No-fault opponents fight for victims

A high-profile lawsuit whose outcome could validate or scrap portions of Michigan's recent no-fault auto insurance overhaul had oral arguments Tuesday in Detroit before the Michigan Court of Appeals.

The case, brought by opponents of the overhaul, centers on whether new price controls on medical services for some car crash survivors can continue to retroactively apply to those whose auto accidents occurred before the no-fault overhaul law took effect in June 2019.

The price controls were designed to rein in medical costs and make auto insurance more affordable in Michigan.

The opponents argue that the controls violate the contract clause of the Michigan Constitution because they downgrade contractual policies that injured motorists had with their auto insurer at the time of their accident.

Defenders of the overhaul law say the medical benefits in no-fault policies were always subject to future changes made to the law, and note how courts previously upheld retroactive changes impacting Michigan's Workers' Disability Compensation system.

The overhaul opponents lament how since the price controls began last July — two years after Gov. Gretchen Whitmer signed the law — some rehabilitation centers for auto accident patients have closed and some in-home attendant care services have dropped or threatened to drop patients, including retired Red Wings great Vladimir Konstantinov, who was injured in a 1997 limo crash.

The lead plaintiff in the current lawsuit, 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 suffers lasting brain injuries and can no longer walk or use her left arm. Her legal guardian is her husband, Dr. Michael Andary, a medical doctor whose specialty before the accident happened to be treating patients with catastrophic brain injuries.

A family friend who was driving Ellen Andary that day, Dr. Scott Kuhnert, died in the crash, as did the wrong-way driver.

The lawsuit's second plaintiff, Philip Krueger, was catastrophically injured in 1990 at age 18 while a passenger in a pickup truck.

That accident left him permanently disabled and unable to walk, talk or care for himself. Since 1997, he has been staying at the Eisenhower Center, a neurological rehab center in Ann Arbor.

The lawsuit's defendants include auto insurers USAA Casualty Insurance Co. and Citizens Insurance Co.

In November 2020, Ingham County Circuit Court Judge Wanda Stokes sided with the auto insurers and against Andary and Krueger in the case.

Stokes ruled that the pair's auto policies were not exempt from future changes made by the Legislature to the underlying no-fault law.

On Tuesday, three Court of Appeals judges heard arguments from lawyers on both sides of the case.

Lawyers say a decision from the appeals court could take anywhere from weeks to months.

"I think whoever 'loses,' it's going to go to the (Michigan) Supreme Court," said attorney George Sinas of the Sinas Dramis Law Firm in Lansing, who is representing the plaintiffs. "It's one of the most important pieces of litigation I've seen in my career. It affects thousands and thousands of people."

Price controls at issue

The lawsuit concerns new price controls that apply to post-acute medical services paid by no-fault insurance that have no equivalent Medicare billing code, such as in-home attendant care and long-term stays in specialized rehab centers.

Those services lack a Medicare billing code because no-fault insurance offers benefits that most other forms of insurance do not.

Under the no-fault overhaul, those non-Medicare-coded services were subject to 45% price cuts from whatever the medical provider charged in early 2019. Some providers claim those cuts were too deep, forcing them to discharge patients or even close.

Also at issue in the lawsuit is a new rule capping reimbursement for in-home attendant care that is provided by a patient's family or friends at 56 hours per week.

Patients can still receive more than 56 hours of care, but the extra hours must come from a care agency or other third party. Insurers, however, can grant exceptions to the family-and-friends rule.

A similar 56-hour rule for attendant care paid by Workers' Disability Compensation has existed for years.

Savings from the no-fault price controls was a major reason why Michigan drivers this spring received $400 per-vehicle refund checks from auto insurance companies.

Those refunds represented $3 billion of a $5 billion surplus in the Michigan Catastrophic Claims Association's fund, or MCCA, which last reported $27 billion in total assets.

Retroactive?

Lawyer Mark Granzotto, who also represents Andary and Krueger, argued Tuesday that nowhere in the law does it say state lawmakers intended for the price controls and 56-hour rule to apply retroactively to patients whose accidents occurred in the past.

He noted how state Rep. Julie Brixie, D-Meridian Township, and the late state Rep. Andrea Schroeder, R-Clarkston, submitted a legal brief last year with signatures from more than 70 other lawmakers, claiming the Legislature didn't intend for those changes to apply to people injured before the no-fault overhaul.

However, some of those legislators who signed the brief had opposed the overhaul law.

Lori McAllister, a lawyer for the defendant insurance companies, told the judges that legislators in fact knew that the price controls in the overhaul would apply retroactively.

"It's a public policy issue, not a court issue," she said.

McAllister pointed out how the same day that the overhaul bill received final approval in the Michigan House in May 2019, then-state Rep. Sherry Gay-Dagnogo, D-Detroit, proposed an amendment that would have made the price controls apply only to those injured after the law's effective date. That amendment failed.

McAllister said that that and similar amendments showed how lawmakers knew the overhaul was designed to impact existing accident victims — not just those injured later.

"I think that is pretty strong evidence as to what was intended with regard to this bill," McAllister said.

Reached for comment Tuesday afternoon, Gay-Dagnogo, who is now a Detroit school board member and running for U.S. Congress, recalled how she did seek to amend the legislation "to grandfather" in earlier accident victims, so that they wouldn't lose their care.

Gay-Dagnogo, who opposed the overhaul, said she believes it is unconstitutional for insurance companies to now be applying the price controls to earlier accident victims like Andary.

"I would have never wanted the insurance industry to use my testimony or my amendment to that effect, but unfortunately, they use it to their advantage, and I am disappointed," Gay-Dagnogo said in a phone interview.

Still lifetime benefits

McAllister also told the appeals court that the 2019 law did not take away auto accident victims' right to unlimited, lifetime medical benefits. What changed was how much medical providers can now be paid for those services.

"A point that I think is being lost is these insurers are not off the hook for lifetime benefits," McAllister said. "They are still subject to paying reasonable benefits for reasonably necessary care."

Now, the definition of what is reasonable is determined by the price controls and fee schedules, she said.

Catastrophic claims

The cost of Andary's and Krueger's medical care is currently covered by the MCCA, which reimburses auto insurance companies whenever a patient's bills exceed a set threshold, currently $600,000. There were 17,542 individuals with an open MCCA claim as of June 30, 2021.

Sinas, the attorney for Andary and Krueger, said the insurance companies have not cut their medical providers' reimbursement levels, or imposed the new attendant care rule, because the lawsuit is still pending.

Doctors have prescribed Andary with 36 hours of daily attendant care because of the seriousness of her injuries, which means two people for some shifts.

Most of those attendant care hours are performed by family members, including her doctor husband and their adult children.

The pay rate for Andary's attendant care is $28 per hour, which equals $1,008 per day or $367,920 per year, according to legal briefs filed by the MCCA.

When providing the care, the family members are employees of a home care staffing agency known as Optimal Medical, according to the MCCA.

Sinas said that is a relatively common arrangement.

"Family members are frequently hired by commercial agencies so that the family member becomes a member of that agency, becomes a W-2 employee of the agency and gets health insurance benefits and medical, paid vacation — that is pretty typical," he said.

In their legal brief to the court, the MCCA lawyers argued that the high cost of Andary's attendant care, paid out in large part to family members, shows why the Legislature acted to overhaul Michigan's no-fault system.