With the March 31, 2014 deadline to enroll in the Affordable Care Act (ACA), more widely known as Obamacare, fast approaching I’ve been thinking more and more about how the ACA will affect the Michigan no-fault law.
The effects of the ACA will be far reaching. At the outset, one must remember that under the Michigan no-fault law, car insurance companies are responsible for paying for the reasonable and customary charge of medical expenses incurred for injuries sustained from a motor vehicle accident. This means car insurance companies, such as State Farm and AAA Insurance, often become health insurers for accident victims. This is especially true for uninsured victims. When the accident victim has no health insurance, the car insurer becomes primary for all medical expenses – including rehabilitation and surgery.
However, this may change under the ACA. Soon, many accident victims who were previously uninsured will now have health insurance through the ACA and the state of Michigan’s insurance exchange. This means many no-fault car insurance companies who previously were primary for paying allowable expenses – such as hospital bills and doctor’s bills – will become secondary. This simple change will save car insurers millions.
Another factor that will be very significant is the “set off” feature in the Michigan no-fault law. Under the law, no-fault insurance companies can set off PIP benefits against any other benefits “provided or required to be provided under the laws of any state or the federal government.” MCL 500.3109(1). For example, social security benefits are a benefit offered by the federal government. As such, no-fault insurance companies can set off the wage loss benefits a claimant is entitled to receive against the social security benefits he or she is already receiving due to the car accident. As you can imagine, this is a huge windfall for car insurance companies.
Because of the ACA, a new windfall may be arriving for car insurers. Because the ACA is a federal government benefit, no-fault insurers may be able to set off any medical benefits it must pay out against medical benefits the claimant has already obtained.
The impact of this change was recently highlighted in an interesting article in the Michigan Bar Journal. According to the article’s author, Nelson Miller, the big losers will be hospitals and other medical providers. And without questions the big winners will be car insurance companies.
Currently, no-fault insurers must pay medical providers the charge up to the amount customarily charged “in cases not involving insurance.” MCL 500.3157. This means medical providers do not have to accept the large discounted amounts Medicare, Medicaid and other health insurers pay. Instead, for car accidents the reimbursement rates from no-fault insurers are very high – providing a steady revenue stream for hospitals and doctors. But soon no-fault insurers may get to set off those payments – shifting the cost back to lower paying health insurers.
Now, if this does in fact happen, one would expect no-fault insurance rates to decline. Insurers would be expending much less in allowable expense payments to claimants because private insurers or the federal government (tax payers) would be picking up the tab. However, because there is no real regulation or oversight by any state agency on how much car insurance companies can charge consumers, meaningful savings are very doubtful.
In the article, Mr. Nelson argues that Congress or the courts should shift the healthcare costs back to the no-fault insurers – much like what is currently done under Medicare. For example, if Medicare pays for auto accident-related treatment on behalf of a beneficiary, the no-fault insurance company responsible for paying auto related treatment must reimburse Medicare under the Medicare Secondary Payer Act.
I agree with Mr. Nelson. It would behoove the federal government to include “Secondary Payer Act” like language to the ACA to ensure no-fault insurers – and not U.S. taxpayers – pick up the tab for auto accident treatment. The ACA was meant to ensure all Americans have access to health insurance. It was not meant as a way for no-fault insurers to deflect payment back on to Michigan taxpayers.
Although it is certainly unsettled how the ACA will affect the No-Fault law and the payment of accident victim’s medical expenses, I encourage everyone to stay vigilant. If the ACA is used as a profit generator by car insurance companies, our legislature and political leaders must step in to fill the void.
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