Michigan’s No Fault system.  In my own opinion, you can expect the following unfavorable consequences:

  • An annual cost shift of “hundreds of millions dollars.” Or as much as $1 billion – from No Fault auto insurers “back to health insurers.” (According to the Michigan Catastrophic Claims Association’s March 20, 2014, press release, “The MCCA paid out $1 billion … in 2013 for claim costs resulting from catastrophic injuries.”) For more info, check out my blog post, “Michigan insurance industry gets $1 billion raise as drivers face losing No Fault protections.”
  • Health insurance costs will skyrocket. It’s inevitable. In order to adjust for the increased exposure to such staggeringly costly annual expenses, health insurance companies will have no choice but to adjust by increasing their premiums and prices.
  • Taxpayers’ Medicaid burden will increase. As those who are not covered by insurance seek medical benefits through the Medicaid system.  This is exactly what the insurance industry has been attempting to do for the last several years in Michigan, and was behind much of the outcry of HB 4612 just last year.  No fault insurance claims go down, but insurance company profits go up. And our auto insurance rates remain the same.

How can medical costs be shifted from No Fault to health insurance?

Under Michigan’s No Fault law, auto insurers are not obligated to provide and pay for an auto accident victim’s No Fault medical benefits if federal or state law requires another source to provide the benefits.

As Professor Miller accurately notes, this is the No Fault law’s “set off” provision. (MCL 500.3109(1):

“Benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury under this chapter.”

The argument that auto insurance will make in order to shirk their “responsibility to pay” for auto accident victims’ medical benefits (i.e., the benefits that their insured customers have dutifully been paying premiums for) is as follows, according to Miller:

Because No Fault’s set off provision relieves auto insurance companies of their “responsibility to pay” for medical benefits that are “paid or payable under insurances required by law,” auto insurers don’t have to pay for medical benefits that will be “paid or payable” by the health insurance that is federally mandated by the Affordable Care Act.

What’s the impact?

Although he does so in an understated manner, Professor Miller is clear about who the winners and losers are if the ACA and No Fault’s “set off” provision are used to shift medical costs from No Fault to health insurers:

“Michigan no-fault insurers may be about to receive a substantial windfall, while those injured in Michigan motor-vehicle accidents and their medical-care providers may receive a substantial setback.”

Many forecasters are expecting Republicans to win big this November – largely because of the ACA.  But it seems the backlash to Obamacare and the ACA are continuing to unravel in some unexpected ways. In one of the most ironic twists, it’s the Michigan insurance industry that might win big, while people hurt in automobile accidents will be hurt the most.

Related information:

Michigan needs an Affordable Care Act to prevent price gouging from insurance companies

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