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No Fault ‘caps’ shift costs – not reduce costs

September 30, 2015 by Steven M. Gursten

Insurance companies win, as consumers will pay more out-of-pocket expenses, legal costs, increased health insurance, taxes, liability and UM & UIM coverage

Michigan No Fault caps

When people talk about how so-called “caps” on Michigan No Fault insurance on unlimited necessary medical care  will lower auto insurance prices, most of the time they either misunderstand or they’re deliberately not telling the full story.

Or they work for an insurance company as a lobbyist in Lansing. Or they’re a judge or politician in Lansing making a boatload of money from insurance company campaign contributions (click here to see who and how much).

A more complete story about caps on No Fault auto insurance would include a discussion about how “caps” on medical payouts won’t really save consumers money. What it will really do is shift the costs from insurers (who receive a premium from consumers) onto entities like Medicaid, which receive the money from our tax dollars.

It will also shift the costs to our employers, who will pay much more for health insurance. These days, many employers are seeking a greater share of those costs back from their employees.

And the rest of us will bear the burden, many joining a similar fate as those who sustain car accident injuries in states without No Fault and who don’t have great health insurance. These people often lose all their life savings on paying their medical bills, eventually declare personal bankruptcy, and go onto Medicaid.

Under a No Fault “cap” system on medical payouts by insurance companies, in order to secure (hopefully) the medical coverage one will need if injured in a Michigan auto accident, consumers will still have to pay their auto insurance companies. We just hope they won’t charge us as much. That’s a nice hopey-changey wish for us to have, but it hasn’t worked out so well with the Michigan auto insurance industry in the past. They’ve gotten their wishes granted by dangling the promise of lowering premiums on car insurance, think after 1995 tort reform changes or Kreiner v. Fischer.

But consumers will also have to pay out-of-pocket (again, dipping into savings, retirement and college funds – risking financial ruin and possible bankruptcy). They will also have to pay more for health insurance, more in taxes to cover Medicaid and Medicare, more in legal fees and, ironically, more in liability/uninsured and underinsured auto insurance.

Tomorrow I will explore these in more detail, including a  “less-than-the-full-story” approach to advocating medical payment “caps” on Michigan No Fault auto insurance benefits in the July 9, 2015, op-ed by Eric S. Poe, COO of CURE Auto Insurance (based in New Jersey and Pennsylvania) that first appeared in The Detroit News.

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