Comparing the Competing No-Fault Reform Plans

How does the Duggan/Leonard PIP cap plan compare to the Fair and Affordable No-Fault Reform proposal?

In the past two weeks, two competing auto insurance reform proposals have been announced in Lansing. While both proposals have some level of bipartisan support and both seek to address fraud and rising medical costs to treat accident victims, there are some significant differences that will impact all stakeholders in Michigan’s no-fault auto insurance system. This post will provide a quick overview of each proposal, but look for a more comprehensive legal analysis of the Duggan/Leonard plan (HB 5013) soon.

The Duggan/Leonard No-Fault PIP Choice – Pip Cap Plan
Detroit Mayor Mike Duggan joined House Speaker Tom Leonard and a group of Detroit pastors and business leaders this week to announce a plan that has as its key feature a cap on personal injury protection (PIP) coverage. This plan proposes to allow drivers the choice of either keeping the lifetime PIP coverage they have today, or to buy lower PIP policies of either $250,000 or $500,000. At least that is how the legislation was announced.

In reality, the Mayor Duggan and Speaker Leonard oversold the coverage offered in their proposal. The bill language shows that the majority of the $250,000 coverage is for “an emergency medical condition and related emergency care only.” That coverage will get a driver through an emergency, but once the real recovery starts the lifetime PIP cap is only $25,000. This is nowhere near enough to cover the lengthy rehabilitation therapy, and possibly years of care needed after a catastrophic accident. What’s worse is that the $25,000 cap would also include wage loss, replacement services and survivor’s loss benefits.

It should also be noted that PIP choice proposals are not new in Lansing. The last time a serious proposal was introduced to cap PIP coverage in Michigan, CPAN commissioned a study by Public Sector Consultants, that found the cost shift to the state Medicaid system would be $30 million in the first year alone.

Other provisions of the Duggan/Leonard PIP Choice – PIP Cap Plan include:

  • A cap on family-provided attendant care of just 56 hours per week. The weekly limit would apply even if the patient requires 24-hours per day  support.
  • Fee Schedules on health care providers treating auto accident victims that would be set at the Medicare reimbursement rate. A schedule of 125 percent of Medicare would apply to services for emergency care or related to an emergency medical condition.
  • People 62 or older would be allowed to opt out of PIP coverage under this plan and rely solely on Medicare. The proposal ignores the fact that Medicare does not cover the long-term care needed by seniors recovering from a catastrophic accident.
  • The creation of a fraud authority that would have a board represented by the insurance industry, law enforcement, prosecutors, one member of the general public and one Detroit resident. This authority would not be subject to the Freedom of Information Act.
  • Mandatory auto insurance rate reductions by insurance companies. For those who purchase the $250,000 plan, insurers would be required to reduce the premiums for the PIP coverage by 40 percent and drivers would not be required to pay the $170 per vehicle Michigan Catastrophic Claims Association fee. However, drivers should not count on the savings as guaranteed because the bill language allows insurance companies to make an exception if they can explain why the required rate reductions are not achievable.
The Fair and Affordable No-Fault Reform Plan
Led by Republican State Rep. Ben Frederick and Democrat Rep. Donna Lasinski, the Fair and Affordable No-Fault Reform proposal aims to reduce costs for drivers, while also preserving lifetime injury coverage and adding consumer protections to Michigan’s auto insurance system.

Key features of this proposal include:

  • A medical fee schedule for health care providers treating auto accident victims. The schedule would be set at 185 percent of the Workers Compensation rate, which is far more reflective of the complex treatment and increased attention that auto accident victims require. In addition, this fee schedule would NOT apply to Level 1 trauma centers, which helps preserve funding for those facilities that are among the first to receive and stabilize catastrophic auto accident victims.
  • An hourly rate schedule for family-provided attendant care that would allow for rates that are reasonably related to the nature and extent of the patient’s disability and needs, including providing for patients who require 24/7 care.
  • A ban on insurers from using non-driving related factors such as credit score, gender and job title from unfairly impacting auto insurance rates. These factors have nothing to do with how cautious someone drives or how expensive their vehicle is to fix.
  • A requirement for the fees charged by the Michigan Catastrophic Claims Association to be transparent by making its ratemaking data available to the public.
  • The creation of a Fraud Prevention Authority, that is meaningful and balanced. This authority will address fraud committed by claimants and providers as well as prevent insurance companies from wrongly and knowingly denying legitimate claims, which drives up litigation and expenses.
  • Amends wage loss benefits to better align with the auto accident victim’s actual wage/salary loss.
  • An Admire Fix – Correct the Admire vs. Auto Owners decision, which has been used by insurance companies to deny paying for legitimate expenses needed by auto accident victims, including handicapped accessible transportation and even specialized food needed by patients.
  • A Bahri Fix – Corrects the unjust decision of Bahri vs IDS Property Casualty Insurance Company, which allows insurance companies to void an entire policy if a claim submission was made in error, or if the insurance company alleges fraud.
  • A Bazzi Fix – Re-instates innocent party rule, which was ended in the case of Bazzi vs Sentinel Insurance Company, thereby protecting innocent third party claimants who did not participate in fraudulent procurement of a policy.
  • A Covenant Fix – Corrects the disastrous court ruling Covenant Medical Center vs. State Farm, which prevents medical providers from suing insurance companies, on behalf of auto accident patients when insurers refuse to pay for treatment that has been rendered.
CPAN will be working diligently with its coalition partners and all stakeholders to garner support for the Fair and Affordable No-Fault Reform legislation. This proposal is a far more comprehensive reform package that will provide an overall improvement to Michigan’s auto insurance system while continuing to maintain the lifetime coverage that is so critical to the quality of life for our state’s auto accident victims.
We encourage all members to meet with their state lawmakers and encourage their support for this well-thought out, bipartisan proposal. You can write your lawmaker directly from the CPAN website at www.protectnofault.org/takeaction.
In addition, the Legislative Coffee Hours page on our website includes information on how to look up your lawmaker and is updated regularly with the dates and times each lawmaker holds their coffee hours.

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