The Citizens Research Council of Michigan often wades deep into complex policy issues to offer perspective for thoughtful Michiganders. Its latest foray is into the world of no-fault auto insurance.
Insurance industry advocates and consumer advocates worried about auto insurance costs are pushing for reform they say will help cut rates paid by Michigan drivers, who are required to purchase personal injury protection with unlimited lifetime benefits.
Health care providers and consumer advocates worried about quality care argue that Michigan’s system protects victims by assuring good care without threat of financial ruin.
CRC notes that Michigan is among 12 states with either mandatory or optional no-fault insurance. While Michigan’s mandatory no-fault with unlimited lifetime medical coverage for accident victims provides quick payment to victims, data suggest it’s more expensive.
CRC found medical claims in Michigan cost auto insurers 57 percent more than claims for similar crashes elsewhere. Auto insurance premiums are 17 percent higher.
Michigan makes auto insurers the primary payer for accident-related medical care, whereas states without no-fault make health insurers the primary payer.
And there are other quirks within the way Michigan manages no-fault, including a requirement that auto insurers pay for medical charges that “shall not exceed the amount the person or institution customarily charges for like products, services and accommodations in cases not involving insurance.”
The key word being “charges.” Health insurers rarely pay what they are charged, negotiating discounts. If the insurance code allowed auto insurers to pay what is customarily received rather than what is customarily charged, costs could go down.
The status quo seems ripe for improvement —although just how remains up for debate. Many alternatives reviewed by CRC could shift costs.
If auto insurers pay less, hospitals and other providers will recover costs by charging more to other customers. Some states rely on Medicaid for catastrophic cases - but those victims have to pay down personal assets to qualify.
The CRC’s bottom line: “Policymakers should consider reforms to Michigan’s no-fault insurance that have little to no impact on accident victims but would potentially lead to significant reductions in health care spending related to auto accidents.”
That’s wise advice.
Lansing State Journal