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Consumers’ Guide

Raw Deal

An excellent example of how proposals for reforming Michigan’s No-Fault auto insurance system can prove to be a raw deal for drivers, crash victims and consumers is House Bill 4612 from the Michigan Legislature’s 2013-14 legislative session.

Significantly, HB 4612 never made it out of the House of Representatives’ Insurance Committee and, thus, “died” due to inaction at the close of the legislative session.

The following “No-Fault Reform Balance Sheet For Consumers” illustrates how the temporary gains of “reform” can be undercut – if not totally cancelled out – by the elimination and/or restriction on No-Fault benefits and protections and by new (and ongoing) costs:

NO-FAULT REFORM BALANCE SHEET FOR CONSUMERS
(Page Numbers Refer to House Bill 4612)

GAINS
from Michigan No Fault Reform
LOSSES
from Michigan No Fault Reform
$150 “premium” savings for one year. (Pg. 52)
  • Permanent elimination of reasonably necessary and reasonably priced lifetime No Fault medical benefits. (Pg. 32)
  • New, unprecedented and permanent limitations on No Fault rehabilitation benefits. (Pg. 36)
  • New, unprecedented and permanent limitations on No Fault attendant care benefits. (Pg. 38-39)
  • New, unprecedented and permanent limitations on No Fault home modifications. (Pg. 36)
  • New, unprecedented and permanent limitations on No Fault special motor vehicles and/or modifications for wheelchair-bound accident victims. (Pg. 37)
  • New, unprecedented, permanent, inconsistent and extremely restrictive eligibility standard for No Fault medical and allowable expense benefits. (Pg. 32, 35-37)
  • New, unprecedented and permanent restrictions on an auto accident victim’s ability to challenge an insurer’s denial of No Fault benefits. (Pg. 35-36)
  • Unprecedented and permanent denial of auto accident victims’ right to trial by jury. (Pg. 47)
  • All of the new changes and limitations, except the elimination of reasonably necessary and reasonably priced lifetime No Fault medical benefits, apply “retroactively” to existing claims. (Pg. 38)
  • Consumers will continue to pay MCCA assessments indefinitely. (Pg. 17).
  • Consumers will be required to pay the new “Catastrophic Claims Fee” indefinitely. (Pg. 25, 28, 52)
  • Consumers will be required to pay for the new $21 annual assessment for the Insurance Fraud and Theft Prevention authorities until 2019. (Pg. 54)
  • Consumers will pay a new $25 Medicaid Fee. (Pg. 28-29)

To illustrate how significant it is that HB 4612 attempted to eliminate reasonably necessary and reasonably priced lifetime No-Fault medical benefits, consider the position that former Insurance Commissioner Thomas C. Jones took more than 30 years ago when the auto insurance industry was pushing to cap No-Fault medical benefits just as HB 4612 proposed to do:

  • Capping No-Fault medical benefits is “destructive to the no-fault concept,” “clearly contrary to the public interest, and “actually increases the overall cost of the catastrophic loss.”
  • “[Capping] benefits introduces no overall savings in the economy.”
  • 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.”
  • Capping No-Fault medical 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.”

(Source: “No-Fault Insurance In Michigan: Consumer Attitudes And Performance,” Thomas C. Jones, Michigan Insurance Commissioner, April 10, 1978, Pages 76-77)