More Information Regarding the Michigan No-Fault Hearings

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By now, you have probably heard that the Michigan Senate passed a bad bill (SB 248) in an effort to "reform" the No-Fault system. The Michigan House of Representatives held hearings on that bill from April 21st to 23rd. A modified bill passed the House on party lines. The bill now sits on the House floor where our fate will be decided in the days to come. You can review the entire bill at:
 I was present for all of the hearings.  I was struck by the Republicans' willingness to accept insurer claims that No-Fault premiums are excessive, and that the only solution to this is to diminish our benefits.  State-wide, our auto insurance premiums are only about 7th in the nation. For the best benefits in the nation, this is more than fair. It is true that premiums in Detroit are untenably high. However, that is because insurers are permitted to "red line" in Detroit instead of spreading the risk of loss through the entire state.  However high premiums are, the Republican majority is simply unwilling to contemplate insurance reform and investigate rate regulation. Instead, and for decades, the insurers and their Republican allies always seek to reduce benefits. The most shameful aspect of all of this is that the bill had no guaranteed rate relief until the House tacked on a $100 reduction in premiums, guaranteed for only 2 years.  

Unfortunately, I did not get the chance to testify. I wanted to inform the Representatives of several things. I share them with you so that you can add to your talking points with your legislators. First, there have been numerous legislative and judicial changes to the No-Fault Law in the last 2-3 years. These have already served to decrease the scope of and diminish our rights under the No-Fault Law. One example that we are already aware of is the infamous Admire decision that allows insurers to refuse to pay for vans. Another example that seems to have gotten very little attention is a legislative amendment to No-Fault §3109(3) regarding deductibles. For many years, Michigan No-Fault insurers were allowed to offer a one-time $300 deductible for No-Fault PIP claims. No-Fault §3109(3) USED to read:  

"An insurer providing personal protection insurance benefits may offer, at appropriately reduced premium rates, a deductible of a specified dollar amount which does not exceed $300.00 per accident."

In a virtually unnoticed amendment, the law was changed effective December 27, 2012. §3109(3) NOW reads:  

"An insurer providing personal protection insurance benefits under this chapter may offer, at appropriately reduced premium rates, a deductible of a specified dollar amount."

In other words, the $300 limitation has been removed, and there appears to be no limit to the size of the deductible that a No-Fault insurer may offer. The purpose of this revision was to address the problems with coordinating No-Fault coverage with other payors that may have preemptive coordination powers, e.g., Medicare and ERISA plans. 

The implications of this change are potentially huge. No-Fault insurers could offer huge deductibles ($10,000? $25,000? $100,000?), with concomitant premium savings. Consumers may choose to take high deductibles in the interest of cost-savings. Because a deductible deals with first dollars paid, the premium savings would be dramatic. BEST OF ALL: THIS HAS ALREADY BEEN PASSED INTO LAW!

A second thing to share with your legislators is that they appear to assume that No-Fault insurers are required to pay 100% of what service providers charge. During the hearings, various and dubious statistics of charges were stated in support of this proposition. In fact and reality, No-Fault insurers almost never pay 100% of the full charges. There are many reasons for this. One important reason is that insurers are entitled to dispute the amount that is "reasonable" to pay. Another important reason is that there are a variety of defenses available to No-Fault insurers that also act to "beat down" the amount that providers will accept.  

We are at a moment of reckoning not seen since the days of Propositions C and D in the early 1990s. Please make sure that your legislators know how much our No-Fault system means to us. Make sure that premium relief is accomplished through insurance reform and regulation and not through further abuse of consumers. Thanks and good luck to us all.


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