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No-Fault plan a road to nowhere for consumers, crash victims

April 20, 2017 by Steven M. Gursten

Rep. Sheppard’s PIP Choice plan leaves car crash victims with TBI & spinal injuries without adequate insurance coverage — and no guarantee of savings (again)

No-Fault crash victims

Let’s not mince words. Rep. Jason Sheppard (R-Temperance)’s new auto No-Fault insurance “reform” proposal is a terrible idea.

In particular, the No-Fault “PIP Choice” provisions in Rep. Sheppard’s House Bill 4488 (introduced yesterday on April 19, 2017) suffer from the same serious flaws as did his previous failed No-Fault reform bill (House Bill 5951) from the last legislative session.

Let me count the ways in which this latest bill to reform No-Fault insurance in Michigan is a bad idea:

  1. HB 4488’s No-Fault “PIP Choice” will make consumers who forfeit their right to catastrophic medical coverage still continue to pay for it in their annual assessments from the Michigan Catastrophic Claims Association (MCCA).
  2. There is no guarantee of savings on auto insurance for consumers. And we can say the bill will also shift significant costs onto health insurance, Medicaid and any car crash victim’s own personal savings and personal financial resources. In other words, we are shifting costs from already profitable auto insurance companies to taxpayers — apparently for no other reason than to boost profit margins for the insurance industry.
  3. The bill’s No-Fault “PIP Choice” provisions will mislead many consumers into forfeiting all reasonably necessary No-Fault medical benefits protections, leaving a car crash victim without enough insurance coverage in the event of serious injuries. We need only look to many “pure tort” states such as Ohio to see how this plays out — most car crash victims with very serious injuries who are not lucky enough to have had great private health insurance in effect at the time of their injury lose everything after a serious car crash. They declare personal bankruptcy because of medical debt, and the burdens of medical care are shifted onto taxpayers as these crash victims turn to Medicaid for care.
  4. HB 4488 also imposes drastic, unreasonable, and unwarranted hourly restrictions on in-home, family-provided attendant care.
  5. It creates an additional significant cost to auto insurance consumers that will make auto insurance more expensive by creating an annual $21 million “fraud authority” assessment tax whose costs will be passed onto consumers in the form of higher auto insurance prices.

I know very well — just like all Michigan drivers — that the price we pay to insure our vehicles has gotten too high. But this latest No-Fault reform plan — House Bill 4488 — by Rep. Jason Sheppard doesn’t reduce the price of auto insurance. It just acts as a boondoggle for the insurance industry.

Eliminating, restricting or just watering down car crash victims’ No-Fault rights to increase insurance company bottom lines and profit margins, without slashing the costs of auto insurance creates no savings to consumers, yet consumers and car crash victims will suffer real harm.

Yes, we can lower the price of auto insurance in Michigan (see below). But dismantling No-Fault is not the way to do this. I know very well — as an auto accident attorney who helps people every day who have been seriously injured in car, truck and motorcycle accidents — how critically important existing No-Fault protections and benefits are to car crash victims.

How to really lower the price of auto No-Fault insurance in Michigan

If Rep. Sheppard is serious about lowering car insurance prices and preserving vital No-Fault protections and benefits, then he should consider the strategies in my “2017 No-Fault reform guide for new lawmakers on how to lower car insurance rates and preserve No-Fault benefits”:

  • Create a No-Fault medical-provider fee schedule modeled on the fee schedule used in the Workers’ Compensation system.
  • Empower Michigan’s Insurance Commissioner to stop auto insurers from charging “excessive” prices.
  • Empower the Insurance Commissioner to regulate excessive profits by Michigan’s highly profitable No-Fault automobile insurance companies.

No-Fault ‘PIP Choice’ is bad idea for consumers and car crash victims

As I mentioned above, the No-Fault “PIP Choice” provisions in Rep. Sheppard’s House Bill 4488 suffer from the same flaws as the PIP Choice provisions the lawmaker unsuccessfully proposed during the last legislative session:

  • It leaves drivers without enough insurance: By allowing drivers and consumers to forfeit their guaranteed unlimited No-Fault medical benefits coverage (which protects them in the event of a catastrophic injury) in return for capping or limiting benefits to a specific dollar amount, HB 4488 will leave motor vehicle accident victims underinsured and without adequate coverage when they need it most: After a serious automobile accident 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 crash victim’s lifetime.
  • No guarantee of savings: First, HB 4488 makes no guarantee of “savings” for consumers (no guarantee of amount or of a duration). Second, to the extent that consumers see any savings under HB 4488, it’s likely they will continue to pay some of the highest rates in the country — yet, for less coverage than they have now. Third, because of the “cost shift” effect of HB 4488, money won’t go back into consumers’ and drivers’ pockets, but rather, toward higher health insurance costs, increased out-of-pocket expenses and higher tax burdens for Medicaid and Medicare.
  • People will be forced to continue to pay for catastrophic coverage even though they’re no longer eligible to receive it: HB 4488 allows consumers to opt-out of their long-standing unlimited No-Fault medical benefits (which encompasses catastrophic coverage) and opt-into limited medical benefits at levels of $250,000, $500,000 and $1 million. But what HB 4488 doesn’t allow consumers to do is opt-out of continuing to pay their annual, per vehicle assessments to the Michigan Catastrophic Claims Association (MCCA) – even though they’ve forfeited their right to collect catastrophic injury benefits. (Note: HB 4488 makes no changes to the provision of the MCCA statute, MCL 500.3104(22), which provides that “[p]remiums charged [auto insurance companies doing business in Michigan] by the association must be recognized in the rate-making procedures for insurance rates in the same manner that expenses and premium taxes are recognized.”)

As with HB 5951, Rep. Sheppard’s HB 4488 proposes to require consumers to “select” one of four “levels of maximum personal protection insurance [No-Fault PIP] benefits” with “limit[s]” of $250,000, $500,000, $1 million or “[n]o maximum limit.” (Page 17, lines 21-27; page 18, line 1)

Picking on in-home, family-member attendant care providers

HB 4488 proposes that:

An “insurer is not required to provide [No-Fault] coverage for more than a cumulative 56 hours per week of attendant care in the home if the attendant care is provided directly, or indirectly” by “a family member,” “member of the household” or a “business” or “social” friend from “before the automobile accident.” (Pages 16, lines 24-27; page 17, lines 1-5)

Setting aside for a moment the absurdity of this arbitrary, nonsensical suggestion, let’s ponder the important question: Why?

Where is the evidence that the costs associated with quality in-home, family-provided attendant care are out of control — let alone so much so that attendant care is threatening the continued viability of the auto No-Fault system in Michigan?

Plus, if the politicians are so concerned about “runaway” costs, maybe they’d do well to spend a little more time trying to figure out how to implement a reasonable medical fee schedule to stop medical providers and provider lawyers from price-gouging to the tune of 300% or more when No-Fault is paying.

Now, back to the absurdity that is Jason Sheppard’s plan to fix auto No-Fault in Michigan.

If only 56 hours out of a week are covered, then what is a catastrophically injured car crash victim — who needs 24/7 care — supposed to do for attendant care during the remaining 113 hours?

Whoever authored this proposal — and whoever agrees to it — has never met (and most certainly never cared for) a seriously and possibly catastrophically injured car crash victim.

This is outrageous, reckless and cruel. It also fails in its touted aim of actually protecting consumers and guaranteeing savings on auto No-Fault insurance.

Higher car insurance prices to pay off an annual $21 million assessment

The preposterous nature of the “fraud authority” proposal speaks for itself — aside from the fact that the Fraud Authority would not go after fraud committed by insurance companies.

Rep. Sheppard’s HB 4488 proposes the creation of a Michigan Automobile Insurance Fraud and Theft Prevention Authority, which will be funded through an annual $21 million assessment on Michigan No-Fault auto insurers.

And, conveniently, under existing Michigan law (which would not be changed under HB 4488), auto insurers will be able to safely pass along those assessment costs to consumers in the form of higher auto insurance prices. (See: “Any assessments paid [to the MAIPF] may be recouped through a surcharge in the insurer[‘s] rates for automobile insurance policies issued by the [insurer] …” (MCL 500.3385))

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