High court: No-fault cuts don't apply to 15K victims

The Michigan Supreme Court on Monday ruled that new medical cost controls in Michigan's recent overhaul of its no-fault auto insurance system do not apply retroactively to the nearly 15,000 car crash victims whose accidents occurred before the change in the law.

The 5-2 opinion affirms in part an August 2022 decision by a Michigan Appeals Court panel.

However, the Supreme Court justices ruled that the new cost controls do indeed apply to medical services for crash victims whose accidents occurred after Gov. Gretchen Whitmer signed the no-fault overhaul into law in June 2019.

The cost controls took effect in July 2021.

The majority ruling held that the Legislature did not clearly state that it intended for the cost controls to apply to those whose accidents happened before the law change.

The court's decision means that unlimited, lifetime medical services for those nearly 15,000 Michiganders who were catastrophically injured in accidents prior to the overhaul must be paid at full rates and not subject to the cost controls.

The overhaul law requires medical providers who provide services used by many catastrophic accident survivors to cut their prices by 45%. Those cuts resulted in some providers shutting down, dropping patients or threatening to drop patients, such as retired Red Wings star Vladimir Konstantinov, who suffered severe brain injuries in a 1997 limousine crash.

The decision also exempts pre-2019 crash survivors from the law's new 56-hour cap on in-home attendant care that is provided by a patient's family or friends. (Attendant care for over 56 hours is still available under the law to all severely injured survivors, but must come from a care agency or other third party unless an exemption is granted.)

Likely impact on future refunds, fees

The court's decision makes it less likely for Michigan drivers to see future refunds from the Michigan Catastrophic Claims Association, or MCCA, such as the $400 checks sent out in spring 2022. Those refunds were largely the result of savings from the medical cost controls.

The MCCA recently raised its per-vehicle assessments on all Michigan vehicles in response to the Appeals Court decision, which had opened a deficit in the $21.8 billion fund. State insurance regulators last fall ordered insurance companies to go back to paying full charges for pre-2019 catastrophic patients while awaiting the Supreme Court's final say.

The Supreme Court justices in the majority decision were Elizabeth Welch, Elizabeth Clement, Richard Bernstein, Megan Cavanagh and Kyra Bolden. Those in dissent were David Viviano and Brian Zahra.

The decision was immediately praised by the Coalition Protecting Auto No-Fault, known as CPAN, an influential pressure group of medical providers, patient advocates and trial lawyers.

"The Supreme Court has issued a strong affirmation that accident victims who were injured prior to the passage of the new law cannot have the rights and benefits they purchased through their auto insurance premiums stripped away by this legislation," CPAN President Tim Hoste said in a statement.

The Insurance Alliance of Michigan, an industry group, blasted the decision as bad for consumers and having "opened the floodgates for overcharging for medical procedures."

Some medical providers have called for the Democrat-controlled Legislature to take up legislation that would upwardly adjust reimbursement rates for treating catastrophically injured patients whose accidents happened after the June 2019 cutoff.

The Insurance Alliance said it urges lawmakers to protect the cost controls in the law for those more recent accidents, "and stop efforts by those who profit off overcharging and pushing unnecessary medical procedures from taking us back to the old broken system with astronomical rates, rampant fraud and widespread abuse and overcharging."

For most catastrophically injured car crash survivors, the money for their medical bills comes from the Michigan Catastrophic Claims Association, or MCCA, which acts as a form of reinsurance that reimburses auto insurers once the size of a patient's no-fault bills exceeds a set threshold, currently $600,000.

There were 16,683 crash victims who had crossed that threshold with open claims as of last September, according to the MCCA. Of that group, 14,872 were injured in accidents that occurred before the no-fault overhaul.

The 2019 no-fault overhaul instituted two types of cost controls on medical services.

The first generally limited medical providers' reimbursements from no-fault insurance to about 200% of what Medicare charges for the same service or procedure.

For services with no applicable Medicare billing code, such as in-home attendant care and long-term stays in specialized rehab centers, providers and caregivers had their reimbursements cut by 45% of whatever they charged in 2019.

Those types of services not covered by Medicare are used a lot by the catastrophically injured, who often have brain and spinal injuries and may need 24/7 help for the rest of their lives.

Some rehab centers and care providers shut down after the cost controls began, as their business models depended on the former no-fault reimbursements, which were thought to be generous.

The overhaul also gave Michigan drivers a first-ever choice in the amount of medical coverage, or personal injury protection, that they must purchase with auto insurance. Previously, all Michigan auto insurance policies had to include unlimited, lifetime medical coverage — even for drivers with health insurance.

The lead plaintiff in the case decided Monday, Ellen Andary, 65, of East Lansing, was a passenger in a vehicle that was struck head-on by a drunk, wrong-way driver on U.S.-127 in December 2014.

Andary received lasting brain injuries and can no longer walk or use her left arm. A family friend who was driving Ellen Andary that day, Dr. Scott Kuhnert, died in the crash, as did the wrong-way driver.

Doctors have prescribed Andary with 36 hours of daily attendant care because of her serious injuries, which means two people for some shifts. Most of those hours are performed by her family members. The pay rate as of last year was $28 per hour, which equals $1,008 per day or $367,920 per year, according to legal briefs filed by the MCCA.

The case's second plaintiff, Philip Krueger, was catastrophically injured in 1990 at age 18 while a passenger in a pickup truck. The MCCA has been paying $572 per day, or more than $208,000 a year, for Krueger to stay at a specialized center known as the Eisenhower Center in Ann Arbor.

The defendants in the case are insurance companies USAA Casualty Insurance Co. and Citizens Insurance Co. The plaintiffs appealed a November 2020 ruling in Ingham County Circuit Court that sided with the defendants.

The city of Detroit and several other insurance companies filed friend-of-the-court briefs earlier this year arguing for the new no-fault cost controls to be applied to all accident victims.

Underpayment reimbursement?

The Michigan Department of Insurance and Financial Services has said that medical providers and caregivers who believe they were underpaid by insurance companies between July 2021, when the cost controls took effect, and the Aug. 25, 2022, Appeals Court opinion are to try and negotiate directly with the insurers to be made whole.

A department spokesperson said Monday they are still reviewing the Supreme Court's decision and have not issued any additional guidance regarding underpayment reimbursements.

Gov. Gretchen Whitmer was asked by reporters Monday whether she will be urging lawmakers to make any more changes to the no-fault system in light of the court's decision.

"I know that our legal counsel is still reading through all the documents and making sure that we have any questions that need to be answered answered, and then we'll figure out what next steps look like — if next steps are necessary," the governor said.

Attorney Nick Andrews of law firm Liss & Andrews in Bloomfield Hills, whose clients include catastrophically injured car crash survivors, said the decision is a big deal for patients and clients. Some had to scramble to find any caregivers willing to work for such low reimbursement amounts, he said, while others had to dig deep into their savings or, in one instance, declare bankruptcy.

Bob Mlynarek, co-owner of 1st Call Home Health Care, based in Clinton Township, said it could not afford to permanently absorb the 45% price cuts in the cost controls and stay in business, as that once lowered 1st Call's reimbursement rates for home health aides down to about $15 an hour.

Had Monday's Supreme Court decision gone the other way, he said, his business would have had little choice but to send discharge papers to its more than 50 no-fault patients.

1st Choice's current billing rate for aides ranges from $35 to $40 an hour, he said, which, in addition to the aide's pay, covers business expenses such as taxes, liability insurance, billing and other overhead.

"This means that our business survives and we can continue to take care of our patients," Mlynarek said.

The American Civil Liberties Union of Michigan was among various organizations that issued friend-of-the-court briefs supporting the case's accident victim plaintiffs.

"The Michigan Supreme Court made the correct legal decision, as well as a humane one," Dan Korobkin, the Michigan ACLU's legal director, said in a statement Monday. "Applying the law retroactively has resulted in the withdrawal of critical care from people who are living with severe disabilities as a result of catastrophic injuries suffered in car accidents — care that allows them to continue living their lives and participate in society."

Free Press staff writer Clara Hendrickson contributed to this report.

Contact JC Reindl: 313-378-5460 or [email protected]. Follow him on Twitter @jcreindl.