FPCA Auto Division: Michigan Bill Would End Unlimited PIP Benefits
May 26, 2010
FPCA Auto Members:
A bill introduced in the Michigan House of Representatives would allow insurance companies to sell policies with maximum personal injury protection (“PIP”) benefits starting at $50,000. Michigan, currently the only state with unlimited PIP benefits, would no longer make unlimited medical payouts a PIP standard if this bill becomes law.
An article from Michigan Lawyers Weekly analyzing the issue is reprinted below.
Faulty no-fault fix? Proposed Michigan bill which would allow lower PIP benefits criticized
Douglas J. Levy
With approximately 20 percent of Michigan residents driving without mandatory no-fault auto insurance, a recently introduced House bill would give them affordable options in getting it.
But attorneys from both the plaintiffs’ and defense bar say that there are a host of caveats and ramifications — among them, conflicts with federal law, reduced competition among insurance companies, and unrealistic premiums that can result in litigation for unfunded medical care.
House Bill 6094, introduced by Rep. Pete Lund, R-Shelby Township, and referred to the Insurance Committee, would allow insurance companies to sell policies with maximum PIP benefits starting at $50,000.
If passed, Michigan would join 11 other states that offer similar no-fault options (see “Minimum PIP requirements for no-fault states,” page 28), and would not make unlimited medical payouts a PIP standard. Michigan is the only state with unlimited PIP benefits.
Thomas J. Azoni said he’s not surprised by the proposed legislation, explaining that it’s a means of getting a handle on perceived excess costs incurred by insurance companies in PIP claims.
Besides, said Anzoni, of Farmington Hills-based Secrest Wardle Lynch Hampton Truex & Morley, PC, “More choice is always better than less choice, and it allows people to tailor their policies both to their needs and their financial abilities. “
Peter Kuhnmuench, executive director of the Insurance Institute of Michigan (IIM), said that would give some people an actual choice, period.
“That individual who drives uninsured and gets involved in a car accident, he’s denied not only the typical no-fault benefits he would have had under coverage, but also any recourse in tort,” he said. “He’s not protected from the other party suing him because of his violation of not having insurance. “
A decision to save money in the short term could add more problems once an accident takes place, said George T. Sinas of Sinas, Dramis, Brake, Boughton & McIntyre, P.C. in Lansing.
“Once you’ve exhausted your $50,000, which is about four days in the hospital, you’re out,” he said.
“People who have not had traumatic injuries don’t realize how expensive the system is,” said James L. Borin of Garan Lucow Miller P.C. in Troy, “and I’d suggest a lot of people will underestimate their needs. “
Sinas said that people who do not have a no-fault policy, such as minors or senior citizens who don’t drive, also would have underestimated needs, as they would be limited to $50,000, under the bill’s limitations of no-fault benefits through the state’s assigned claims facility.
And, once the benefits on a catastrophic injury are exhausted, the insured would have to turn to health insurance, Medicare or Medicaid, thus resulting in higher taxes, Sinas said.
“At least right now, we know who has to care for people who are injured in motor vehicle accidents, irrespective of the cost,” Borin said. “There’s some value to the certainty of that system. “
However, Azoni said the federal government would take exception, based on one of the bill’s sections, which reads: “Personal protection insurance benefits payable under this subdivision are not payable to the extent that the benefits covering the same loss are available from other sources, regardless of the nature and number of benefit sources available and regardless of the nature or form of the benefits. “
“This would appear to be inconsistent with federal law on Medicare and Medicaid payors,” Azoni said, “in that Medicare and Medicaid providers are to be reimbursed first. This section appears to say on its face that they would not be reimbursed first. “
Sinas said there’s other ambiguous language in the bill, and wonders whether an employee who’s injured on the job is subject to, possibly, a $50,000 PIP benefit limit if his employer has opted for that amount. (Lund did not return Michigan Lawyers Weekly’s calls for comment.)
Smaller insurance companies also could feel the brunt of the bill, said Joseph S. Mierzejewski of Bloomfield Hills-based Anselmi & Mierzejewski, P.C.
“If we are going to reduce premiums, the exposure is the same for insurance companies,” Mierzejewski said. “For smaller companies, two or three catastrophic claims would kill them, especially if their premiums are limited. And they’d be likely to leave the state. “
IIM’s Kuhnmuench said the emphasis should be that the PIP choice plan isn’t limited to just $50,000.
“The beauty is, it retains the benefits of our no-fault system,” said Kuhnmuench, who noted that, in the last legislative session, the IIM helped develop legislation that HB 6094 was modeled after.
“Quite frankly, people who can afford the full coverage, with unlimited medical benefits, will continue to purchase it. But what it will do is allow people who are challenged economically to have some choices under the law in which they can pare back their auto insurance coverage,” he added.
Yet, Sinas said, “There’s no guarantee that if insurers could reduce the premiums, that reduction would be significant, and that the reduction will last. There’s nothing in this bill that obligates them to reduce the premium by any specific amount. There’s just general language that says they’ll adjust the premiums to reflect the exposure.
“It doesn’t mandate that they reduce premiums by 25 or 30 percent, and doesn’t require they get approval for what the reduction is. “
James F. Hewson of Hewson & Van Hellemont PC in Oak Park said the bills could only survive if the proper congressional makeup is there after the November election.
“The only way I see this going through is if you have a unified House and Senate, as well as a Republican governor, because I don’t see Granholm signing it,” he said.
But Sinas is fighting to be sure it doesn’t get that far, and is working with the Coalition for Protecting Auto No-Fault — an alliance that includes Michigan Health & Hospital Association, Michigan Association for Justice, Michigan Osteopathic Association and Michigan Consumer Federation — in doing so.
“This whole auto reparation system is an organic, singular organism,” he said. “We cannot tolerate massive shifts on one side without experiencing significant problems on the other. “
Minimum PIP requirements for no-fault states
New Jersey $250,000
New York $50,000
North Dakota $30,000
Source: RAND Institute for Civil Justice
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