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Why Rep. Sheppard’s No Fault PIP ‘choice’ plan is bad for consumers, accident victims

October 3, 2016 by Steven M. Gursten

By capping No Fault medical benefits, auto accident victims will be underinsured and inadequately covered when they need PIP benefits the most; many consumers will lose catastrophic injury coverage


Let’s not mince words. Rep. Jason Sheppard (R-Temperance)’s proposed No Fault “PIP Choice” plan is horrible for Michigan auto accident victims and auto insurance consumers:

  • It will leave motor vehicle accident victims underinsured and without adequate coverage when they need it most: After a serious automobile accident.
  • It will not deliver the promised “savings” to auto insurance consumers – and cannot even begin to justify the loss of No Fault insurance benefits and protections his plan will bring about if enacted.

Sadly, Rep. Sheppard’s plan is just another in a long line of Republican-sponsored “giveaways” to the state’s powerful auto insurance industry.

I know we live in a world where corporations can now make unlimited financial contributions to politicians. But these Republican politicians aren’t even making a pretense about trying to help the people of this state and to truly fix our auto No Fault system. The purpose of all of these auto No Fault bills is to provide a big caffeine boost to the already highly profitable auto insurers’ booming bottom lines – chiefly by slashing No Fault PIP benefits to those injured accident victims who need it most. If we truly cared about lowering the price of auto insurance, there would be clear amounts of savings guaranteed in the legislation – something that’s clearly missing now and that the auto insurance industry is desperate to avoid at all costs.

This latest proposal to gut No Fault is currently being hyped to the media and on the House Republicans’ website.

Thankfully, it hasn’t yet been introduced in the Legislature. With any luck, this terrible plan never will.

Capping Michigan No Fault medical benefits for car accident victims

Rep. Sheppard’s plan is really just a “PIP Choice” plan, which is really just a nicer way of saying that it’s a plan to “cap” people’s No Fault auto insurance medical benefits.

No Fault medical benefits, which are sometimes referred to as “PIP” benefits (also known as “personal protection insurance” benefits), cover all necessary medical care and treatment for an injured car accident victim who’s insured by No Fault. Under current law, a motor vehicle accident victim is guaranteed unlimited No Fault medical benefits, but it has to be “reasonably necessary” to the victim’s accident-related care, recovery or rehabilitation. If it is not reasonably necessary care, then the auto insurer does not have to pay.

The proposal from Rep. Sheppard wants to eliminate the guarantee by requiring Michigan car insurance consumers to “select 1 of the following levels of maximum” No Fault medical benefits:

  • “A $250,000.00 limit.”
  • “A $500,000.00 limit.”
  • “A $1,000,000.00 limit.”
  • “No maximum limit.”

For the reasons I will discuss in more detail tomorrow (now that the Detroit Lions just lost again as I write this, I now have a bit more time this Sunday afternoon to explain why this is a horrible idea).

No catastrophic coverage when a catastrophic auto accident strikes

The catastrophic characteristic that all but one of the proposed benefit levels have in common is that if a catastrophic crash occurs, there will be no catastrophic coverage for the injured auto accident victims.

Under our existing No Fault law, the medical-claim costs for a catastrophically injured auto accident victim are paid for by the victim’s auto insurer up to $545,000 and after that, the Michigan Catastrophic Claims Association (MCCA) steps in to pay for as long as the medical benefits are “reasonably necessary” for the victim.

But under this newly proposed plan, victims who chose the first two options will receive no catastrophic coverage under the MCCA. And those who chose the third option will receive only limited MCCA coverage. That’s a raw deal for car crash victims and consumers for two big reasons:

  • The proposed limits are woefully inadequate in many cases and especially, in catastrophic personal injury cases such as those involving a traumatic brain injury, spinal cord injury or other serious injuries to the neck and back where the medical expenses can easily run into the millions of dollars over the victim’s lifetime.
  • And as I’ll explain tomorrow, even though auto accident victims and consumers will be disqualified from receiving this catastrophic coverage if they’re ever seriously hurt in an auto accident, they will still be paying for it!

Oh, it must be good to be an auto insurance company in Michigan, with politicians introducing boondoggles like this. Now I know why Warren Buffett buys insurance companies.

Tomorrow, I will address the clearly misleading “savings” of Rep. Jason Sheppard’s No Fault plan.

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