HB 4936

SEPTEMBER 21, 2011

In mid-September 2011, HB 4936 (sponsored by Representative Lund) was introduced in the Michigan Legislature. This Bill makes massive changes in the Michigan auto no-fault insurance system and will result in significant limitations on the medical expense coverages and legal rights of auto accident victims. The highlights and consequences of these proposed changes are summarized below.

The House Insurance Committee will meet on HB 4936 at the House Office Building (519 House Office Building, Lansing, MI) next Tuesday, October 4, and Thursday, October 6.  Hearings will start at 9am and will end at 12pm. 

A. CONTENT SUMMARY*
1. Medical Expense Coverages Reduced.
(a) The current lifetime coverage for reasonably necessary products, services, and accommodations is eliminated. No one will be able to buy this coverage any longer. Rather, coverage for such expenses will only be available in incremental coverage levels of $250,000, $500,000, $1,000,000, or $5,000,000. [§3107(1)(a)]

(b) If a person incurs medical expenses in excess of his or her selected PIP coverages, the victim has no recourse other than to file a lawsuit against the at-fault party to recover the unpaid balance. [§3135(3)(d)]

(c) The coverage election made by the insured person is applicable to his or her spouse and any relative of either domiciled in the same household, including children, regardless of whether they were able to participate in the coverage election. [§3107(1)(a)]
*Content Summary prepared by CPAN General Counsel, George T. Sinas, Sinas Dramis Law Firm, Lansing, Michigan.

(d) Individuals who do not have auto insurance available to them in their household, are limited to the minimum coverage level and then, only after the victim first exhausts his or her health insurance coverage or other benefit sources. [§3107(3)]

(e) Employees driving vehicles furnished by their employers are limited to the coverages selected by the employer, regardless of whether the injured employee purchased higher coverages on his or her personal auto. [§3114(3)]

(f) Insurance companies and their agents have no liability whatsoever if they sell incorrect or inadequate coverages to policyholders, regardless of the instructions, requests, or needs of the policyholder. [§1245(1)]

(g) The legislation contains no guidelines regulating how insurance companies can price the reduced PIP coverages. Therefore, insurance companies will be able to charge excessive premiums for the higher coverages, thereby leaving many with no choice other than to buy the cheapest medical coverage.

2. In-Home Attendant Care Benefits Reduced.
(a) Attendant care or nursing services provided to an injured person in his or her home by individuals who are not certified, registered, or licensed under Article 15 of the Public Health Code, are limited to a total of 56 hours per week (8 hours per day) and are payable at the rate of $11 per hour for basic care and $17 per hour for skilled care, regardless of how severe the injury or the extent of the patient’s needs. It is only if the injured person is institutionalized or hires certified/registered caregivers, that an auto insurance company may be required to pay more for attendant care. [§3107C(2)]

(b) These changes in in-home attendant care benefits appear to be retroactive and thus, applicable to all current and future accident victims.

3. Fee Schedules for Medical Providers.
(a) All physicians, hospitals, clinics, and other persons lawfully rendering treatment to an injured person can only be paid for services rendered in an amount that does not exceed the current workers’ compensation fee schedules, regardless of the severity of the patient’s injuries or the extent of their needs. [§3157(2)]

(b) The Insurance Commissioner has the authority to make changes to these fee schedules, presumably increasing or decreasing them, and can do so without legislative approval. [§3157(2)]

4. Injured Motorcyclists’ Rights Severely Limited.
(a) Any motorcycle operator or passenger who does not wear a helmet conforming to Motor Vehicle Code requirements is completely disqualified from receiving any auto no-fault PIP benefits, regardless of whether the lack of a helmet had anything to do with the nature of the injuries suffered. [§3113(D)]

(b) Even if motorcyclists wear required helmets, they are only entitled to the minimum PIP coverage of $250,000 for medical and rehabilitation expenses, regardless of whether the motorcyclist purchased higher coverage on his/her auto no-fault policy. [§3114(6)]

(c) Motorcyclists who do not wear conforming helmets are not entitled to collect any economic loss damages from the at-fault driver, regardless of the relationship between the type of injuries suffered by the motorcyclist and the failure to wear a helmet or the fact the motorcyclist was not at fault for the accident [§3135(3)(c)]

(d) Motorcycle operators or passengers who do not wear conforming helmets are deemed to be at least 35% comparatively at fault regarding any claim they make for noneconomic damages, regardless of the relationship between the type of injury suffered by the motorcyclist and the failure to wear a helmet or the fact the motorcyclist was not at fault for the accident. [§3135(2)(b)]

5. Assigned Claims Facility Changes.
(a) Any PIP benefit claim processed through the Michigan Assigned Claims Facility which involves no applicable or identifiable insurance is payable only at the lowest PIP benefit coverage level. [§3172(5)]

(b) Any PIP benefit claim processed through the Michigan Assigned Claims Facility which involves a dispute between two or more insurers, is payable only at the lowest PIP benefit coverage level as among the insurance policies in dispute, regardless of whether one of those policies was purchased by the injured person and has PIP coverage limits that are higher than the other policies involved in the dispute. [§3172(4)(b)]

6. Increased Threshold Protection for Drunk and At-Fault Drivers.
(a) The no-fault “serious impairment of body function” tort threshold is made more restrictive than current law by requiring proof that the victim’s injury and impairment have had “a meaningful affect on the person’s general ability and capacity to lead his or her normal life.” [§3135(7)(a)(ii)]

(b) The new threshold requirement recognizes only a handful of injuries that constitute serious impairment as a matter of law. Absent from this list are victims who sustain permanent and total blindness, permanent and total deafness; severe brain damage rendering the victim mentally incompetent; and a host of other severe injuries. Any injury not in this “matter of law”category will require a jury trial or judicial hearing to determine if the injury constitutes serious impairment. [§3135(8)(9) and (10)]
 

7. No Rate Reduction or MCCA Oversight.
(a) There is nothing whatsoever in the proposed legislation that would require insurance companies to reduce auto no-fault premiums in any way.

(b) There is nothing in the proposed legislation that increases the transparency of the Michigan Catastrophic Claims Association or subjects it to any regulations regarding how it may invest the public’s money or the extent to which it can surcharge the public for the coverage it provides.

B. ADVERSE CONSEQUENCES
1. Increased Taxes—The elimination of lifetime coverage for all reasonable charges for reasonably necessary products and services will result in a very substantial amount of unpaid medical expenses incurred by catastrophically injured auto accident victims. In this regard, last year the MCCA paid over $600 million in catastrophic claims. The loss of no-fault auto insurance funding for these expenses will mean a massive cost shift to Medicaid and Medicare, thus increasing the State and Federal tax burden for Michigan citizens.

2. Loss of Jobs—The under-funding of medical treatment for severely injured accident victims will result in thousands of lost jobs in that sector of Michigan’s medical care industry that services those patients.

3. Increased Insurance Premiums for Liability Coverage—Most Michigan drivers will be forced to buy more liability insurance coverage because all citizens now will have personal financial liability for any unfunded medical expenses suffered by the victim of an at-fault accident.

4. Inadequate Medical Care for Severe Injury—Persons who suffer catastrophic injury and who did not buy enough PIP coverage to cover the expense, will, in many cases, not receive the medical care, treatment, and rehabilitation they require in order to attain the highest level of recovery.

5. Increased Risk of Financial Ruin for Michigan Families—Michigan citizens who cannot afford the optional higher PIP benefit coverage limits could be financially destroyed if a catastrophic injury results in medical expenses in excess of the coverage selected. This is particularly true of motorcyclists who will never have more than $250,000 of medical coverage for severe injuries suffered in motorcycle-auto accidents.

6. Increased Health Insurance Costs—Because health insurance will pay on a primary basis for any auto accident victim not covered by a household no-fault insurance policy, a significant cross-shift form auto no-fault to health insurance will occur, thereby increasing health insurance costs for Michigan families and small businesses who provide health insurance to employees.

7. Increased Litigation—Victims incurring medical expenses in excess of their selected PIP coverages will be forced to sue at-fault drivers to recover the unpaid costs, thereby unnecessarily increasing litigation throughout the Michigan court system.

8. Increased Protection for Drunk and Reckless Drivers—Totally innocent victims sustaining serious injuries will have a much more difficult time holding drunk and reckless drivers accountable for the harm they inflict on the public.

*Content Summary prepared by CPAN General Counsel, George T. Sinas, Sinas Dramis Law Firm, Lansing, Michigan.