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Duggan’s ‘D-Insurance’ plan is bad deal for Detroiters

May 1, 2015 by Steven M. Gursten

The mayor’s plan fails to achieve stated goals and is terrible for Detroit residents. Here are the details.

Detroit Mayor Mike Duggan

I really do like Mayor Mike Duggan. I think he’s doing a pretty good job so far. And the idea of trying to make auto insurance less expensive for Detroiters is an important one.  As I’ve written before, the consequences of driving without auto insurance in Michigan are catastrophic – and with estimates of over 50% of drivers in Detroit driving without insurance, this hits Detroiters especially hard.

The problem is, Duggan is proposing to do this all wrong with his “D-Insurance” plan, a low-cost auto insurance proposal for Motor City drivers.

How bad is D-Insurance for Detroit?

Well, answer these questions:

  • What is a quick, easy and surefire way to significantly increase Detroiters’ health insurance costs?
  • Increase taxpayers’ Medicaid and Medicare burdens?
  • Generate more car accident lawsuits and force people to unnecessarily hire more lawyers to file these lawsuits?
  • And what pushes what will probably be a sizable number of Detroiters injured in these car accidents right up to – and very likely, right over – the brink of financial ruin and into personal bankruptcy?

Yep. You guessed it.

In exchange for eviscerating people’s No Fault legal rights and compensation if they’re injured in car accidents, Duggan says there’s the possibility of a $1,000 in savings for drivers under his plan.

Huh? This still fails Duggan’s stated aim of making auto insurance cheap and Detroit a more desirable place to live than surrounding cities where people will still pay less for auto insurance but have full legal protections intact.

Capping No Fault medical benefits for Detroit car crash victims

Unfortunately, capping No Fault medical benefits is precisely what the well-intentioned Mayor Duggan has proposed with his recently unveiled plan.

On April 29, 2015, at a District 5 Community Meeting, Mayor Duggan revealed that, under his D-Insurance plan, auto insurance policies would cap their medical benefits coverage. The amounts I’m reading about vary, but range between $25,000 to  $250,000 as of this publication.

So what happens to a crash victim living in Detroit who incurs crash-related medical expenses that exceed the medical-benefits cap?

The costs for that medical care “would be borne by drivers’ health insurance providers, ranging from Medicare, Medicaid, Blue Cross and plans offered through the Affordable Care Act,” according to reporting by the Detroit Free Press.

And therein lies the big neon red flashing “Danger Ahead” warning in Duggan’s D-Insurance plan: It will result in increased costs and financial burdens for consumers, taxpayers and it will be catastrophic for car accident crash victims.

Had Mayor Duggan, the former president and CEO of the Detroit Medical Center, delved into those consequences of his D-Insurance plan, I believe he would have mentioned the following:

  • As more people will be turning to their health insurance for coverage of their motor vehicle crash-related medical expenses (which could run into the millions of dollars), health insurers will be increasing their prices to adjust to the increased risk they face.
  • As more people will be turning to Medicaid and/or Medicare for coverage of their crash-related medical expenses (which could run into the millions of dollars), the burden on taxpayers could increased by the hundreds of millions of dollars. Consider that when a statewide $1 million cap on No Fault medical benefits was proposed in 2013 in House Bill 4612 (which still allowed $725,000 more in medical benefits coverage than does the D-Insurance plan), the House Fiscal Agency estimated that the cost for just the catastrophic claims over $1 million would result in an approximate $630 million cost shift to Medicaid (Page 10 of the House Fiscal Agency’s 10/22/2013 “Legislative Analysis” of HB 4612). Significantly, Medicaid won’t cover many of the necessary products, services and accommodations that are covered by Michigan’s No Fault Law. “[T]he state’s Medicaid program does not provide coverage for bill review, home purchase or modification, replacement services, van purchase or modification, wage loss or survivor’s loss, and various other products, services, and accommodations covered under the current no-fault law …” (Page 16 of the House Fiscal Agency’s 10/22/2013 “Legislative Analysis” of HB 4612)
  • Crash victims and their families will have to pay out-of-pocket for crash-related medical expenses, which will have the following adverse consequences: Draining personal savings, resources and assets; taking on debt; declaring bankruptcy. Notably, the medical bankruptcy rate in the U.S. is already approximately 57% (i.e., approximately 57% of all bankruptcies are based on medical debt).
  • More people will be forced to hire lawyers and more lawsuits will be filed, clogging the courts unnecessarily. When a crash victim’s crash-related medical expenses exceed the D-Insurance plan’s cap, the accident victim will be forced to sue the at-fault driver for coverage of the victim’s medical expenses that are in “excess” of the cap.

Duggan’s No Fault Plan for Detroit fails in its most basic stated aim

Mayor Duggan may have also mentioned how the D-Insurance plan’s medical-benefits cap cost result in increased auto insurance prices – yes, that’s right, auto insurance prices for many Detroiters will rise, not fall:

  • As litigation over medical benefits in “excess” of the D-Insurance plan’s medical-benefits cap increases, drivers will protect themselves against “excess” medical liability by purchasing liability policies and uninsured and underinsured motorist policies with higher limits – and thus, with higher auto insurance price tags.
  • Significantly, as medical bills and thus, medical debt grows, this will affect and lower car crash victims’ credit ratings, which – because of the ugly but quite legal way in which auto insurance companies use credit scoring  – will ultimately lead to higher auto insurance prices.

Are the anticipated consumer savings from the D-Insurance plan enough?

Here’s what Detroiters are reported to be paying for Michigan No Fault auto insurance:

How much would Detroiters pay under Mayor Duggan’s ‘D-Insurance’ plan?

Average Detroit auto insurance prices

Is that enough savings to justify the D-Insurance plan’s drastic reduction in car crash victims’ medical benefits and legal rights?

Medical benefits on a ‘no-fault’ basis?

Under Michigan’s No Fault law, car crash victims are entitled to and are provided No Fault medical benefits on a No Fault basis, i.e., without regard to whether they or another driver caused the crash that resulted in their injuries. (See: “Personal protection insurance [No Fault] benefits are due under this chapter without regard to fault.” MCL 500.3105(2))

Mayor Duggan has not yet specified whether the medical benefits afforded to car crash victims under the D-Insurance plan would be provided on a No Fault basis or whether medical benefits would be provided only if the victim could prove the other driver was at fault.

Managed care

More will need to be revealed about whether the D-Insurance plan includes a “managed care” option.

The Detroit News reported:

“The draft bill also allows insurers to set up limited-provider networks for nonemergency treatment, such as physical rehabilitation or occupational therapy.”

Learning from the past

As Mayor Duggan and Michigan lawmakers consider the D-Insurance plan’s proposed cap on car crash victims’ medical benefits, let’s hope they keep in mind the words of former Michigan Insurance Commissioner Thomas C. Jones:

Capping No Fault medical benefits would cause the cost of paying for auto accident-related medical benefits to “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.” Moreover, he said, capping No Fault medical 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.” (“No-Fault Insurance In Michigan: Consumer Attitudes And Performance,” Thomas C. Jones, Michigan Insurance Commissioner, April 10, 1978, Pages 76-77)

A ‘D-Insurance’ bill?

To date, no “D-Insurance” bill has yet been introduced in the Michigan Legislature. However, The Detroit News reports:

“[Sen. Virgil] Smith [D-Detroit] said he will be holding a committee hearing and substitute in Duggan’s language in place of the language in his existing bill.”

Sen. Smith recently introduced Senate Bill 288, which proposed his version of a low-cost automobile insurance plan. To read more about Sen. Smith’s “low-cost” auto insurance plan, please check out Michigan Auto Law’s blog post, “The ‘warning’ nearly says it all about Sen. Virgil Smith’s ‘low-cost automobile insurance’ plan.”

Duggan’s D-Insurance No Fault Plan fails

It would be one thing if Duggan’s D-Insurance plan resulted in Detroiters paying the lowest auto insurance rates in the state. But it doesn’t even come close. Rates are still largely unaffordable for many, and auto insurance is still going to be cheaper in the suburbs. So it fails in this regard completely. And not only does it fail to make auto insurance cheap and affordable for Detroiters, but it results in increases in health insurance costs and in taxpayers’ Medicaid and Medicare burdens. It also results in more lawsuits and even the likely result of being forced into financial ruin. All of these serious consequences make Duggan’s No Fault plan for Detroit a very bad idea.

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