A closer look at the impact of auto insurance reform on drivers

Auto insurance reform was desperately needed in Michigan because the one-size-fits-all approach that was created nearly 50 years ago was too expensive, according to state Sen. Aric Nesbitt.

Nesbitt, R-Lawton, said that’s why he sponsored a law passed in 2019 to give drivers a choice.

When Michigan lawmakers created the State’s No-Fault Automobile Insurance Act that went into effect in 1973, he said drivers were limited by what they could do. They also had to have unlimited Personal Injury Protection (PIP) coverage.

“Michigan has the most expensive car insurance in the country,” he said. “… New Jersey was the last state to have unlimited lifetime benefits. It was in the early 90s and they changed that because it was becoming unaffordable for so many people.”

Before 1973, Michigan was a tort state where at-fault drivers were responsible for paying the other driver’s medical bills, leading to numerous costly lawsuits.

In 1978, the Michigan Legislature created the Michigan Catastrophic Loss Association (MCCA), a private, not-for-profit entity that sets the cost of PIP benefits per vehicle, which is passed on to drivers through their motor insurance companies.

But the amount of money needed to cover catastrophic claims has ballooned over the years, with the amount assessed by the MCCA rising from $3 per vehicle in 1978 to a maximum of $220 per vehicle in 2019.

Nesbitt said the 2019 law allows drivers to choose not to have PIP coverage at all if they have health insurance or to choose from four levels of PIP coverage.

“Drivers could still choose the Unlimited Lifetime Benefit, they could choose a $500,000 advantage, $250,000 advantage, $50,000 benefit, or they could opt out … of PIP and rely on their health insurance or any long-term insurance like they do in other states,” he said.

Drivers could start making these choices July 1, 2020.

The rates assessed by the MCCA for people who elected to continue to have unlimited PIP fell to $100 per vehicle in 2020 and $86 per vehicle in 2021.

Insurers and health care

Another part of the 2019 law, which came into force on July 1, 2021, required car insurance companies to reimburse providers 55% of what they paid in 2019 for services not covered by Medicare, which includes most home health care. This rate drops to 54% in July and 52.5% after July 1, 2023.

Nesbitt said something had to be done to get health care costs under control.

“There was a massive overcharge for car insurance accident victims and there was no choice in the system,” he said. “…We stopped the price hike that was happening. You could see, whether it was hospitals or other healthcare or long-term care, where they were charging two to three to four times as much for different procedures or care…for auto injury claims.”

Nesbitt said those injured before the new law took effect will continue to receive care, but the fee schedule has been put in place to control costs.

“There are a lot of tragic accidents that the system has covered without question for a long time,” Nesbitt said. “And we need to continue to provide quality of care to ensure a quality of life that doesn’t overburden drivers here in the state. That’s the goal and that’s what I’m going to continue to monitor.”

Sarah Rhine, deputy director of Private home care service in Saint Joseph, said his company charges the same rates to all patients, whether their bills are paid for themselves or paid through car insurance, health insurance or some other type. insurance.

She said the reduction in auto insurance reimbursement has forced many home health care agencies, including Private Duty, to continue serving their auto insurance clients at a loss or abandon them as patients. .

Nesbitt said several bills have been introduced to change the law, but they are not on the fast track.

“People want to say, ‘Let’s give it some time. Let’s make sure the competition comes in before we change anything,'” he said.

State Representative Brad Paquette, R-nils, said his office had helped several people who were at risk of losing their home care.

“We were diligent in getting the director of the Insurance Department and onboard financial services to bring some of these issues to light and resolve them with many of these people who are afraid of losing their coverage,” said Paquette.

He said his constituents can contact him if they have a problem so he can better understand their situation.

“If necessary, we will change the law because we are certainly looking to improve the law,” Paquette said.

In one March 2019 press release, MCCA estimated that more than 1,000 insured people in the state “will be catastrophically injured in motor vehicle crashes in the next fiscal year.”

From July 1, 1978, through December 31, 2018, 40,715 claims had been reported, with more than $17.2 billion having been paid.

Kevin Clinton, executive director of MCCA, was unavailable for comment to give updated stats.

Help

Nesbitt said people and providers who have trouble paying for care can call the Michigan Department of Insurance and the toll-free Financial Services Helpline at 833-ASK-DIFS (833-275-3437).

“Insurers will have about 48 hours to respond in the event of a lack of care,” he said.

Additionally, Nesbitt said state lawmakers created a fund last year to provide financial support to health care providers who can show they are losing money caring for people injured in crashes. of the road.

“We’ve actually set up a $25 million funds to help providers who can demonstrate they are at risk of closing due to the new fee schedule,” he said. “Return what are your costs. Return what is needed. … It was created so that we could collect data on what is really going on with these providers.”

When he last checked, Nesbitt said only one provider had applied to the fund.

Rhein said the application process for the fund is long and most healthcare providers can receive a one-time payment of $500,000.

“To access this fund, you must first file a complaint with the DIFS and be denied,” she said. “It’s a long process that takes a few months. And then you have to file a usage review appeal through DIFS and share full financial information about your business and basically prove there’s no possible way to do what you did for less. And then you have to be denied for that. After you’ve been denied for that, you can apply to this fund.

Rhein said she spent many unreimbursed administrative hours over three months last year during the first stage and was turned down.

“The process you have to go through even to apply can take up to six months,” she said. “Meanwhile, you are just supposed to take a loss for six months in the hope that you can get paid out of the fund.”

She said she didn’t know if she would take the next step.

“We are trying to operate during a pandemic,” she said. “Most of the time I can’t work on it because I’m trying to figure out if I can send staff to work or if I have to quarantine them and who can go where safely.”