EDITORIAL: No-fault insurance reform bill doesn’t go far enough

April 29--Ladies and gentlemen of Michigan, the state Legislature would like to save you $8 a month. And in return, they'll essentially obliterate a state program that you might really need someday.

Michigan's personal injury protection provision, a part of auto insurance, costs drivers $186 a year, for which they're assured lifetime benefits in case of catastrophic injury through the Michigan Catastrophic Claims Association. It's unique in the nation -- a fact the insurance industry has seized upon to attack the program.

Call us unconvinced.

The Legislature is debating a bill that would install a fee schedule for auto insurers' reimbursement to hospitals for personal injury protection. Peter Kuhnmuench, executive director of the Insurance Institute of Michigan, said auto insurers pay for care at a higher rate than other insurance providers, up to four and five times the rate paid for acute care by Medicare or workers compensation. The fee schedule would cap reimbursements at 150% of the Medicare rate.

Laura Appel, vice president of federal policy and advocacy for the Michigan Health and Hospitals Association, said that's the wrong comparison; other commercial carriers rates are more comparable to those paid by no-fault insurers.

If something doesn't change, Kuhnmuench said, insurance costs will go up. But if the Legislature passes Senate Bill 248, drivers will save only $100 per car, per year, for two years -- about $8 a month. Because this law would impact only the personal injury protection portion of auto insurance, that means consumers could still see an overall increase, despite the $8-per-month drop. Mandatory coverages, he said, have grown from roughly 30% to 40% of consumers' bills in the last five years, and controlling personal injury claims will bring those costs down.

Kuhnmuench said the change won't impact the quality or standard of care -- just what his industry is willing to pay for it.

We find that claim disingenuous.

Appel said the changes proposed by the insurance industry would take about $1 billion a year in reimbursements out of the system.

"Not a single hospital CEO wants to stand up and say, the quality of care in this facility would go down, but I am sure every single one of them is looking at those numbers and saying, 'I don't know how we do that,' " she said.

"Are the hospitals going to have to readjust or cut costs internally? Yes," Kuhnmuench said. "But auto insurance claims are 4% to 5% of total revenue for the hospitals, it's not really affecting their revenue stream."

How will the change impact impact Detroit auto insurance customers, who pay sky-high rates, even in the city's safest neighborhoods?

There is "no direct benefit to urban ratepayers," Kuhnmuench said, except, he noted, "Urban hospitals are going to have a tougher time accepting the reduced fee schedule."

So let's tally this up. Michiganders pay too much for auto insurance, and Detroiters pay the most of all.

Balanced against those rates is a catastrophic claims fund that's a national model. The quality of care -- and the catastrophic claims fund's ability to pay for it -- can mean the difference between a life in a nursing home, or recuperation and a return to functional and productive life.

There's no question that everyone in Michigan deserves lower rates. And we need the Legislature to think through a sophisticated fix that will achieve that without leaving victims of devastating car wrecks in a financial lurch.

This proposal won't do that -- not even close. And so even if the Legislature passes it, Gov. Rick Snyder should prevent it.

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