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Can Detroiters save money without losing No Fault benefits under the new ‘Alternative D-Insurance’?

January 11, 2016 by Steven M. Gursten

Rep. Brian Banks’ proposed ‘Alternative D-Insurance’ Plan tries, with a 12% rate savings and no reduction in No Fault PIP benefits

Rep. Brian Banks (D-Detroit)
Rep. Brian Banks (D-Detroit)

Rep. Brian Banks (D-Detroit) has done an amazing job of coming up with a new No Fault insurance reform plan that would still allow Detroiters to save money on auto insurance, but without having to give up the vital No Fault PIP benefits and legal protections that they’re currently guaranteed under Michigan’s No Fault law in the event of a car accident.

In other words, he’s found a middle way. In House Bills 5134 and 5135, which could aptly be described as an “Alternative D-Insurance Plan,” Rep. Banks aims to:

  • Reduce the price of auto insurance for Detroit consumers by “12% or more of the average premium”; and,
  • Preserve all of the existing No Fault PIP benefits and legal protections for Detroiters.

Rep. Banks’ three-part plan for generating his proposed 12% savings for Detroit auto insurance consumers consists of the following:

  • Capping the amount that a hospital can charge to Michigan No Fault auto insurance companies for treating a Michigan auto accident victim at 80% of the hospital’s “chargemaster” rates.
  • Creating a “Michigan Automobile Insurance Fraud Authority” that will target No Fault fraud committed by auto insurance companies as well as No Fault fraud committed by fraud “rings.”
  • Granting a $500 tax credit to auto insurance companies for every auto insurance policy that provides 12% price savings to Detroit drivers.

Of his plan, Rep. Banks said the following in a December 2015, press release on the Michigan House Democrats website:

  • “‘Urban and rural residents deserve the same quality, first-class insurance policies offered to their suburban neighbors, and should not have to forgo these benefits simply because of where they live.’”
  • “‘My bill would encourage insurance companies to participate in this plan and lower rates by also giving the company a tax credit for each household that signs up. This is the best kind of tax credit because it actually puts money back into the hands of consumers, in the form of lower rates, so that they have more to spend in their local shops and stores. This is a win for everyone.’”

Rep. Banks also made a point of explaining how his plan is different than the D-Insurance Plan proposed by Detroit Mayor Mike Duggan (a plan that I’ve frequently and vocally criticized in my blog posts and media interviews as being incredibly unfair and harmful for Detroit car accident victims, while still forcing them to pay more).

Rep Banks differentiated his plan from Duggan’s D-Insurance as follows:

  • “Banks said that his plan is a better option than D-Insurance because it maintains the best of our no-fault insurance system – it guarantees medical care for victims with catastrophic injuries so they can live the best possible life. This medical care is one of the paramount features of no-fault and it must be preserved for every Michigander.”

Below are details about the various aspects of Rep. Banks’ “Alternative D-Insurance Plan.”

12% savings for auto No Fault insurance for Detroiters

In House Bill 5134, Rep. Banks proposes the following savings for Detroit auto insurance consumers:

“The rates … [“filed” by “an insurer”] for [Detroit “automobile insurance policies”] must result in a per-policy reduction in the annual premium from the annual premium for the year in which the amendatory act that added this section takes effect equal to 12% or more of the average annual premium.”

80% of hospital’s chargemaster rates to reduce No Fault costs

In HB 5134, Rep. Banks proposes the following limit on what hospitals can charge to No Fault auto insurers for treating Michigan auto accident victims:

“A hospital shall not require payment from [a Michigan No Fault auto] insurer … of more than 80% of the hospital’s charge for inpatient, outpatient, rehabilitation, and skilled nursing facility services.”

Significantly, HB 5134 specified that this limit does not apply to:

  • “[P]rofessional services rendered by an independent practitioner or to post-acute services provided outside of a licensed hospital facility.”

Targeting auto insurance company fraud

As an attorney, one of the most welcome parts of Rep. Banks’ “Alternative D-Insurance Plan” is his proposal to create a “Michigan Automobile Insurance Fraud Authority.” What a welcome change from the lopsided, insurance company driven boondoggle that SB 248 was with its one-sided fraud authority that would only investigate consumers but leave rampant insurance company bad faith, lies and fraud outside the scope of any fraud authority oversight. This new No Fault fraud authority would accomplish the following very overdue and ground-breaking tasks:

  • The fraud authority “shall … provide financial support to an independent entity that … shall [be] establish[ed] to investigate the claims practices of insurers and to evaluate if those claims practices create unnecessary disputes, treat claimants or medical providers unfairly, increase litigation, or cause unnecessary delays in the payment of claims.”
  • In its “annual report to the Legislature on the authority’s efforts to prevent automobile insurance fraud and unfair claims practices of insurers and cost savings that have resulted from those efforts,” the authority “must detail the … unfair claims practices of insurers occurring in this state … assess the impact of the … unfair claims practices of insurers on rates charged for automobile insurance …”
  • “The authority shall evaluate the impact unfair claims practices by insurers have on the citizens of this state and shall determine the costs incurred by the citizens through unnecessary litigation and bad-faith practices that delay, withhold, or deny policyholder benefits that are based on legitimate claims, including special investigation units that report suspected fraud and abuse cases that are not based on independent, appropriate, and good-faith investigation.”
  • “The authority shall … report on … the costs of unnecessary litigation and bad faith practices that delay, withhold, or deny policyholder benefits, and shall recommend any changes to existing laws to reduce these costs.”

$500 tax credit for auto No Fault insurance companies under HB 5135

According to HB 5135, Rep. Banks proposes the following tax credit for auto insurance companies who provide 12% price savings to Detroiters:

“For tax years beginning after December 31, 2015, an insurance company may claim a credit against the tax imposed under this chapter for that tax year in an amount equal to $500.00 for each automobile insurance policy issued in accordance with” the provision of House Bill 5134 allowing savings “equal to 12% or more of the average annual premium” on “automobile insurance policies.”

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