The Michigan House of Representatives is expected to bring HB 4936 to the floor for a vote soon.
That legislation would significantly change Michigan’s auto no-fault Personal Injury Protection (PIP) coverage.
Here is a quick overview of what we have now, the proposed changes, and the potential consequences of those changes.
1. What we have now
There’s some confusion about changing no-fault. It’s not the “no-fault” part that would change. It’s the Personal Injury Protection portion of auto insurance that would change.
The state mandates a minimum of $500,000 in Personal Injury Protection and an annual fee to the Michigan Catastrophic Claims Association (MCCA) for each vehicle policy.
That MCCA fee varies from year to year. This year, the fee amounted to $145. That buys you coverage for any reasonable and necessary care if the cost of your injuries exceeds that $500,000. In other words, if you're in a horrible accident with disabling injuries, you're covered.
It will pay all of your medical costs.
It will pay up to 85% of the income you would have earned if you had not been hurt for up to three years- with some limits.
If you need physical therapy or other kinds of therapy, such as help with your speech, or re-learning tasks, or how to hold a job, you’ll get help as long as necessary.
It’s lifetime, unlimited coverage.
The Michigan Catastrophic Claims Association coverage is considered to be the best in the nation.
2. Changes under the legislation
HB 4936 would give auto-owners the choice to purchase Personal Injury Protection at three levels:
· $1 million,
· or $5 million.
If the cost of care exceeds the amount of coverage you buy, you are on your own.
The legislation would also implement a medical fee schedule which would restrict the amount of money paid for medical procedures. Rather than paying the ‘retail’ costs of medical care, a medical fee schedule would cap prices, generally at lower rates.
3. Supporters of change say system is unsustainable
The supporters of the legislation to change the Personal Injury Protection say the system we have now is unsustainable.
Those legislators, the insurance industry, and the state’s insurance commissioner say the projected costs for the generous coverage given to people who suffer catastrophic injuries will cost much more in the future.
They say it will drive that MCCA fee and your auto insurance rates higher.
They also note that the charges for medical services are much higher for Personal Injury Protection than they are for other cases in which the same care is given. That’s why they plan to include the medical fee schedule is included in the changes.
They also acknowledge the changes in auto insurance coverage would not cover medical care to the same degree. It will mean families will have to turn to other means. That could be more burden on government medical coverage such as Medicare for senior citizens, or Medicaid for the poor, or it could mean more costs passed on to private health insurance coverage if you are covered.
It could also mean an increase in lawsuits as a way to cover the costs of care.
4. Opponents say there’s no proof the current system is unsustainable
Those opposed to changing auto no-fault Personal Injury Protection note that the insurance industry claims the system is “unsustainable,” but refuses to open the Michigan Catastrophic Claims Association’s (MCCA) calculations to public review.
The state’s insurance commissioner says even if the MCCA did open its books, people would not understand the data used to calculate the projected costs.
Opponents also say capping injury benefits will force the most severely injured accident victims to turn to Medicaid and welfare once they reach the insurance cap and exhaust all their family resources.
They estimate it will shift $30 million a year to taxpayers.
The people who are currently receiving care (13,000 Michigan residents) will see funds for rehabilitation and in-home care cut by the medical fee schedule, reducing the quality of care they receive.
5. The medical community says changes would shift costs
While supporters of the legislation note medical costs paid by the Michigan Catastrophic Claims Association are higher than fees paid by other types of coverage, the medical community says these are the actual costs of medical care.
They say implementing a fee schedule for care for catastrophic auto accident victims will only shift more costs, forcing health insurance costs higher.
While auto-owners would have the options of higher levels of coverage ($1 million or $5 million), if Michigan is like other states, most people will buy the lowest level of coverage mandated by the state, $500,000.
The average cost of care for a catastrophic injury is about $1.4 million.
6. The drivers of higher insurance rates in Michigan
Supporters of the legislation say something must be done to lower auto insurance costs.
They note that the number of uninsured autos on the road has reached 19% because auto insurance costs are so high in Michigan. That’s up from 11%. That increase has occurred during the same time the economy has worsened, so the rise in the rate of uninsured automobiles simply could be a reflection of the hard times.
Personal Injury Protection is not the most expensive part of auto insurance.
Michigan’s PIP coverage, while the best in the nation, is only 5% (about $23/year) more expensive than the national average.
The sources of Michigan’s higher insurance costs are chiefly collision (30% higher) and comprehensive (13% higher) coverage.
Still, the insurance industry wants to scrap the current coverage and says people will see lower auto insurance costs.
A Michigan Watch analysis suggests it will only save auto-owners about $136 a year. And even that’s not guaranteed.
There is nothing in the legislation which would require insurance companies to lower rates.
7. Voters could not overturn it
There is, however, a provision to block the people from overturning the proposal if it becomes law.
Twice before there have been attempts by the legislature to change the system and each time through a referendum voters blocked the change.
This time the legislation includes an appropriation in the measure which would effectively block a referendum by the people to overturn the law.