Michigan Auto Insurance Reform (maybe)

The Michigan legislature is making another run at reforming the state’s beleaguered no-fault auto insurance law.  Despite the major selling point of no-fault (i.e., lower costs by eliminating most litigation that may arise from auto accidents), Michigan drivers pay the highest auto insurance premiums in the nation.  Why?  Two reasons…

Michigan is the only state in the country that mandates unlimited lifetime personal injury protection (PIP) benefits on every auto insurance policy.  Sounds great, until the bill comes due.  Speaking of those unlimited lifetime medical benefits, if you’ve ever visited a Michigan hospital emergency room with an injury you have likely been asked by the staff checking you in: “Are your injuries the result of an auto accident?”  Why does that matter? Because an affirmative answer means you/your auto insurer will be charged higher prices for the tests and treatment you receive.  The x-rays, MRIs, and whatever other services you receive will be billed at rates that may be 2-3 times more than they would be otherwise.  There are no fee schedule restrictions on what providers can charge auto accident victims.  Sweet deal for Michigan Hospital Association members – not so much for all of us who pay the premiums to cover these inflated charges.

The latest auto insurance reform proposal attempts to reduce the cost of Michigan auto insurance by giving drivers the option to choose a limit on their PIP benefits ($250,000 or $500,000 at last check) or keep the current unlimited benefit.  Naturally, the premium paid will reflect the choice made by each auto insurance consumer.  The reform proposal also places a limit on what providers may charge by capping the fees based on Medicare fee schedules.

Naturally, the hospitals and medical providers are apoplectic about reform that endangers their auto accident gravy train.   There are indignant howls that the reform will leave people with serious brain injuries out in the cold… how cruel, how heartless.  Enough.  Let’s be genuine about this… there will be resources for those seriously injured in auto accidents to receive the care that they require.  Health insurance benefits may kick in after the auto insurance PIP benefits are exhausted.  Medicare or Medicaid will apply in some cases.  Some argue that all this reform accomplishes is cost shifting.  Well, yes.  The cost of caring for seriously injured auto accident victims is going to be paid somewhere by someone.  As a society, Michigan must decide if it wants to continue the current system where the entire cost is borne by drivers and the cost is inflated by the inequitable fee structure of the medical community that is taking advantage of the current system, or have some of the cost be spread among the broader health insurance and social insurance system with some equity imposed upon the fee structure.

This is a political question which is why the lobbyists are out in full force.  That is also why previous reform attempts have died.  Will this one succeed or will Michigan drivers continue paying the highest premiums in the country to subsidize the medical providers with inflated fees? Your guess is as good as mine.

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