House approves $10M fix to study, address effect of fee cuts in auto insurance law

Lansing — The Michigan House approved legislation late Thursday that would create a $10 million fund to aid medical providers who could prove they experienced a "systemic deficit" as a result of a scheduled 45% cut to fees for their services. 

The July 1 fee cut, detailed in the 2019 historic no-fault auto insurance reform, has caused panic among post-acute medical providers and the catastrophic car crash victims they serve. Both parties have argued the fee cut would put providers out of business and force victims to find alternative sources of care. 

In order to qualify for the $10 million fund, post-acute care providers would need to open their books to the Department of Insurance and Financial Services to demonstrate need — forcing the companies to  lift the veil on pricing that opponents have said is less than transparent and a factor in Michigan's high auto insurance costs. 

Once the money in the fund is exhausted, the department will be expected to submit a report to the Legislature examining whether there is a legitimate need to ease the fee cut on medical providers and potentially guide future changes to the auto insurance law. 

"This is the only proposed solution that I've seen that actually will help us identify if there really is a problem," said House Speaker Jason Wentworth, R-Farwell. 

The legislation, approved 95-13, moves next to the Senate, where Senate Majority Leader Mike Shirkey, R-Clarklake, has expressed hesitance about intervening too early in the insurance reform's implementation. 

Gov. Gretchen Whitmer, who signed the reform into law in 2019, has said she would support a narrow fix to address the concerns of medical providers.

The 2019 auto no-fault law made several changes to the state's no-fault auto law to address Michigan's highest-in-the-nation auto insurance costs. The law included required cuts to the Michigan Catastrophic Claims Association assessment as well as new lower-coverage policy choices for consumers.

Some of the more controversial changes included limits on the number of hours of care for which family members could be reimbursed, as well as cuts to the fee schedule governing how much auto insurance companies can reimburse medical providers for care of injured crash victims.

The fee schedule is set to revert on July 1 to 55% of what medical providers were receiving in January 2019 for non-Medicare-comparable services. For services with a Medicare code, fees would be capped at 200% of the Medicare rate.

In recent weeks, providers and victims have been pushing the House and Senate to make changes to avoid the drastic cut but other legislation that would have changed the auto insurance law to delay or lessen the decrease stalled out. 

The legislation passed by the House on Thursday would distribute the $10 million, after a thorough department review, on a first-come, first-served basis. 

Medical providers would have to prove their loss is more than just a profit loss, but instead a systemic deficit. They also would need to provide documentation on the total number of patients served, the insurance billed for care, a list of auto insurance companies and other forms of insurance billed for care in 2019, and proof that reimbursement was denied by auto insurance carriers and upheld by the department.

Medical providers also would need to provide documentation that their charges are below regional and market averages, that there were "good-faith efforts" to adjust the business model to accommodate the fee cut, financial statements showing a systemic deficit or "any other information deemed necessary by the department."

Providers who incorporated or re-incorporated after Jan. 1, 2020, wouldn't be eligible. 

Under the bill approved Thursday, the Department of Insurance and Financial Services would have to review an application within 21 days and send out payment within seven days after the review. 

eleblanc@detroitnews.com