High court won't block ruling nixing key parts of Michigan's auto insurance reform
Lansing — The cost of auto insurance in Michigan could increase next year after a court ruling blocked cost controls in the state's 2019 no-fault reform law from being enforced on medical providers.
A Michigan Court of Appeals decision blocking the state's auto insurance reform law from being enforced on individuals injured prior to the law's 2019 passage will remain the law of the state for at least the next six months, the Michigan Supreme Court ordered Thursday.
The high court denied a motion from auto insurance companies to stay or temporarily block the August appellate decision that stopped the 2019 law's mandated fee cuts on services provided to individuals injured in catastrophic crashes before the passage of the law.
But the Supreme Court agreed to take up the case and scheduled oral arguments for six months from now in March.
The legal wrangling will result in a $48-per-vehicle increase in the annual fees drivers get charged for catastrophic medical coverage, starting July 1, 2023, according to the auto insurance industry.
The rejection by Michigan's highest court strikes a huge blow to auto insurers, which were hoping for a stay while an appeal of the case was heard. The insurance companies have warned the appellate court's decision would stifle any progress the state has made in lowering Michigan's highest-in-the-nation car insurance costs.
"That progress is in jeopardy after activist judges ignored legislative intent and the actual statutory language, and substituted their own interpretation," said Wendy Block, vice president for business advocacy and member engagement for the Michigan Chamber of Commerce.
Just last week, the Michigan Catastrophic Claims Association hiked its annual per vehicle fee from $86 to $122 for most policies in anticipation of a roughly $3.7 billion deficit it attributed to higher claims costs due to the state Court of Appeals panel's August ruling and lower-than-expected returns on investments. The hike is set to take effect July 1, 2023. The association was created by the Legislature in 1978 to cover costs for a person injured in a crash that are in excess of $600,000 in a given year.
“If you pull the string on part of the medical fee schedule, the sweater unravels quickly,” said Erin McDonough, executive director of the Insurance Alliance of Michigan, in a statement. “Everyone who got $400 per-vehicle refunds this past spring are going to be sending $48 of it back to the MCCA because of the disruption caused by the Court of Appeals’ decision."
In the spring, the MCCA issued $3 billion in refunds from the trust fund for injured drivers, sending out $400 checks to every insured vehicle owner — a cornerstone of the 2019 auto insurance reform law.
But medical providers subject to the fee cut at issue praised the Supreme Court ruling as a "breath of hope" for those injured in catastrophic crashes and reiterated pleas to the Legislature to make long-term changes to the law.
"While this case is not yet settled, we hope the insurance industry will follow the law and allow care to be restored for people in need," said Tom Judd, executive director for the Michigan Brain Injury Provider Council.
The Michigan HomeCare & Hospice Association questioned the MCCA's reasons for the fee increase. The Court of Appeals decision affected two of seven key provisions in the reform, the group said, and it estimated a fix to the 45% fee cut would cost about $250 million a year — far less than the $3.7 billion deficit the MCCA is projecting.
The Michigan HomeCare & Hospice Association said it welcomed the court ruling but argued there should be more done to help those injured in crashes after the passage of the 2019 law.
"There are still people, approximately three per day, seriously injured in catastrophic auto accidents, who have paid full personal protection coverage (PIP) into the Michigan Catastrophic Claims Association (MCCA) their entire driving lives, and will not receive care as part of the appellate court decision," said Barry Cargill, president and CEO of the Michigan HomeCare & Hospice Association.
The Michigan Department of Insurance and Financial Services said it was reviewing the Supreme Court order and would make any necessary updates to guidance.
"At the end of the day, our role is to implement the law, and we will follow the law as set forth by the Legislature and the courts," department spokeswoman Laura Hall said.
The Michigan Court of Appeals ruled last month that key provisions of Michigan's no-fault auto insurance reform law do not apply retroactively to individuals previously injured in car crashes.
The 2-1 ruling, if allowed to be enforced, was expected to have wide-ranging consequences as it frees an estimated 17,000 to 18,000 individuals injured prior to the passage of the 2019 law from provisions they said made it impossible to get the delivery of adequate in-home care.
Some of the key provisions of the law required a scaleback of reimbursable services for auto crash victims in two specific areas: A 56-hour per week limit on the time family members can be reimbursed for caring for a patient and a cut to the fees medical providers can charge insurance companies for caring for an injured motorist.
Medical providers and their clients have argued the fee cuts and family care limits are too steep to maintain service at past levels or, in some cases, to maintain service at all.
The appellate panel majority ruled in August those insured prior to the law change "had a legitimate expectation that should they be injured in a motor vehicle accident, they would receive unlimited lifetime benefits, so long as the charges were reasonable and the care reasonably necessary."