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Dear reader: Mayor Duggan’s ‘D-Insurance’ Plan is not the solution to Detroit’s insurance problems

December 5, 2015 by Steven M. Gursten

My response to someone who says  ‘No Fault should be abolished’ and replaced by D-Insurance, even if the savings are no more than ’50 bucks’

D-Insurance myths

Recently, I received a passionate reader comment from Detroiter S. Carl Binion about a blog post criticizing Detroit Mayor Mike Duggan’s “D-Insurance” plan for low-cost auto insurance in the city. Mr. Binion has subsequently removed his comments, but I thought I would share the dialogue we had in a blog post.

In my June 9, 2015, blog post, “8 reasons Duggan’s ‘D-Insurance’ Plan is ‘D-angerous’ for Detroit,” I explained why I thought the D-Insurance plan is a terrible idea for Detroit insurance consumers and for auto accident victims.

In his comments to my blog, Mr. Binion raises several points, or what I like to call myths, below.  I will share my responses to Mr. Binion’s posts.

Myth: Michigan “No Fault is comparable to … ultimate stupidity”

Truth: I disagree with this statement 1,000%. The alternatives to our auto No Fault insurance system are far, far worse. Michigan’s tried it. It didn’t work. Before No Fault, Michigan had a tort-based (and, thus, lawyer and lawsuit-driven) auto insurance system. It is important to note that this was such a failure that it drove lawmakers to enact Michigan’s No Fault Law in 1973. Michigan’s former Insurance Commissioner Thomas C. Jones in the 1970s summarized the failings of Michigan’s tort-liability system far better than I could.  He wrote as follows:

“incomplete, inequitable, inefficient and slow”; 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; “lengthy delays existed under the tort system in compensating those injured in automobile accidents — often in cases where the need for prompt compensation was strongest”; and, given the “long payment delays,” “[s]everely injured people [were forced] to bear devastating financial burdens while waiting for lawsuits to be settled.”

To learn more, please check out Michigan Auto Law’s blog post, “Part II: What’s so bad about capping No Fault benefits.”

Myth: Capping No Fault auto insurance, as many urge, will save consumers money.

Truth: Significantly, the auto insurance companies have refused anything like a guarantee of savings (except for a ridiculous, short term one). Other No Fault states like New York, New Jersey and Florida have No Fault medical benefit caps at $50,000 and less, yet auto insurance consumers in each of those states pay more than consumers do in Michigan. And as further proof, there are many tort-liability states – which have no No Fault auto insurance systems and, thus, provide no money for medical benefits or wage loss. Their drivers are totally dependent on luck and the policy limits of the person who causes the auto accident –  and also have higher auto insurance prices than Michigan. Finally, when thinking about D-Insurance, I’ll end where I started, with what former Michigan Insurance Commissioner Thomas C. Jones said in response to the auto insurance industry’s push for “caps” in the 1970s:

“[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”; and, 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.”

Myth: One person’s auto-accident-related medical condition are not another person’s problem.

Truth: The goal of No Fault is to provide timely, adequate and reliable medical (and other) benefits to Michigan auto accident victims. The result is that No Fault guarantees medical benefits (as well as wage loss and replacement services) to auto accident victims on a first-party, no-fault basis. That means that the auto accident victim’s auto insurance company, in return for the years of premium dollars it has accepted from the victim, provides medical coverage to the victim, regardless of whether the auto accident was at-fault in causing the crash that resulted in her injuries.

Myth: Even if you save “50 bucks,” D-Insurance is worth your while.

Truth: First, whatever savings D-Insurance might generate for consumers like Mr. Binion (note that the D-Insurance bill currently contains no guarantee of savings for consumers), those savings have to weighed against cuts to consumers’ No Fault benefits, such as a $25,000 hard cap on all doctor visits, surgeries, medications, wage loss and replacement services. It also must be weighed against Detroiters being forced into a “managed care” system where the auto insurance company, not the auto accident victim, chooses a person’s doctor and is forced to obtain “preauthorization” from the auto insurance company that the recommended medical care is truly (in the auto insurer’s opinion) a “medical necessity.”

As an auto accident attorney, I believe this is probably one of the most alarming parts of Duggan’s misguided proposal. I deal with insurance company hired guns (“independent” medical examiners) who never find any medical treatment my injured clients received reasonable, but Mayor Duggan wants to put them in charge of determining whether medical care is necessary (also note necessary is a huge obstacle to require people to meet).

What makes D-Insurance a total failure

What makes D-Insurance a total failure is that even with the savings that Mayor Duggan has talked about, a Detroiter with D-Insurance will still be paying anywhere from $500 to $700 more than auto insurance consumers in “surrounding communities” – even though the Detroiter will be receiving a fraction of the auto No Fault insurance benefits.

And, assuming there is this savings that Duggan has suggested, the savings generated by D-Insurance’s cap on No Fault medical benefits will likely be canceled out by the effects of the resulting “cost shift”: Health insurance premiums will increase as Detroit auto accident victims are forced to rely on health insurance to cover their auto-accident-related medical care costs that aren’t covered by D-Insurance; taxpayer burdens for the rest of us will increase substantially as more auto accident victims are forced to turn to Medicaid; and, auto accident victims will be forced to use all of their personal savings and then retirement money to pay out-of-pocket for medical care, services and products that aren’t covered by health insurance and/or Medicaid/Medicare. Carl, this needs to be emphatically understood: D-Insurance is going to be a complete disaster for everyone but the auto insurance companies.

As I’ve said before, let’s focus on the record profits of the auto insurance industry in this state, not taking away vital protections from Detroiters who can least afford it. Mayor Duggan, your plan is a disaster.

To learn more, please check out Michigan Auto Law’s blog post, “How I would change Mayor Duggan’s D-Insurance Plan to actually protect Detroiters.”

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