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?
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.