Reforms Will Save Michigan’s No-Fault System

High Medical Costs Making System Unsustainable

Lansing, Mich. — A coalition formed to save the state’s no-fault system encourages lawmakers to pass legislation enacting medical cost controls and allowing choice for Michigan drivers.

House Bill 4936, introduced by state Rep. Pete Lund, R-Shelby Township, would protect the best no-fault system in the country and keep a lid on insurance rates by controlling medical costs, which currently account for up to 40% of the premium price. The legislation would provide consumers with a choice of no-fault auto medical coverage options of $500,000, $1 million and $5 million and eliminate the unlimited coverage mandate.  It would also implement a medical fee schedule successfully used in the state’s workers’ compensation system.

The average medical claim under a Michigan no-fault policy has risen 166 percent over the last 10 years.  The cost to pay for catastrophic injuries has increased 2500 percent and the number of people driving on the state’s roadways without insurance is nearly 20 percent, up from 17 percent just a few years ago, according to a Coalition trying to save the state’s 38-year old no-fault system from disaster.

The cost and procedures and treatments hospitals currently charge no-fault patients (with unlimited benefits) is significantly higher than what they charge under workers’ compensation and systems with a fee schedule. A medical fee schedule has brought consistency and stability to the workers’ compensation market in Michigan and could do the same in the no-fault auto insurance system for nearly 25 years.

Right now, no-fault patients are charged up to 400 percent more for tests and procedures than workers’ compensation patients. A medical fee schedule is one of the most common cost containment tools used in the workers’ compensation insurance system to effectively rein in skyrocketing medical costs.  Forty-two states use some sort of medical fee schedule in their workers’ compensation system.

Michigan’s no-fault law has been a “one size fits all.”  This legislative package will allow policyholders to choose the amount of coverage that fits their individual needs, according to the Coalition.

Michigan law mandates that all motorists must purchase unlimited, lifetime medical benefits.  The bottom line is 49 states, plus the District of Columbia, permit consumers to choose the level of medical coverage that fits their individual needs and usually at significant cost savings.

The Coalition is not along in its concern for the viability of Michigan’s auto no-fault system.  The Commissioner of the Office of Financial and Insurance Regulation, which oversees the insurance industry in Michigan, testified that he is concerned what will happen if reforms are not enacted.  He told lawmakers on October 13, 2011 that without reforms the system will “implode.”

The Coalition for Auto Insurance Reform (CAIR) is comprised of the following organizations: American Insurance Association, Americans for Prosperity, Insurance Institute of Michigan, Michigan Chamber of Commerce, Michigan Insurance Coalition, National Association Mutual Insurance Companies, Michigan Association of Professional Insurance Agents and Property Casualty Insurers Association of America.