Protecting No-Fault Blog

CPAN president John Cornack's blog post was published in the opinion section of today's Detroit News!  Please take the time to share with your friends and colleagues!  

Posted by John Cornack, August 13, 2010

Whenever the Michigan insurance industry loses a court case or whenever legislation is passed that doesn’t go its way, industry representatives immediately issue dire warnings of hefty rate increases and job losses.  But before policymakers and the public buy into these bullying scare tactics they need to look at the facts.  

Case in point: The Michigan Supreme Court’s recent decision on McCormick v. Carrier. The court overturned the 2004 Kreiner decision and returned Michigan’s auto no-fault law to what the legislature intended when it passed a 1995 law outlining Michigan drivers’ rights to sue for quality of life damages.  

The Kreiner decision made it nearly impossible for accident victims to receive quality of life compensation for severe injuries caused by drunk and negligent drivers.  Predictably, the insurance industry claims that McCormick will result in more lawsuits, which will mean increased costs to insurance companies and higher rates for consumers. Before we reach for our torches and pitch forks and storm the Supreme Court for raising our rates, Michigan citizens need to understand the following:

• In the six years since Kreiner was decided there have been over 250 Court of Appeals decisions, compared to less than 10 cases in nine years prior to Kreiner! Why?  Because insurance companies forced victims to file suit with the full knowledge that the courts would deny the claim, citing the draconian legal standard that Kreiner imposed.  Insurers will no longer be able to hide behind Kreiner and will be under pressure to deal fairly with innocent victims outside of court.

• During the repressive six years the Kreiner ruling was in effect, insurance companies pocketed obscene profits because they escaped paying legitimate bodily injury claims. Yet during this time insurance companies never significantly decreased rates to reflect their increased profits. Thanks to McCormick, instead of piling up staggering profits, the insurers will have to compensate innocent victims of drunk and careless drivers.

• Finally, the state Supreme Court’s latest decision correctly returns our no-fault injury threshold to the standard approved by the Legislature – which was fully supported by the insurance industry – in 1995, not the judge-made law that was the Kreiner decision.

Policymakers should absolutely do everything they can to ensure Michigan maintains a strong insurance industry while also keeping rates affordable and our auto no-fault system intact.  However, the insurance industry knee-jerk, my way or the highway attitude doesn’t add to the discussion.  It’s childish, bullying behavior and it’s offensive.  

Instead, we should be discussing the real cost of auto insurance rates – collision and comprehensive coverage, which accounts for 50-60 percent of the typical auto insurance premium (compared to 20 percent for liability), and the skyrocketing profits that insurance companies are earning in this state.   Unless something is done to solve those problems meaningful rate reduction will never happen.  


John Cornack is president of the Coalition Protecting Auto No-Fault

Last week, the Michigan auto insurance industry had two bills introduced in the House that would completely alter the Michigan auto no-fault system as we know it. For many patients and providers, no-fault PIP insurance benefits – the benefits that provide care for those injured in auto accidents – would become unavailable or would be significantly reduced. These bills are a clear confirmation that the Michigan auto industry desires to effectively repeal Michigan’s model auto no-fault system. Here are the details:

HB 6094 PIP Choice

1. Insurance companies would be authorized to sell auto policies with maximum no fault PIP benefits as low as $50,000. Higher limits would be available for higher premiums. Those who suffer catastrophic injury and surpass their limit would be forced to turn to their health insurance, Medicaid, or Medicare, thus increasing the burden on taxpayers and the health insurance system.
2. Persons who do not own a car (and therefore don’t need coverage) would be limited to the minimum auto no-fault benefits. This creates a potential of great economic hardship for seniors, the disabled and others who do not drive.
3. Victims who incur medical expenses in excess of their PIP limit would be forced to sue the at-fault driver for the excess expenses. This would increase litigation in an already crowded legal system.
4. Workers who draw no-fault PIP benefits under insurance policies issued by their employer would arguable be limited to the coverage chosen by the employer regardless of whether the worker chose to purchase higher coverages on their own auto insurance.
5. Most no-fault PIP claims paid through the Assigned Claims Facility would be limited to $50,000 of coverage, thereby increasing the burden on health insurance, Medicaid, Medicare and ultimately the taxpayer.
6. More no-fault claims would be coordinated – health insurance coverages would have to be exhausted before no-fault benefits would be payable.
7. Medicaid providers servicing severely injured patients who selected inadequate PIP benefit limits would no longer be able to provide services to those patients. This would result in a significant loss of jobs in the health care industry and a reduction in access to necessary medical care.

HB 6095 – Home Care and Fee Schedules

1. Benefits payable for attendant care or nursing services rendered to an injured person in his or her home would be subject to two caps:

   A) A weekly hourly cap – This cap would limit payment for in-home attendant care and nursing services to no more than 56 hours per week if the care is performed by an individual who is not certified, registered or licensed to render such care.

   B)An hourly rate cap – This cap would limit payment for in-home care performed by an individual who is not certified, registered or licensed to render such care to no more than $11 per hour for “basic care” and more more than $17 per hour for “skilled care.” Even if the services are performed by a person who is certified, registered or licensed, payment for such services could not exceed $17 per hour – far below the standard commercial rate.

   Both caps are applicable to family provided in-home care as well as in-home care provided by commercial agencies and hospitals.
2. Workers compensation fee schedules will be applicable to every health care provider or other person rendering treatment to auto accident victims. No provider charges in excess of those set forth in the workers compensation fee schedule would be compensable. This would result in a significant loss of revenue for major trauma centers, a reduction in services and a loss of jobs.
3. The provisions dealing with in-home care and fee schedules would be applicable immediately upon passage of the bill, regardless of whether the patient was injured in an auto accident before the bill was passed.

Conclusion: There is no doubt that HB 6094 and 6095 are a clear assault on our auto no-fault system. If these bills are enacted they consequences would be dire and would include, among other things:

Increased taxes – resulting from a massive cost shift from no-fault insurance to health insurance coverage.

Increased health insurance costs – resulting from massive cost shifts from no-fault insurance to health insurance coverage.

Job losses – resulting from diminished reimbursements to medical providers who treat severely injured accident victims.

Reduced access to medical care – resulting from unfunded essential medical and rehabilitation services.

Increased insurance premiums – resulting from the need to purchase higher liability insurance to protect consumers from exposure to liability for a victim’s unfunded medical expenses.

Increased litigation – resulting from victims being forced to sue at-fault drivers for unfunded medical care.

Limited coverage for senior citizens, those with disabilities and others who do not drive – resulting from statutorily mandated minimum coverage for non-motorists who have no household auto insurance coverage.

In addition to the serious consequences referenced above, it is important to note that there is absolutely no guarantee that these bills would significantly reduce auto insurance premiums and keep those premiums reduced for any period of time. In short, these bills are bad for drivers, bad for accident victims, bad for health care providers and bad for Michigan!

CPAN is pleased to announce the launching of its re-designed website! We have worked hard to create a website that will be used as a tool and resource for information about Michigan Auto No-Fault insurance and any items that affect this delicate system. Please take a moment and provide us with your comments about our site and any additional items you would like to see here.

Thank you for taking the time to visit our site, we hope you come back often.