Report Says Michigan PIP Changes Could Add to Tax Burden

Legislative proposals to reduce the amount of personal injury protection (PIP) Michigan drivers must carry would shift the burden of funding care for catastrophic injury victims from insurance companies to taxpayers, according to a new study.

The study, released this week by opponents of altering the state’s no-fault coverage system, claims that the costs would be forced on victims, their families and taxpayer-funded health care programs, costing the state’s Medicaid program an estimated $30 million or more in just the first year.

“There is no compelling reason to reduce coverage requirements for personal injury protection insurance at this time,” Jane Powers, vice president of Public Sector Consultants—which conducted the study—said in a statement.

Debate is ongoing over what—if any—changes must be made to Michigan car insurance laws.

The state’s 39-year-old no-fault system was crafted to reduce the number of lawsuits filed as a result of vehicle accidents. It stripped motorists of the right to file lawsuits over crashes, but introduced the potential for lifetime medical coverage of insured parties who suffer catastrophic injuries, which can often require a lifetime of care, in vehicle accidents.

Under the system, policyholders contribute to a catastrophic claims fund that helps pay for PIP claims greater than $500,000. That contribution comes in the form of a fee tacked onto all policies that is currently $145 per vehicle, according to the Michigan Office of Financial and Insurance Regulation.

Legislation expected to be taken up this session by the state Senate would allow motorists to buy as little as $50,000 in PIP coverage. Supporters say the proposed law would lower premiums in the state, which has among the highest rates nationwide.

Critics—including the Coalition Protecting Auto No-Fault (CPAN) and the Michigan Brain Injury Provider Council, which funded the study—maintain that the changes would allow coverage providers to avoid paying for needed medical care. They say relieving insurers of the obligation to cover the costs of catastrophic injury victims would drain families of savings and force taxpayers to foot the bill for many of those patients.

Michigan’s existing system “does what it was intended to do—direct resources to necessary care and treatment of victims of motor vehicle accidents,” according to the study.

PIP coverage protects all insured motorists statewide and spreads the risk of economic losses among all drivers, researchers found. Reducing the amount of PIP coverage required would shift that risk back to individuals for costs beyond the level of coverage they have paid for.

Because traumatic brain injuries and other catastrophic injuries that commonly result from serious vehicle crashes can take years—and potentially more than a million dollars—to treat, those without adequate PPI coverage will have to turn to loved ones and government programs such as Medicaid, Medicare and Social Security Disability, Public Sector Consultants determined.

Just how great those costs would be is difficult to predict because of ongoing changes to the nation’s health care and coverage systems, the range in severity of crash-related injuries and other factors, “but there is enough information available to suggest that the impact could easily exceed $30 million for long-term care in the first year alone,” according to the study.

The report states that a claims data analysis shows 1 in 17 accident claims exceeds $50,000 and 1 in 200 is more than $400,000.

More than 500 people who sustain a traumatic brain injury in a vehicle crash each year will require long-term care, according to Public Sector Consultants, costing Medicaid about $61,000 annually for each individual.

And those with inadequate coverage could be expected to soon become eligible for taxpayer-funded programs, even if they did not initially qualify, researchers found.

“If you make cuts to Michigan’s auto insurance system, the accident victims don’t go away—and neither does the cost of care,” John Cornack, president of CPAN and the chief executive of an Ann Arbor-based rehabilitative care center, said in a release. “It all just gets shifted from insurance companies and onto the backs of taxpayers.”


About Gregor McGavin
Gregor McGavin is an award-winning journalist who has reported across the country for such publications as The Associated Press, the Arizona Republic, the Pittsburgh Tribune-Review and the Press-Enterprise.

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