Those involved in talks to reform Michigan’s no-fault auto insurance law â€" and it’s one-of-a-kind lifetime medical benefits for catastrophic injuries from auto accidents â€" liken the debate to sorting out a puzzle.
Or playing a five-level chess game.
Or trying to get your arms around a camel.
“It’s much like a Rubik’s cube,†said Tom Constand, vice president of development and marketing for the Brighton-based Brain Injury Association of Michigan.
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“As you turn one thing, you’ve affected three things on the other side of the cube,†Constand said. “It’s the process of aligning all of them that’s so difficult, but it is attainable.â€
How soon reforms may come, however, is anyone’s guess because of the complexity of making changes to the state’s 42-year-old no-fault law and the 37-year-old Michigan Catastrophic Claims Association fund that pays for lifetime care for accident victims once auto insurers pay their limits.
Michigan lawmakers, on their summer recess, have two pieces of legislation to consider, Senate Bills 248 and 288.
At the heart of proposed reforms are the goals of lowering Michigan’s auto insurance premiums â€" among the highest in the country â€" while continuing to provide health care for people who suffer catastrophic brain or spinal injuries in auto accidents and require care beyond what auto insurance policies provide.
Senate Bill 248
Passed by the Senate, it’s pending in the House.
It would create an authority to go after fraud, limit reimbursements rates to family members providing in-home care for injured family, establish a medical fee schedule, and allow insurers to sell consumers excess insurance for long-term care. It would also replace the current Michigan Catastrophic Claims Association with an authority.
“It doesn’t limit the standard of care,†said Peter Kuhnmuench, executive director of the Insurance Institute of Michigan. “What changes is what we’re going to pay for it.â€
Senate Bill 288
Called the D-bill because it applies to the city of Detroit, which has the highest average premiums of any major city in the country. It passed out of committee and is pending in the Senate.
It would allow policies in qualifying cities that offer less than Michigan’s current no-fault law requires.
It would limit benefits for critical care to $250,000, and limit personal protection benefits to $25,000.
“(Senate Bill) 288 is not the answer,†said Constand, from the Brain Injury Association. “The quality of life would be much for the rest of the country. The state of care for brain injuries across the country is inhumane.â€
Constand said those receiving care under the catastrophic claims fund would be shifted to Medicaid.
“They’d get a wheelchair with a blanket,†he said. Instead of getting treatment they need, they get a new wheelchair every three years and a new blanket.â€
Michigan No-Fault
Michigan’s no-fault auto insurance law was passed in 1973. Part of the goal was to end lengthy litigation to assign blame and cost after an auto accident.
The catastrophic insurance fund was established in 1978 to cover catastrophic medical claims.
All auto insurance companies operating in Michigan are assessed a fee to cover the catastrophic medical claims occurring in Michigan. The rates are adjusted yearly.
The 2015-2016 assessment is $150 per vehicle and are generally passed on to auto insurance policyholders. The fund picks up the cost of catastrophic medical care once insurers have covered a certain limit, currently $545,000 per occurrence.
There are 31,846 reported claims and 14,938 open claims totalling more than $11.9 billion since July 1, 1978, according to the Michigan Catastrophic Claims Association.
The Great Debate
The Insurance Institute of Michigan supports both Senate bills.
Particularly, it supports an authority to chase down fraud, setting medical fees through the fund, and the option for insurers to sell policies with less-than-lifetime coverage to lower rates.
“We’re basically buying Cadillac coverage here,†said Kuhnmuench, the institute’s executive director. “You can’t buy it at Malibu prices. You either limit reimbursements or you limit services.â€
Kuhnmuench said a final solution is a long way off.
“We’re a long way from getting there,†he said. “It’s an issue that needs more discussion and debate.â€
At the Brain Injury Association, Constand said there’s much to be done before reforms are final.
“I certainly understand the need on behalf of city of Detroit to lower rates, they’re egregiously high,†he said. “But This current iteration represents second-class insurance. At what cost are these significant costs achieved? They’re at the cost of the motoring citizens in Detroit.â€
“If there’s going to be reform, it needs to be fair and balanced on all sides,†Constand said. “We believe it’s absolutely doable to reform no-fault and maintain the standard care. Whether rates come down is up to the insurance industry.â€
Among lawmakers, state Sen. Mike Kowall, a White Lake Republican, compared passing reforms that benefit just city of Detroit residents to a camel and creates a whole set of other problems.
“That would be more than the camel’s nose under the tent,†Kowall said. “It’d be up to the shoulders. i don’t think we want to go there.
“I want to get insurance costs down like everyone else, but you have to look at all the insurance policy, not just one component of it,†he said.
Among the questions Kowall said he has:
• The catastrophic fee: “Why do we have to pay that amount on every car we own? Shouldn’t the fund follow the license holder rather than the car itself?
• Redlining: “I know redlining is technically legal, but when one of my colleagues who lives in Detroit pays 1.5 times more than I pay for mine, something tells me redlining still exists. Also the theft rates and accident rates and other variables are higher too.â€
• Car registrations. Kowall said some people living in Detroit register their vehicles with family in lower-rate suburbs.
“We’re trying to find some kind of place where everyone can get to, and there’s a lot of different interest groups, as well as the consumer,†Kowall said.
“This is like playing chess on about five different levels,†he said. “There’s more work to be done.â€