If passed, HB-4936 would reform the Michigan No-Fault Auto Insurance Law that was created in 1970. The current No-Fault law requires that all Michigan auto insurance policies include Personal Injury Protection. PIP has many provisions. These include unlimited medical benefits, up to 15% of lost income from work, and a maximum monthly amount. Michigan is the only place that requires unlimited medical coverage.
The problem is the increasing cost of catastrophic injury claims and the current No-Fault Law. PIP benefits for auto insurance policies must pay the entire amount they consider reasonable and customary to medical providers. Other medical insurance providers are able pay lower fees due to PPO or HMO arrangements or, in workers compensation cases, a fee schedule which is part of Michigan’s Workers Compensation Statute.
There is currently no limit to the amount of PIP benefits that can be paid for injuries resulting from an automobile accident. Two charges are included in Michigan’s auto insurance policies that cover this benefit. One is the PIP coverage premium. The insurance company keeps this money and it is used to pay the first $500,000 for PIP benefits claims. Another fee is the MCCA Assessment. The MCCA assessment is a fee that insurance companies collect from the Michigan Catastrophic Claims Association and then pass on to them. It will be slightly higher at $145.00 per vehicle in 2012. The MCCA reimburses insurance companies for any portion of an injury case that exceeds $500,000. According to the MCCA the highest proportion of individuals whose PIP claims exceed $500,000. is between 16 and 20 years old (12.4%).
Sharon Tennyson, Ph.D. presented a testimony to the Michigan House Insurance Committee October 4, 2011. She stated that the average amount paid by Michigan PIP claims in 2010 was $35.446. It is also stated that between 1% and 2% of all PIP cases in Michigan exceed $500,000. Problem is, 47% of all PIP claims are made by claims that exceed $500,000 (1%-2%) The claim cost of a claim that exceeds $500,000 is considered high.
The proposed legislation aims to reduce the rising cost for auto insurance in Michigan. The following legislative analysis summary was compiled by the House Fiscal AgencySix key provisions are included in the No-Fault Law’s proposed changes:
- No-fault policies will no longer automatically provide unlimited lifetime rehabilitation and medical benefits. Instead, drivers can choose personal injury coverage (PIP) with a maximum limit of $500,000; a maximum $1,000,000; or a maximum $5,000,000. The default amount would then be $500,000.
- The Michigan Catastrophic Claims Association, (MCCA) currently pays rehabilitation and medical claims up to $500,000 once they exceed that amount. It would be split into two accounts. One would be the MCCA Account which only applies to losses resulting from accidents occurring before July 1, 2012, and another account, the Excess PIP Account which would apply for losses resulting from accidents occurring after July 1, 2012. Each account would be self-sustaining and assets and liabilities cannot be transferred between them.
- For loss occurrences resulting from accidents occurring on or after July 1, 2012 each auto insurer would cover 100% of the total loss under PIP coverage to $500,000. The MCCA would cover 90% of the total loss above $1,000,000.
- The Workers’ Comp fee schedule would be used to apply payments by auto insurers to hospitals, doctors and other providers that treat injured persons or provide rehabilitation. (The fee schedule will not apply to ambulance operations that provide emergency medical services.
- PIP benefits can only be claimed by individuals who are injured when a motorcycle is involved in an accident with another motor vehicle.
- The statute will set forth specific limitations on the provision of attendant care or nursing services in the home for an injured person, as well as limits on hourly pay for basic and skilled services.
How would claims costs be covered if they exceed the amount of insurance selected on the auto insurance policy if passed? They would likely fall under the purview of private insurance, VA Benefits, or Medicaid.
Radio ads for this change are abounding on the airwaves, from those who support it to those who don’t. Consumers and insurance companies favor the change, as it would reduce spiraling medical bills resulting in auto accidents and keep auto insurance premiums low. The change is opposed by health care providers.