Appeals court: Michigan's no-fault overhaul does not apply to previous crash survivors
A Michigan Court of Appeals panel ruled Thursday that new medical cost controls in Michigan's recent overhaul of its no-fault auto insurance system are unconstitutional and do not apply retroactively to crash victims whose accidents occurred before the 2019 change in the law.
The 2-1 ruling, which lawyers say they will appeal to the Michigan Supreme Court, is a win for critics of the overhaul who contend the cost controls on no-fault's unlimited, lifetime medical coverage for auto accidents are too stringent and have forced some rehabilitation centers for patients to close and in-home attendant care services to drop patients or threaten to drop patients.
The eventual outcome of the case could affect the size and frequency of any future refund checks issued to drivers across the state for surpluses in the Michigan Catastrophic Claims Association fund, known as the MCCA. Drivers this spring received $400 per-vehicle refunds from auto insurers because of an MCCA surplus that was largely generated by the new cost controls.
Under Michigan law, the ruling is to have immediate precedent, meaning that insurance companies may have to start reimbursing medical and care providers of accident victims with older injuries at the previous, more generous rates — even before the state Supreme Court hears the case.
However, an attorney for the losing side told the Free Press they will seek a stay to prevent the ruling from taking effect right away.
The appeals court panel sided with the two plaintiffs in the case. The lead plaintiff, Ellen Andary, 65, of East Lansing, was a passenger in a vehicle that was struck head-on by a drunk, wrong-way driver in December 2014. She suffered lasting brain injuries and lost the ability to walk.
Doctors have prescribed Andary with 36 hours of daily in-home attendant care generally paid at $28 per hour, much of it provided by her family members and some shifts with two people, which has cost insurance more than $350,000 per year.
Under the new law's cost controls, reimbursement for that attendant care would have been cut by 45% had her auto insurer not delayed enacting the cuts pending the outcome of the case.
The medical care for patients such as Andary is covered by the Michigan Catastrophic Claims Association, which reimburses auto insurance companies whenever a patient's bills exceed a set threshold, currently $600,000. There were 17,542 individuals with an open MCCA claim as of June 30, 2021. More recent data is not yet available.
However, the ruling would most impact the approximately 6,600 severely injured auto accident victims in Michigan receiving some form of long-term care, generally in a care center or their own home.
Outside Michigan, catastrophically injured crash victims often end up in Medicaid-funded nursing homes or may get some in-home care through a Medicaid "waiver" program.
That is generally the same fate in Michigan for people who suffer catastrophic injuries that didn't occur in an auto accident. No-fault insurance is unique in paying caretakers for round-the-clock supervision and assistance.
"I have passionately believed from the time this lawsuit was filed that we had the right position, both in terms of the law and in terms of equity and fairness, and I believe that more than ever today," attorney George Sinas of the Sinas Dramis Law Firm in Lansing, who is representing the plaintiffs, said in a phone interview.
“I do not believe it is legally appropriate to take patients like these, who had years ago purchased these auto no-fault medical benefit policies, paid hard earned money for that coverage, and that coverage at that time guaranteed them lifetime medical with no caps, I don’t believe it is appropriate to strip them of those purchased benefits by a subsequently enacted law — and that’s exactly what the Court of Appeals held," Sinas said.
A lawyer for the two auto insurance defendants, USAA Casualty Insurance Co. and Citizens Insurance Co. of America, called the decision a loss for Michigan drivers, who would end up paying more for insurance rates if the ruling holds.
"The court’s decision invalidates important bipartisan reforms that had started to lower the costs which had rendered coverage unaffordable for many residents, due to widespread fraud and abuse," Lori McAllister of the law firm Dykema, said in a statement. "The defendants intend to appeal the decision and are confident the bipartisan reforms to the no-fault system will ultimately be upheld by the Michigan Supreme Court."
Less impact on other cost controls
The ruling has less effect on a different set of medical cost controls in the law, and which concerns a greater number of accident patients.
Those controls generally limit medical providers' no-fault reimbursements to a maximum 200% of Medicare rates. By comparison, the average commercial insurance reimbursement to Michigan hospitals in 2020 was 203% of Medicare rates, up from 190% in 2018, according to a study by the Rand Corp.
The services subject to the overhaul’s 45% cuts are just those with no equivalent Medicare billing code, such as in-home attendant care and long-term stays in specialized rehab centers. Those types of services lack Medicare codes because no-fault insurance covers more services than other forms of insurance.
Anticipated savings from the new law's cost controls was a major reason why Michigan drivers this spring received the $400 per-vehicle MCCA refund checks. Those refunds represented $3 billion of a $5 billion surplus in the MCCA's fund, which last reported $27 billion in total assets.
Appeals Court Judges Douglas Shapiro and Sima Patel concluded that the state Legislature did not "clearly demonstrate" an intent for the cost controls to apply retroactively to people whose injuries occurred before the law took effect in June 2019.
They also concluded that even if lawmakers meant for the cost controls to apply retroactively, the reimbursement cuts to patients' medical providers violate the Contracts Clause of the Michigan Constitution because they "substantially impair no-fault insurance contracts entered into before the amendments’ effective date."
PIP choice still stands
Judge Jane Marke dissented with the majority opinion, affirming a November 2020 ruling in Ingham County Circuit Court that sided with the insurance company defendants.
The ruling does not affect other aspects of the 2019 no-fault overhaul, such as allowing drivers to choose the level of medical benefits in their auto insurance policies, known as personal injury protection or PIP.
Prior to the overhaul, Michigan was the only state that required all auto policy holders to buy unlimited, lifetime PIP — and without cost controls on the medical coverage. Michigan was the most expensive state for car insurance when Gov. Gretchen Whitmer signed the overhaul into law in 2019. However, the cost controls did not begin until July 2021.
Before the cost controls, some doctors and chiropractors would prescribe months or even years of questionable services to accident victims that drove up costs, and even legitimate services were expensive because of billing markups.
A 'drastic limit' on care
The other plaintiff in the Andary case, Philip Krueger, was catastrophically injured in 1990 at age 18 while a passenger in a pickup. Unable to walk, talk or care for himself, he has been staying since 1997 at the Eisenhower Center, a neurological rehab center in Ann Arbor.
The MCCA says it has been paying $572 per day, or more than $208,000 a year, for his stay at the specialized center.
The panel's majority opinion Thursday said the cost controls "directly and drastically limit the ability of motor vehicle accident victims to continue to obtain the care they require." It also noted how some survivors' family members have given up jobs and careers to stay home and be compensated for caring for an injured loved one.
"To summarize, the lifetime unlimited benefits that the insurers were paid for will be severely impaired if the amendments are given retroactive effect," the opinion says. "Defendants have not shown that retroactive application of the amendments is necessary to accomplish the goal of lowering no-fault policy premiums. Nor have defendants explained how applying the (cost controls) to those injured before the (law's) effective date is reasonable, especially considering that the relevant premiums have already been paid in full."
The ruling also exempts victims of accidents that happened before the law of a new rule capping reimbursement for in-home attendant care that is provided by a patient's family or friends at 56 hours per week. Patients can receive more than 56 hours of care, but the extra hours must come from a care agency or other third party.
A similar 56-hour rule for Workers' Disability Compensation claims has existed for years.
The Andary case, filed in 2019, is considered the "test case" in Michigan for whether it is constitutional to retroactively apply the new law to earlier accident victims.
Circuit court judges in several counties have in the past year issued temporary injunctions that require insurance companies to pay the earlier rates to specific car crash victims until the retroactive question is settled.
Contact JC Reindl: 313-378-5460 or jcreindl@freepress.com. Follow him on Twitter @jcreindl.
This article originally appeared on Detroit Free Press: Court: No-fault overhaul does not apply to previous crash survivors
