By Elena Durnbaugh
Staff Writer
Posted: April 3, 2023 12:23 PM

In the first three months of the new legislative session, the Democratic majority has raced through its initial six priorities laid out at the beginning of the term. As lawmakers prepare to dive back in after the spring recess, one issue that could be taken up is no-fault auto insurance.

"The energy and the desire … to take up the issue is there," said Rep. Brenda Carter (D-Pontiac), who chairs the House Insurance and Financial Services Committee. "After we get through these first six bills and the gun legislation bills, then auto no fault becomes the priority."

How fast those changes could take place also is complicated by current litigation over the implementation of the 2019 overhaul in the Michigan Supreme Court case, Andary v. USAA Casualty Insurance Company.

Changes were made to Michigan's no-fault auto insurance in 2019 with the passage of bipartisan legislation that created multiple levels of personal injury protection coverage to make it more affordable. The multi-tiered PIP rate was created as an alternative to the mandatory lifetime health coverage (See Gongwer Michigan Report, June 30, 2020). The legislation also mandated medical fee schedule that imposed a 45 percent provider rate cut and limited reimbursement for family-provided attendant care to 56 hours per week (See Gongwer Michigan Report, May 12, 2021).

"The impact has been devastating," said Tom Judd, executive director of Michigan Brain Injury Provider Council, a trade association that serves providers in professions related to brain injury rehabilitation, and which has strongly objected to the reforms (editor's note: This story was changed to correct Mr. Judd's first name).

The fee schedule went into effect in July 2021, causing problems for the approximately 17,000 people receiving care under the prior no-fault law, which assured unlimited coverage for "all reasonable charges" needed to provide care for those catastrophically injured. Providers also said they could no longer afford to provide care for patients due to a lack of funds.

"We warned legislators about this before the fee-cap system was implemented in 2020, and everybody kind of took a wait and see approach," Mr. Judd said. "Well, we've seen the impact."

Erin McDonough, executive director of Insurance Alliance of Michigan, said that the reforms have benefited Michigan drivers.

"The goal of them was to drive down costs for Michigan's 7.2 million drivers, and we think the reforms are working," she said.

The Department of Insurance and Financial Services released a report showing that as a result of the new law, the Michigan Catastrophic Claims Association deficit of approximately $2 billion had been eliminated and the associations assessment could be reduced by $1 billion. The MCCA also stated the changes resulted in an estimated $3.5 billion reduction in liabilities.

The report also said that, as of December 29, 2022, the department reviewed 47 percent of the personal auto insurance filings, and those filings reflected $106 million in savings passed on to consumers as the result of the application of the fee schedule provided by the no-fault reforms.

"They've kept costs in check by preventing overcharging and reducing incentives for medical providers to push harmful procedures and have established a reasonable reimbursement rate for medical services," Ms. McDonough said.

The state also developed a hotline to ensure that fees were being paid in a timely manner, Ms. McDonough said, and people who didn't have car insurance before the reforms are now buying that protection.

"We have a choice," she said. "We have savings in the form of a fee schedule. We have accountability through programs like utilization review that allow third party disputes to be overseen by the department. We've had 60 new companies enter the market since the reforms passed."

Last month, the Coalition Protecting Auto No-Fault called into question the accuracy of the number of new insurance companies since the law changes (See Gongwer Michigan Report, February 13, 2023).

Unclear is how the new Senate Democratic majority will handle the issue. Sen. Mary Cavanagh (D-Redford Township), chair of the Senate Finance, Insurance and Consumer Protection Committee, did not respond to multiple requests for comment.

Both Ms. Carter and Ms. Cavanagh were co-sponsors of House Bill 4486 during the 2021-22 term, which would have restored payments to rehabilitation clinics to what they charged prior to the 2019 no-fault changes.

The Michigan Supreme Court is currently hearing a case related to the fee schedule. The case, Andary v. USAA Casualty Insurance Company (MSC Docket No. 164772), will decide whether the 2019 changes apply retroactively (See Gongwer Michigan Report, March 2, 2023).

Mr. Judd said that the decision of the Supreme Court won't prevent the Legislature from addressing the reimbursement system.

"It's a very narrow, small part of the law that really needs to be fixed so that people can get the care that they deserve and that they paid for," he said. "That's a legislative caused problem, and the only solution has to come from the Legislature with an amendment to the law that makes sure that providers are getting paid a reasonable amount."

Ms. McDonough said any discussions about no-fault reforms were dependent on the court case.

"We need to understand what decision the Supreme Court is going to make," she said. "It will determine constitutionally what the Legislature can and can't do, and what's at the heart of this is the medical fee schedule."

Ms. Carter said she is in ongoing discussions with House Speaker Joe Tate's (D-Detroit) office about bringing the insurance industry and the provider industry to the table to develop solutions to auto no-fault insurance.

"I'm really optimistic, especially with the subject matter experts we have on the committee, that we will come to some kind of resolution where both sides of the industry wins," she said.

The biggest concerns to address are the fee schedule and the cut in fees paid to providers, Ms. Carter said.

"That's the 800-pound gorilla in the room for both sides," she said. "We've watched this law since 2019-20, and we see that there's been a reduction in claims and a reduction in price, however the provider industry is being disproportionately impacted."

Mr. Judd said that when the no-fault auto insurance laws were originally passed, stakeholders like the Michigan Brain Injury Provider Council would have liked an opportunity to discuss what the fee schedule looked like and different strategies to reasonably lower costs in the system.

"We did not get that opportunity," he said. "We need to see a change to the reimbursement level for post-acute services. Those services that have had their reimbursement rate slashed by 50 percent. That's not sustainable…We're not looking to touch any other aspect of the law except for this one very narrow solution that looks for justice and fairness in terms of making sure that people who are injured have care providers that are getting paid at reasonable rates."

Mr. Judd said he's cautiously optimistic about the chance of reform.

"We think that we have champions at key points in the Legislature, within leadership and within both parties who have been championing for a change, and the new legislators coming into this session have really shown some great insight into this issue, and they recognize the need," he said. "We know that over the past few years, Governor Whitmer has said she wants to see some solutions to her desk, and so we're very hopeful and optimistic now that she has her party with the majority that a solution will get to her desk."

Ms. McDonough said that the medical fee schedule is helping keep costs in check because it allowed providers to charge people with no-fault insurance more for procedures than they charged people without no-fault insurance.

"Loading costs into the system makes rates go up, and when you have choice, unchecked medical costs can prevent people from getting the value of their policy," she said. "Think about it: You could only afford a $50,000 policy. Why should you have to by a $5,000 MRI when it costs everybody else $500?"

Ms. Carter also said that the Legislature was not prevented from making adjustments going forward, regardless of the Supreme Court decision.

"We will still have to look at how the law impact pricing going forward," she said. "The obligations that the provider industry will have to meet going forward. And that, once again, is a discussion between the two sides."

Sen. Mark Huizenga (R-Walker) was less confident about the ability of the Legislature to do anything prior to the Supreme Court's decision. Mr. Huizenga is the minority vice chair of the Senate Insurance and Finance Committee.

"In general, any time you have major policy change like that, it's never perfect, and it's not that uncommon to see technical fixes, legislative adjustments and modifications after the fact," he said. "But I think that's all on hold now, just because of litigation."

Mr. Huizenga said that his office still regularly is contacted by people with concerns about auto no-fault. Still, he said he couldn't speculate on whether the Senate committee would take it up as an issue or what kind of changes could be considered.

"I don't think it'd be fair for anyone to speculate as to what changes might or might not occur because of the litigation," he said.

The Republican caucus largely supports the 2019 law because many members feel that the changes made the state more competitive by lowering prices and made Michigan safer. The biggest priority is making sure that people are getting their medically necessary care.

There hasn't been much discussion at the committee level on no-fault auto reform, but Ms. Carter said she was confident that there would be a bipartisan effort.

"With the implementation of the law, there were a lot of eruptions around it," she said. "That doesn't mean that they may not occur once (auto no-fault) starts surfacing as an issue again, but as of right now, it seems like both sides are willing to come to some type of agreement."