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More No Fault Car Insurance ‘Reform’ Nonsense About ‘Savings’ i.e. Capping Medical Benefits

July 1, 2016 by Steven M. Gursten

Why Would MI Drivers Want To Lose Unlimited Necessary Medical Care In Exchange for $250,000 Cap, Higher Health Insurance, Higher Out-Of-Pocket Costs, Just So They Could Still Pay The 3rd Highest Auto Insurance Prices In The U.S.?


Here we go again.

Yet another Lansing lawmaker wants to take away the protections and No Fault insurance benefits guaranteed to all Michigan drivers under our No Fault auto insurance laws.

Yet another Lansing lawmaker is making promises of illusory “savings” for auto insurance consumers.

Yet another Lansing lawmaker is following the same script given to him by lobbyists from the auto insurance companies of promising savings for consumers (but with no guarantees), who in exchange will lose out on life-saving No Fault medical care and insurance benefits like wage loss and attendant care that can keep people injured in automobile accidents above water while they recover from their injuries.

We’ve all heard this sleight-of-hand sales pitch from the insurance industry and the lawmakers it has influence over too many times before.

The reason no one is buying it anymore is because the only real winners are already “highly profitable” car insurance companies. Under these plans to cap Michigan No Fault benefits, these insurance companies will become even richer.

Rep. Jason Sheppard, Temperance, Michigan Republican offers bad deal for consumers, good deal for insurance industry

In a June 21, 2016, press release on the Michigan House Republicans website, Rep. Jason Sheppard (R-Temperance) stated:

“Under my plan, consumers would be offered options … [which] could save drivers 30 percent or more on their car insurance premiums.”

Additionally, WWMT’s Nick Minock reported the following details about how Rep. Sheppard’s plan, which is “being drafted right now and is expected to be introduced this Fall,” includes capping car accident victims’ No Fault medical benefits:

“Sheppard’s plan would [give consumers] the option to not only select unlimited coverage, but making three other coverage options available” including “the first tier of auto coverage [that] would cover … medical expenses up to 250 thousand dollars” and “[t]he second tier would cover … up to 500 thousand dollars and the third tier would cover … up to $1 million.”

What are the holes in Rep. Sheppard’s No Fault Reform plan?

What Rep. Sheppard’s press release and talk with the media fails to address are the following important realities of his plan:

  • Even if Rep. Sheppard’s plan succeeded in delivering 30% savings (presumably to the consumers who opted to allow having their currently unlimited No Fault medical benefits for all reasonably necessary medical care and treatment from an auto accident to be replaced by a $250,000 cap), Michigan car insurance consumers will still be paying the 3rd highest rates in the country and nearly $600 more than the national average!
  • As a result of the cost-shift that will occur with a cap on No Fault medical benefits, any savings that may occur will be reduced and/or cancelled out by increases in out-of-pocket costs, health insurance costs, increases taxpayers costs for Medicare and Medicaid, and increases in legal expenses from increases in tort and personal injury lawsuits to pay for medical costs that exceed the new $250,000 No Fault medical benefits cap. And, as an auto attorney who has helped many people with very serious injuries, I can tell you that in the event of a very serious car accident that requires surgeries and a week or more in the hospital, this $250,000 No Fault cap that Rep. Sheppard is proposing can be blown through in just a couple days following a crash.
  • There are easier, more direct and less painful ways to lower auto insurance prices than stripping consumers and car accident victims of their No Fault protections and benefits. One incredibly overdue and important start would be for Michigan to join most of the other states that currently allow a state Insurance Commissioner to stop auto insurers from charging “excessive” prices.
  • Or, lawmakers could consider adopting one or more of the proposals in my 14-point plan for lowering Michigan auto insurance prices and keeping the legal protections of our auto No Fault insurance system intact for auto accident victims.

These so-called ‘savings’ really are only savings for the auto insurance industry, not for you and I

Saving 30% on the price of Michigan No Fault car insurance still won’t stop drivers from “paying some of the highest car insurance premiums in the country,” Rep. Sheppard’s press release states.

He’s right about you and I still having to pay very high auto insurance rates. It’s his solution to this problem of high auto insurance that is so wrong.

The average auto insurance premium in Michigan is $2,738, according to Insure.com’s “Car insurance rates by state, 2016 edition.”

To learn more about the price trends for Michigan car insurance, please check out my blog post, “Auto insurance prices increase by 10%”:

Thirty percent savings from $2,738 equals $821.40, which would bring the average Michigan auto insurance premium down to $1,916.60.

Based on the Insure.com study, that would still leave Michigan consumers paying the 3rd “highest car insurance premiums in the country.”

And, the average Michigan auto insurance premium would be nearly $600 more than the national average car insurance premium of $1,325.

The cost of 30% ‘savings’ on auto insurance

A 30% savings sounds good.

It’s the fine print (what comes with this) and what drivers will be giving up that makes it unappetizing.

Assuming (for the sake of argument) that drivers embrace the idea of sacrificing their unlimited No Fault benefits for a $250,000 cap on medical PIP benefits so they could still pay the 3rd highest auto insurance prices in the country, that eagerness disappears when drivers discover how this cost shift will drain money from their personal pocket books and empty their bank accounts. For those drivers who suffer very serious injuries from automobile accidents, after bank accounts and pocket books are emptied, personal bankruptcy due to medical debt will come next.

(Although the press release doesn’t explicitly say so, it must be assumed that the only way a consumer has any chance of achieving the 30% “savings” being touted is if he or she agrees to the $250,000 cap on his or her No Fault medical benefits.)

As I noted in a previous blog post, the financial consequences to consumers and car accident victims from capping No Fault medical benefits are substantial:

  • “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 be 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.”

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