Is Michigan no-fault car insurance bill dangerous or a smart money-saver?
But
Motorists would have the option of keeping
"This is not some harsh bill," Duggan said last week during testimony on the bill before the
"The incident rate of catastrophic claims is so low," said Poe, CEO of
He said his company insures roughly 50,000 vehicles and only about six times a year will a customer's medical bills exceed
In
The new legislation is an attempt to lower auto insurance premiums across
Yet its chief mechanisms for reining in costs are proving highly controversial: imposing price controls on hospitals and clinics that see car accident victims, and for the first time since the no-fault system began in 1973, giving consumers a choice in how much health insurance they must buy as part of their auto insurance.
"With the fee schedule that's been promoted in this bill, there are many post-acute providers that won't be able to remain in business," Dr.
Proponents, including the
"We allow people to choose how much health care coverage they purchase. We allow people to choose how much they insure their life. We allow people to choose how much they insure their home," she said. "However, when it comes to medical coverage under their auto policy, they (the bill's opponents) suddenly feel that drivers are inept and can't have that choice."
But opponents contend that the new coverage options would lure consumers into making irresponsible choices. Additionally, the proposed cost-containment mechanisms would put hospitals and rehabilitation centers in a financial squeeze, they say, and also shift the cost of treating people who are catastrophically injured in car crashes to taxpayer-funded Medicaid, instead of auto insurance companies and their customers, who currently foot those bills through premium dollars and annual fees.
"We are strongly -- and in the strongest terms -- opposed to this bill," said
The legislation focuses on the portion of no-fault insurance policies called personal injury protection, known as PIP, which covers benefits such as emergency room care, doctors visits, physical therapy, wage loss replacement and in-home attendant care.
These benefits are the largest component of auto insurance policies in
Motorists in states without no-fault insurance, such as neighboring
And in the 11 other states that do have no-fault insurance, PIP benefits are capped at various dollar amounts.
"In most states, the PIP limits are a tiny, tiny fraction of what
"I can tell you for certain there is no desire in any state to adopt the current structure that
The proposed legislation calls for letting
* The
* The
* Unlimited PIP: The same unlimited, lifetime benefits that exist now under no-fault.
* The seniors option: Those who are 62 or older and have lifetime health benefits, such as Medicare, can opt-out of buying any PIP.
Those who pick the
And seniors are expected to see a 40% or higher price cut.
Opinions on auto insurance in
There is no mandated price cut written into the bill for those who choose to buy unlimited PIP. However, proponents contend that the legislation's other cost-containment mechanisms could still lower the prices for those policies because competitive pressures would compel insurers to pass along the savings, rather than pocket them.
Can drivers handle choice?
The notion of giving consumers options for personal injury protection was a point of controversy during last week's hearings before the
Opponents of the bill, including members of the Coalition Protecting Auto No Fault, said consumers who choose the
Neither commercial health insurance, Medicare nor Medicaid would pay for all the in-home care and other assistance that seriously injured individuals would need, they said.
"I think it's fair to say that none of
"Well, how wrong they would have been," he said.
Those who buy a policy with PIP benefit caps and then get into a crash would face several potential scenarios, including:
* Their commercial health insurance, such as
* Those on Medicaid would use their PIP benefits until they reach their dollar limits. Then they would switch back to Medicaid, which would pay crash-related medical bills -- but not certain no-fault benefits that are helpful after catastrophic injuries, such as extensive rehabilitation therapy, vehicle modification and round-the-clock nursing care.
* Catastrophically injured people who use up their auto insurance PIP benefits may have to rely on commercial health insurance, Medicare or Medicaid for some or all of their nursing care, depending on their financial situation. For the worst injured, the final stop may be Medicaid-funded nursing home care. Yet most of these individuals' medical bills would still be covered by the government programs or by commercial health insurance, which now does not have lifetime limits for benefits.
The bill's opponents also note a
The state currently pays for 35% of Medicaid expenses in
In addition,
Sinas, associate general counsel for the Coalition Protecting Auto No Fault, called the shifting of medical costs to Medicaid "financially irresponsible."
"If you don't want Medicaid funds going to fund auto accidents, you'd be concerned about how much money Medicaid will have to bear under this bill," Sinas, also an attorney with
Proponents acknowledge that Medicaid costs would rise. But they contend that the size of patients' medical bills would be much smaller than under the existing system because of the legislation's price controls for medical service providers who treat people who were in accidents.
These price controls, known as a fee schedule, also would make no-fault insurance less attractive to those looking to game the system and profit from unnecessary services. A
"What's happening right now is we have auto insurance doing health care, which is the least-efficient way possible because they (auto insurers) pay the most expensive price," Theis said. "What we're going to have instead is health insurance paying health care, so it's going under the right line item at the right price."
Can drivers handle choice?
Under the legislation, reimbursement for medical service providers who see no-fault insurance patients for emergency services would be capped at 125% of what Medicare would pay for the same procedures. Afterward, all post-acute services would be capped at 100% of Medicare rates, including ambulance runs.
These billing restrictions would mean a significant pay cut.
Duggan, a former hospital system executive, said during testimony last week that medical providers, when they bill no-fault insurance, often get triple the reimbursement rates that
"Believe me, the people running hospitals and medical care facilities -- it's no longer a nun running a charitable hospital," Duggan said. "These are really smart MBAs who have got very sophisticated financial models, they know exactly how to charge everything."
An analysis of no-fault reimbursement rates several years ago by a casualty claims firm found that
How lucrative is Medicare?
Medicare generally pays hospitals based on their costs and overhead, plus a small profit margin.
To be sure, health care experts have said that low Medicare margins can be a result of hospitals receiving higher reimbursement payments from commercial health insurers, such as
Still, the Medicare-linked fee schedule could mean a
"I can say that compared to what they're currently getting, it's a loss for everybody," she said.
The legislation also would allow insurance companies to limit in-home attendant care to 56 hours per week if the care is being provided by an injured person's family members or friends. Attendant care pays providers roughly
Accident victims requiring more attendant care could still contract through insurance with a nursing agency to visit the home.
Others stand to lose
The total cost for a year of residential care at Rainbow, including therapy and visits to outside physicians, can be about
Under the existing no-fault system, motorists pay an annual per-vehicle fee to support the
Buccalo said that under the proposed legislation, Rainbow and similar rehab clinics would see business dwindle. There would be fewer new patients, as consumers would be inclined to choose the cheaper auto policies with limited benefits. Current patients would still have full no-fault benefits, but Rainbow's budget would take an immediate hit from the price controls, and likely have to reduce its staff of 850 employees, he said.
"If it passed as is, it would be an absolute disaster for the entire industry," Buccalo said.
The legislation also proposes significant reimbursement cuts for medical transportation companies that shuttle no-fault patients between appointments.
Those firms couldn't bill higher than 300% of the standard
"To own the car, employ people, drive miles when nobody is in the car to go get the patient, and get them to their appointments and wait, we would be out of business," Buccalo said in an interview. "And I think everybody else who provides that service at (
Rein in lawsuits, fraud
The legislation also has provisions aimed at reducing the proliferation of accident-related lawsuits against insurance companies. However, the no-fault coalition says the proposed reforms would cause the pendulum to swing too far in favor of insurance companies.
The legislation also specifies that lawyers with financial interests in medical treatment centers where their no-fault clients get treatment would be ineligible for collecting attorney fees.
"These (proposed) reforms were brought forward by trial attorneys who could no longer turn a blind eye to these dishonest ownership practices," Theis said of the financial interests prohibition
And the legislation would create an auto insurance fraud authority to root out behaviors that drive up insurance rates.
Contact JC Reindl: 313-222-6631 or [email protected]. Follow him on Twitter @JCReindl.
MINIMUM PURCHASE REQUIREMENT FOR PERSONAL INJURY PROTECTION (MEDICAL) IN THE 12 NO-FAULT STATES
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