Anyone who has read the July 9 Detroit News opinion column by insurance industry executive David Poe pushing for auto insurance reform may want to take a step back and consider the credibility of the source and the motivations behind the message. We found so many false or misleading statements that we felt it important to address them one-by-one.
False / Misleading Statement #1: There is only one reason Detroit has an epic auto insurance crisis — Michigan’s no-fault system, which provides for unlimited Personal Injury Protection (PIP) coverage.
So fraud, theft and credit scoring has absolutely nothing to do with it? Detroit has some of the highest fraud and theft rates in the state. And because insurers are allowed to charge higher premiums to drivers with low credit scores, cities like Detroit with a high proportion of low-income residents are unfairly impacted.
And while Michigan does not cap PIP benefits, that does not mean that insurers have an unlimited liability for providing coverage. In fact, insurance companies are only liable for the first $545,000 in injury care. Insurance companies that receive PIP claims above that amount are reimbursed by the Michigan Catastrophic Claims Association, a $17 billion fund that all Michigan drivers pay into.
False / Misleading Statement #2: A PIP cap does not preclude injured parties from receiving proper medical care or force them to pay for the care themselves. It merely shifts a portion of the cost from auto insurers to either the injured party’s health insurance, the negligent driver who caused the accident, Medicaid, or other jointly funded programs.
At least Mr. Poe admits that the goal of D-Insurance is to shift costs. But he also completely ignores the impacts that those costs shifts would have on the state. A 2011 study by Public Sector consultants looked at the impacts of a proposed $50,000 PIP cap – double what is currently proposed – and found that it would result in a $30 million annual shift to Michigan’s Medicaid system. You can be sure that D-Insurance will have a similar impact.
False / Misleading Statement #3: Michigan’s laws allow virtually any amount to be charged to auto insurers by health care providers for injured party medical care.
Nothing could be further from the truth. Michigan’s law is clear: auto insurers are only required to pay “reasonable charges incurred for reasonably necessary products, services and accommodations.” Ask anyone who serves auto accident survivors and they will tell you that insurers regularly challenge bills they find to be unreasonable as well as treatments or services they deem unnecessary. Accident survivors may be covered for the life of their injury, but the benefits are hardly unlimited.
False / Misleading Statement #4: In the late 1980s, New Jersey faced virtually the same situation as Michigan. Because of a no-fault system without a cap, national auto insurance companies refused to write business in New Jersey and others filed plans to abandon the state.
By making this statement Mr. Poe is implying that auto insurance companies will pack up and leave Michigan if they don’t get their way. There is robust competition in Michigan’s auto insurance market, with well over 100 auto insurance companies offering insurance here. All State, State Farm, Progressive – they’re all here and doing fine. In fact, recent analyses of the profitability in Michigan’s auto insurance market …
False / Misleading Statement #5: In 1990, New Jersey adopted a PIP cap of $250,000 (with an option as low as $15,000), limited rates that health care providers could charge for procedures, and created a process to ensure treatment was necessary. Twenty-five years later, New Jersey has dropped to having the 10th highest rates in the country, is populated with auto insurers advertising for business, and has reduced its uninsured population by 40 percent.
What Poe fails to mention is what happens to people who reach the PIP cap in other states. There is no record kept of how many people are shifted to Medicaid or the catastrophically injured people – people who are quadriplegic or who suffer traumatic brain injuries and can no longer care for themselves – are unable to get the rehabilitation and other treatments necessary to live full, dignified lives.
The ACA does not cover many important and necessary treatments, such as therapies that help catastrophic accident victims learn how to talk or walk, but Michigan’s auto insurance system does. It’s treatment like this that has helped people, like Ford Motor Company contractor Brian Woodward, be able to go back to work, live quality lives and continue to be productive members of society.
False / Misleading Statement #6: Many insurance companies — mine included — are waiting on the sideline to see what the Michigan legislature will do.
This is actually a very true statement, but it’s highlighted because Mr. Poe is not being very honest about his motivations. Michigan drivers will not be fooled to believe that the insurance industry is advocating for no-fault reform out of the goodness of their hearts. If Mr. Poe was being honest, he would admit that taking away injury benefits for auto accident victims and shifting tens of millions of dollars in costs per year onto taxpayers will mean big profits for insurance companies.
If there is one nugget of truth in Mr. Poe’s entire column, it’s this: “Reform is desperately needed.” CPAN agrees with these four words by themselves and we are actively working toward a set of balanced and comprehensive reforms that will result in lasting rate reductions for all Michigan drivers. Our proposals include cost containment on medical providers, strong anti-fraud measures, streamlined claims processing and changes to family-provided attendant care.
