Michigan Insurance Reform Could Affect Motorcyclists

There's a battle raging in Michigan over revising the no-fault insurance policy there. It has the two major political parties drawing a line in the sand, with consumers and tax payers watching and trying to figure out who is telling the truth. This story is taken from Crain's Detroit Business, written by Amy Lane.


LANSING -- It's not the first time that state Rep. Pete Lund and Sen. Joe Hune have tried for no-fault auto insurance reforms like those they're shepherding through the Legislature.

But a combination of the more receptive ears of a top gubernatorial aide and Republican-led Legislature and, surprisingly, legislation to drop Michigan's helmet requirement for motorcyclists, an opportunity has opened for the two to achieve a goal of putting a ceiling on the state's now unlimited no-fault personal-injury protection.

Legislation introduced by Lund, R-Shelby Township, and Hune would among other things end Michigan's lifetime unlimited injury and rehabilitation benefits and allow Michigan drivers to choose different personal injury protection, or PIP, coverage levels. It would also implement a fee schedule that would limit payment levels to health care providers.

The legislation also specifies that motorcyclists who are injured in a motor vehicle accident could receive only up to $250,000 in PIP coverage benefits for medical and rehabilitation expenses.

Posthumus and the biker bill

Some attribute the increase in interest in no-fault reform to senior adviser Dick Posthumus, who in his years in the Legislature was supportive of no-fault changes.

Posthumus joined the Senate in 1983 and served as majority leader from 1991 until he left in 1998 to become Gov. John Engler's lieutenant governor. Snyder tapped Posthumus in November to join the administration and head up the executive branch's relations with the Legislature.

Senate Bill 291, passed by the Senate in June, would repeal Michigan's mandatory helmet law and allow riders age 21 and older to ride without helmets if they buy $100,000 in insurance. That set off alarm bells in the administration. 

Posthumus said the governor didn't want the no-fault system and auto insurers paying for bikers injured as a result of not wearing helmets.

Snyder press secretary Sara Wurfel said that neither eliminating the requirement for motorcycle helmets nor reforming no-fault are at the top of the administration's agenda, but that Snyder has been "very clear and consistent" that "to look at any helmet law repeal, it must be in the context of broader auto insurance reform."

The reason: Motorcyclists already represent a disproportionate share of claims made to the Michigan Catastrophic Claims Association, the entity that reimburses insurers for vehicle-related medical claims of more than $500,000.

In 2008, that was 7.2 percent of MCCA claims, even though motorcyclists are only covered if they are in an accident with a vehicle. Motorcyclists also in 2008 only paid 2 percent of the money paid into the fund by motorists, which currently is set at $145 per vehicle per year. (See story at top of this Web page.)

The legislation

House Bill 4936 initially included a low-end coverage level of $250,000 but currently contains levels of $500,000, $1 million and $5 million. The mandated levels would still be the highest in the nation.

Among the 12 states that have no-fault insurance systems, the next-highest required coverage level is $50,000 in New York, followed by $40,000 in Minnesota; $30,000 in North Dakota; $15,000 in New Jersey; $10,000 in Florida, Hawaii and Kentucky; $5,000 in Pennsylvania; $4,500 in Kansas; $3,000 in Utah and $2,000 in Massachusetts, according to data from the Insurance Institute of Michigan.

A study by Epic Consulting LLC commissioned by the institute showed that 99.1 percent of all automobile accidents result in medical bills of less than $250,000.

The legislation also would set a fee schedule that would limit payments to hospitals, physicians and other health care providers to no more than what's paid for treatment, service, accommodation and medicine under Michigan's workers' compensation system.

The fee schedule is a bone of contention because medical reimbursements paid out under no-fault are higher than under Medicare or workers' compensation.

For example, a table distributed by the Coalition for Auto Insurance Reform, a group of insurers and business organizations supporting the legislation, shows reimbursement to providers for a spinal X-ray is $227.55 in the Detroit area, while Medicare would pay $55.89 and workers' comp, $77.06.

An MRI of the neck would be reimbursed at $3,258.68 under no-fault, but at $483.98 under Medicare and $769.63 under workers' comp.

Hospitals say such a fee schedule would dramatically reduce payments for patient care and jeopardize some hospitals' abilities to have trauma units.

The Michigan Health & Hospital Association, which is part of the Coalition Protecting Auto No-Fault, has continually opposed adopting workers' comp fee schedules.

CPAN legislative coordinator Kevin McKinney said the proposed legislation "will create significant job loss, shift millions of dollars onto taxpayers and health insurers and quickly unravel one of the nation's best post-acute care provider networks for those suffering catastrophic injuries -- all without any guarantees that premiums will decrease.


Previous attempts

In 1992, AAA Michigan spearheaded what became Proposal D that included capping personal injury benefits at $250,000 per occurrence unless an insured person purchased additional coverage in increments of up to $5 million, and a 20 percent rate reduction.

Voters defeated that proposal, and then came 1993 legislation that included PIP coverage of $1 million to $5 million and a medical fee schedule. Petitions filed for a referendum suspended the law and put it on the November 1994 ballot as Proposal C, which voters also rejected.

This time, if the Legislature passes the no-fault reforms, the law can't be stalled by referendum.

A $50,000 appropriation in the legislation, to pay for informational pamphlets on the no-fault changes and a report to the Legislature, makes the law referendum-proof because appropriation bills are exempt from referendums. However, opponents could gather signatures to place a separate initiative on the ballot. 

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