Pursuit of auto coverage cap insures problems for legislators

If you and your family are in a major auto accident, do you care what the hospital billed the auto insurer for your child’s neurosurgery?

Didn’t think so.

Are you reassured that for roughly $8 a month per family member -- if you have two cars -- unlimited lifetime medical care for that child, if tragically necessary, is provided?

Thought so.

In a nutshell, that explains likely doom for House Bill 4612, the insurance industry’s latest attempt to shrink what remains, for the price, one of the most remarkable security blankets in the nation. The public isn't clamoring for change, nor are they likely to believe the change being proposed would deliver a net economic benefit.

Back in the 1970s, lawmakers undoubtedly felt that the guarantee of unlimited lifetime medical care for catastrophic auto injuries would sweep the nation, given the low cost of the benefit. Instead, Michigan remains alone.

And for that, among those grateful were the dozens of young and middle-aged attendees of a recent House Insurance Committee meeting who, in a split second on a Michigan highway or some county road, have been consigned to their wheelchairs.

It’s a powerful, though small, constituency, as only 30,000 accident victims have received or are receiving care that's reimbursed by the Michigan Catastrophic Claims Association, the reinsurance pool that assessed its first annual fee -- $11.68 -- in 1979.

The costs of catastrophe

At various times since, the insurance industry and lawmakers in both parties have sought to scale back the benefit in ways they said would make the MCCA more structurally sound. Each time, either in the Legislature or at the ballot, they’ve failed.

Undaunted by that history, Gov. Rick Snyder and at least a few lawmakers want to take another run at it. They argue the current program is unsustainable and is creating an uncompetitive insurance market that has Michigan motorists paying the eighth highest premiums in the nation. The per-vehicle average premium in Michigan in 2010, according to the most recent comparison from the National Association of Insurance Commissioners, was $1,074. The national average was $907.

Compared to other Midwest states, average premiums here are $200 to $300 higher.

But more than half that Midwest difference can be explained by the annual MCCA assessment, which for 2013-14, was recently set at $186 per car.

Kevin Clinton, the state's chief insurance regulator, told lawmakers that, given a $2 billion deficit in MCCA accounts, unlimited medical is unsustainable. But he also said that a $1 million cap, sufficient for 99.5 percent of all motorists, would translate into $2.3 million of coverage. That’s because the bill saves money by tightening medical prices, in part by adopting the same fees schedule used for workers compensation claims.

However, since that fee schedule would apply to those injured before and after the change would take effect, adopting that provision alone should work to keep the MCCA solvent.

So, if the MCCA can be sustained through cost controls and (long overdue) anti-fraud policing, then the point of ending unlimited benefits for new injuries is, what, exactly?

That’s what Republican lawmakers, along with just about every Democrat, are wondering.

Counting votes at the Capitol

Lobbyists charged with pushing the bill concede there are fewer than four dozen House Republicans in support of the measure. In Oakland County, where GOP County Executive L. Brooks Patterson and his driver were critically injured in an accident last year, the GOP delegation is nearly unanimous in concurring with Patterson’s warning that $1 million in coverage is not enough.

One of those Oakland lawmakers, Rep. Gail Haines, R-Lake Angelus, is chairwoman of the House Health Policy Committee.

By the way, for two years, Haines steadfastly blocked Gov. Snyder’s proposal to create a state-run exchange where Michigan residents could shop for health insurance under the federal Affordable Care Act.

That’s one of a few paradoxes at work here. On one hand, Republicans recognize the importance of health security to their constituents when it comes to auto insurance. In doing so, they are embracing a central tenet of progressive insurance: Those least in a position to worry about how they'll pay their medical bills -- such as a car accident victim -- should have to.

When it comes to expanding coverage to the uninsured, however, that concern has been lacking in Republican ranks … so far. Smash your pelvis in a car accident? We’ve got your back. Smash it tripping down the cement stairs of your apartment building? Maybe not.

One of the arguments for scrapping mandated unlimited care is that other insurance is available. Those over the age of 65 have Medicare, for example.

Of the MCCA claimants through June 2012, only 14 percent have been above the age of 65. More than 37 percent are between the ages of 16 and 35, the age group that would most benefit from Snyder's Medicaid expansion proposal – the proposal Republican lawmakers have yet to endorse.

Proponents of eliminating unlimited medical, moreover, claim they want insurance to be affordable. Yet, last year, lawmakers kept in place $1,000, two-year driver responsibility fees for those with misdemeanor violations of driving without insurance.

While fees for civil infractions were eliminated, laws remain in place that can send motorists who can’t afford insurance into a downward financial spiral because the risk of driving without insurance is preferable to not going to work.

One fee becomes three

Thirdly, the proposal is more complicated and adds another layer to government. Instead of one fee, the new regime would have three:

-An annual fee to pay off the existing MCCA’s deficit.

-A new $25 fee, through Dec. 31, 2019, to help fund Medicaid.

-A new unspecified annual fee to cover new accident claims that incur medical charges of more than $530,000 up through to the new $1 million cap. This charge would be levied by a new governing board separate from the MCCA.

The tradeoff for eliminating unlimited medical? A $125 reduction in premiums, mandated for one year only.

In past legislative battles, no-fault advocates have sought victory through stalemate that preserved a preferable status quo. But it's becoming more clear, in actuarial terms, and the MCCA's rising cost, that's no longer a viable position. Likewise, the industry doesn't have the votes for a benefits cap.

If lawmakers want to do their jobs, they'll do the hard work of finding interest group agreement on fee schedules and fraud prevention that preserves the system for the injured. And cuts costs for insurers.

Michigan's bold, 35-year experiment in health security just might depend on it.

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James Sawaski
Thu, 05/09/2013 - 9:03am
Hasn't it already been provent that LIFETIME coverage for ANYTHING is an EXTREME COSTLY situation? Yes, it is unfortunate for people to get injured in automobiles, especially catastrophically. That should NOT mean we open the checkbook and pay whatever is required (or desired) - because these funds are NOT audited. These catastrophic claims funds are NOT open to the public. I have heard there is gouging, so bad that the insurance pays $8 for an aspirin. PLEASE - this cannot continue to happen. IF we are going to keep this unlimited coverage, then it MUST have recourse to be audited so the money is fair. Michigan has the highest auto insurance rates BY FAR in the whole nation. I pay $50/month for my 3 vehicles so some doctor can gouge me by overcharging and taking advantage of our catastrophic claims. If I was the disabled people on this, I would be angry with the medical field that has abused this privilege... NOT angry with the legislators that want to get this beast of a free fall under control. Unlimited FUNDS - not open to public viewing - PLEASE - this is thievery!
Charles Richards
Thu, 05/09/2013 - 12:26pm
Mr. Sawaski didn't read the part that said, " That’s because the bill saves money by tightening medical prices, in part by adopting the same fees schedule used for workers compensation claims."
Cheryl Botbyl
Fri, 05/10/2013 - 9:40am
You said, "I pay $50/month for my 3 vehicles so some doctor can gouge me by overcharging and taking advantage of our catastrophic claims.". The current cost for the MCCA fund portion of your premium is $175 per vehicle, per year...that's $43.75 per month for "lifetime medical" coverage if you are catastrophically injured in an auto accident. That IMHO is a pretty good rate for lifetime medical coverage. If all Governor Snyder and his Republican cohorts wanted to do was manage medical fees they could have done just that. HB 4612 if a far reaching bill that guts our No-fault auto insurance law completely and totally in favor of auto insurance companies. It does nothing for the people it is supposed to cover (which is what insurance does). It is because of legislators that the MCCA is operated the way it is, not doctors, not hospitals and definitely not those who are injured. The MCCA fund is managed by a board made up of insurance company representatives, not legislators and not the public. Auto insurance companies do have the ability to negotiate rates, I've seen it done and the representative from AAA Michigan testified during the last hearing that they do have the ability to negotiate fees according to current law. The auto insurance companies are nothing more than a go between, between the MCCA and claims filed through the MCCA. They collect the $175 fee, they pass it on to the MCCA, they process the claims and the MCCA reimburses the auto insurance company. It is up to the legislators to pass laws making the MCCA more transparent, not anybody else. Until the time comes, that you or someone you care about needs lifetime medical coverage due to a catastrophic injury suffered in an auto accident you will have no clue about how important this coverage is. I'm not willing to give it up for a savings of $125...and by the time they are finished with adding the new fees, it won't even be $125. This reduction in cost is guaranteed for 1 year only,
Charles Richards
Thu, 05/09/2013 - 12:21pm
After saying that legislators kept in place a $1,000 driver responsibility fee for driving without insurance, Mr. Luke goes on to say, "While fees for civil infractions were eliminated, laws remain in place that can send motorists who can’t afford insurance into a downward financial spiral because the risk of driving without insurance is preferable to not going to work." Which is it? And just what laws can send motorists into a downward financial spiral? And what kind of insurance structure would avoid unaffordable premiums in high crime areas? And just how much is "-An annual fee to pay off the existing MCCA’s deficit?" And why isn't the new fee to pay for claims between $530,000 and $1,000,000 specified? Are we expected to buy a pig in a poke?
Fri, 05/10/2013 - 7:25pm
The initial problem is that when Mr Engler turned the catastophic insurance fund over to the private insurance companies, there was no provision for public scrutiny, it is all secret and the insurance companies say trust me while I steal your money without fear of oversight. The proposed law, which was written by the insurance industry in secret, lowers my bill by $150.00 per year per car, then tax me to fund medicare shortage. This is a one year savings. Mr Lund claims that the "free market" may lead to lower rates in the future. Right now there are about 100 auto insurance companies in Michigan, that should make for a pretty competitive market, and we are the 4th highest paying state in the country and are the highest paying state in the midwet. This proposed bill does not change that. In fact while it appears to do nothing for my car insurance rates long term, and by shifting the long term cost to the medicaid program and for those with private insurance to them, ensurs continued increases in that insurance costs. And finally, a Republican calling for government controll of pricing for medical care, so much for the free market that rickie deems so important. God love you gov
Sat, 05/11/2013 - 1:22pm
There is a mis-use of terms used in your article headline. " No fault" insurance refers to the portion of your collision that repairs your vehicle after a collision, regardless of who caused the collision. The"catastrophic claims" refer to medical and other payments made on behalf of a party injured in a vehicle collision in Michigan. It is true that Michigan insurance provides both coverages, but the terms are not interchangeable. Republicans are trying to find new ways to rob the middle class and feed insurance companies.
Wed, 09/11/2013 - 1:29pm
My family of two has three cars a pickup truck and two motorcycles. We pay the MCCA fee six times per year even though we can only get in an accident one at a time. That is over $1000 per year. I understand the concept of MCCA but feel that it is unfairly administered as above. The total of all six vehicles is under 20,000 miles per year and the total value is under $30000 so this is not a rich man's complaint. It unfairly penalizes auto enthusiasts. My total MCCA fee is greater than the insurance premium for any one of the six vehicles and nearly equal to the total premium of all six. Let us all pay the MCCA fee once per driver per year. By burying the fee on the insurance policy, the average citizen blames it on high insurance prices and has no idea where the money is going. Let's put the fee on the driver's license and let all see what MCCA costs. How about a little transparency.