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IPS / Lighthouse Insurance Group Blog: personal injury protection

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AutoWe all know that auto insurance in Michigan is expensive. In fact, according to the National Association of Insurance Commissioners, our premiums auto insurance premiums rank 7th highest in the country.  SB-248 has passed the Senate Insurance Committee and the House Insurance Committee, and sill soon come to a congressional vote.  If passed, the framework will be in place to lower Michigan's auto insurance rates.

One of the largest issues has been a combination of Michigan's unlimited medical benefits coupled with auto insurers being required to pay-as-billed for medical services.  Other medical payers, such as health insurance companies, pay medical providers based on an agreed schedule of fees - as is the case with PPOs or HMOs.  Others such as workers compensation and Medicare pay providers based on a schedule enacted by law.  In contrast, Michigan auto insurance companies have been required to pay whatever they're billed by the providers, often being three to four times more that what other types of insurers pay for the same treatment. One element of SB-248 would establish a fee schedule to enable auto insurers to pay amounts similar to that of other health insurance companies.  This will not change the medical services available - only the amount auto insurance companies will have to pay for them.  Still, there will be no maximum limit or cap on what can be paid...only that along the way, amounts paid will become reasonable and in line with other types of insurers.

SB-248 will provide for an Insurance Fraud Authority to go after schemers who abuse our no-fault insurance system.  Michigan's unique unlimited lifetime no-fault medical benefits have led to increasing fraudulent claims.  According to a study by Hillsdale Policy Group, auto insurance fraud costs an estimated $400 million.  Michigan is only one of eight states without a fraud authority to investigate and prosecute fraud, according to the National Insurance Crime Bureau.

SB-248 still provides for reimbursement for non-skilled family-provided care, but limits payment to family members to $15 hour and no more than 24 hours per day.  That's still $131,000 per year!  This limit doesn't apply if the family attendant is a licensed professional.

SB-248 proposes a $100 / car rate rollback on auto insurance policies.

SB-248 changes the Michigan Catastrophic Claims Association (MCCA) to a new Michigan Catastrophic Claims Corporation (MCCC) that will function differently and be more transparent.  The purpose of the MCCC will be to fund the portion of auto-related medical claims in excess of $545,000.  At present, the MCCA pays out over $80 million per month for catastrophic injuries.

The House Insurance Committee passed SB-248 today, April 23, 2015, by a 9-6 vote.

Changes in committee include a fee schedule that would pay 150% of costs allowed by Medicare, removal of the proposed $15.00 per hour limit on family member attendant care if the family member is a licensed medical professional, and a $100 per vehicle rate rollback.

The Bill now moves to the House - hopefully to be acted upon next week.

Senate Bill SB-248 was passed by the Senate Committee on Insurance by a narrow 21-17 vote on April 16, 2015.

This bill contains basic elements of prior attempts to change Michigan's o-fault auto insurance, including:
  • Creation of an insurance fraud authority
  • Family Attendant Care cost controls
  • Establishment of a new entity to replace the Michigan Catastrophic Claims Association, and
  • A payment schedule for medical costs stemming from auto-related injuries based on payments accepted by medical providers from other traditional health insurers.

The Bill not goes to the House Committee on Insurance.  If passed, this could lead to reduced auto insurance costs in the State of Michigan.

MI LegislatureIf passed, HB-4936 will reform the Michigan No-Fault auto insurance law that was first created in the 1970’s.  Under the current No-Fault law, all Michigan auto insurance policies contain a coverage called Personal Injury Protection, or PIP.  PIP includes several provisions, including unlimited medical benefits and up to 85% of the insured’s lost income from work, subject to a monthly maximum amount.  Michigan is the only state that mandates unlimited medical coverage.

The crux of the issue is the rate at which the cost of catastrophic injury claims are increasing in combination with the way our No-Fault Law currently works.  At present, PIP benefits within the auto insurance policy must pay medical providers the full amount of fees they deem to be “reasonable and customary”.  Other medical insurance sources are able to pay reduced fees because of PPO or HMO agreements or, in the case of workers compensation, a fee schedule that is part of Michigan’s Workers Compensation Statute.
Auto Accident
At present, there is no dollar limit on the amount of PIP benefits payable for an injury stemming from an automobile accident.  There are two charges within a Michigan auto insurance policy that pay for this benefit:  One is the premium paid for PIP coverage.  This money is retained by the insurance company and is used to cover the first $500,000 of a claim for PIP benefits.  Another charge is the MCCA assessment.  The assessment, which will increase slightly to $145.00 per vehicle in 2012, is a fee the insurance companies are required to collect and pass on to the Michigan Catastrophic Claims Association (MCCA).  The MCCA fully reimburses the insurance company for the portion of an injury claim that exceeds $500,000.  According to the MCCA, the highest percentage of people whose PIP claim costs exceed $500,000 are between the age of 16-20 (12.4%).

According to a report presented by Sharon Tennyson Ph.D. as testimony before the Michigan House Insurance Committee on October 4, 2011, the average amount paid for a Michigan PIP claim during 2010 was $35,446.  The report also states that only 1% to 2% of all PIP claims in Michigan exceed $500,000.  The problem is that the few claims (1% to 2%) that exceed $500,000 account for 47% of all PIP claims costs.  In other words, once the claim cost exceeds $500,000, chances are that it may be huge. 

The goal of the proposed legislation is to help curb the rising cost of auto insurance in Michigan. According to a legislative analysis summary from the House Fiscal Agency, there are six key provisions to the proposed change in our No-Fault Law:

  • No-fault policies would no longer automatically cover unlimited lifetime medical and rehabilitation benefits.  Instead, drivers could choose personal injury protection (PIP) coverage with (1) a maximum of $500,000; (2) a maximum of $1,000,000; or (3) a maximum of $5,000,000.  The default amount would be $500,000.
  • The current Michigan Catastrophic Claims Association (MCCA), which currently pays medical and rehabilitation claims once they exceed $500,000, would be divided into two accounts:  (1) the MCCA Account, which would only apply to losses attributable to accidents before July 1, 2012; and (2) an Excess PIP Account, which would apply to losses attributable to accidents on or after July 1, 2012.  Each account would be self-supporting and assets and liabilities could not be transferred between them.
  • Under the bill, for loss occurrences attributable to accidents on or after July 1, 2012, each auto insurance company would pay for 100% of the ultimate loss under PIP coverage up to $500,000.  The MCCA would reimburse the auto insurance company 90% of the ultimate loss from $500,000 and $1,000,000 and 100% of the loss in excess of $1,000,000.
  • The fee schedule used in the Workers’ Compensation system would be applied to payments made by auto insurers to physicians, hospitals, and other providers treating an injured person or providing rehabilitation.  (The fee schedule would not apply to emergency medical services provided by ambulance operations.)
  • Individuals injured on a motorcycle involved in an accident with a motor vehicle could claim PIP benefits only up to a maximum of $250,000.
  • Specific limits would be placed in statue on attendant care or nursing services provided in an injured person’s home, including limits on hourly payment for the provision of basic services and skilled services.

If passed, how would claim costs be covered if they exceeded the limit of insurance chosen on the auto insurance policy?  Likely, they would become the responsibility of other insurance sources such as private medical insurance, VA Benefits or Medicaid.

The airwaves are alive with radio ads from both those who favor this change and those who oppose this change.  Insurance companies and many consumers favor the change as it would help contain spiraling medical costs resulting from auto accidents and help to keep auto insurance premiums reasonable.  Health care providers oppose the change.

Change to the Michigan No-Fault Law will affect every driver in the State of Michigan.  It is important to stay informed and determine how this major change might affect you. 

For more details on Michigan No-Fault reform may affect you, visit the Michigan Legislature’s website.  You can also contact us at 800.225.5582 for more information about Michigan auto insurance, or to get a free Michigan auto insurance quote.

734.421.9900  |  800.220.5582  |

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