Is D-Insurance One Step Closer to Becoming Reality?

The Detroit auto insurance plan, “D-Insurance,” was voted out of the Senate Insurance Committee earlier this week

Mayor Duggan’s Detroit auto insurance plan, coined “D-Insurance,” may be a step closer to becoming an option for those in the city who face high auto insurance costs.
michigan-auto-insurance-policyMichigan Senate Bill 288, as passed by the committee, would allow “eligible cities” to offer low-cost auto no-fault insurance plans to its residents. In exchange for those lower premiums, however, those insured under D-Insurance would no longer have access to the benefits under our current Michigan no-fault system; instead, severe limits on both the amount of coverage and the circumstances under which benefits are accessed would be imposed.

While many people may be under the impression that they don’t need the generous benefits we already enjoy, and that they’d rather save money on their premium, that sort of thinking is dangerous. Car accidents can happen to anyone at any time; they do not discriminate. Wouldn’t you take comfort in knowing that your auto insurance policy fully protected yourself and your loved ones? Unfortunately, D-Insurance and other similar policies would not afford that protection.

Breaking Down Michigan SB 288 (S-3) and D-Insurance

We provided the key highlights from SB 288 as it was first introduced by Senator Virgil Smith (D-Detroit) in an earlier blog post. That original bill has been revised, and we now have Michigan SB 288 (S-3), which was voted out of committee earlier this week.

Below are the some of the highlights of the D-Insurance bill as it currently stands:

  • While the original bill was only intended for Detroit, SB 288 (S-3) opens the door to other cities implementing this new system. “Eligible cities,” per the bill, are those that have a population of 500,000 or more and have a charter provision that authorizes the city to provide auto insurance to its residents. Alternatively, “eligible cities” are also those that can show credible evidence that at least 35% of its residents drive without insurance.
  • Insurance companies must be allowed to offer these new no-fault policies, referred to as “qualifying no-fault policies.”
  • Unlike the original bill, SB 288 (S-3) covers the individual to which the policy is issued, that person’s spouse, and a relative domiciled in the same household. However, those individuals can only receive benefits from the qualifying no-fault policy.
  • Those who are covered under these “qualifying no-fault policies” may not have access to the full extent of no-fault benefits currently provided for under the law: “A qualifying insurer shall not issue a qualifying no-fault policy unless the individual insured under the policy has signed a written waiver stating that the individual understands that the qualifying no-fault policy offers only limited benefits and not full, unlimited[*] no-fault benefits.”
  • Because those who are covered under D-Insurance or other qualifying no-fault policies will only have access to limited no-fault benefits, they will not be assessed the Michigan Catastrophic Claims Association (MCCA) fee.
  • Benefits available under D-Insurance: At least $25,000 in PIP; up to $250,000 available “only for critical care for an individual named in the qualifying no-fault policy, the individual’s spouse, or a relative of either domiciled in the same household, who is injured in a single motor vehicle accident during the policy term. . . . ‘Critical care’ means treatment rendered at an acute care hospital or trauma center immediate following the motor vehicle accident, necessary to save the individual’s life or treat life-threatening or permanently disabling injuries, until the individual is stabilized. An individual is stabilized when the individual can safely be discharged or transferred to another acute care hospital or trauma center or to a rehabilitation or another facility, regardless of whether the individual is, in fact, discharged or transferred at that time.” Note that if an insurer happens to provide more than the $25,000 minimum, then it may reduce the $250,000 amount, but only if the total of the two is not less than $275,000 (stated another way, insurers must provide at least $275,000 in coverage between PIP and the amount available for critical care).
  • Occupants of a vehicle covered by a qualified no-fault insurance policy who are injured in a car accident are “only entitled to the benefits available under the qualifying no-fault policy,” and after exhausting the benefits there, can then claim benefits under the assigned claims plan (unless they are the driver’s spouse or a relative domiciled with said spouse, in which case they may not access assigned claims benefits).
  • As with the existing no-fault system, health care providers may only charge “a reasonable amount for the products, services, and accommodations rendered. The charge shall not exceed the amount the person or institution customarily charges for like products, services, and accommodations in cases not involving insurance.”
  • Michigan SB 288 (S-3) sets up a Limited Provider Network: This is the network in which those insured under a qualified no-fault policy may seek treatment for their accident-related injuries. What is interesting about the provision requiring the establishment of these limited provider networks is that only the Director of Insurance and Financial Services can pursue claims against insurers that provide for inadequate treatment services and care within their limited provider network.
  • There would be a preauthorization requirement, meaning that for non-emergency services and treatment, the insurance company must approve of the services, treatment, products, etc. that may be needed. Preauthorization will be granted if there is demonstrated medical necessity, and failing to receive this preauthorization in writing will render “a claim for payment for the products, treatment, services, or accommodations void.”

Why we should be wary of D-Insurance and these types of qualified no-fault plans

The people of Detroit, and others across the state facing unnecessarily high premiums on their no-fault policies deserve more. An individual’s inability to pay thousands of dollars a year for no-fault coverage should not mean that they are faced with purchasing an alternative that does not provide nearly the same comprehensive coverage and protection afforded to those who do possess the financial means to pay.

Additionally, similar to Michigan SB 248 (which is still stalled on the House floor), there is no provision mandating any meaningful cost savings for those who purchase these D-Insurance plans. You would imagine that providing less coverage would automatically lower premium rates, but insurance companies are still free to use information such as your zip code and credit score to determine insurance premium costs.

If SB 288 (S-3) becomes law, those in Detroit who get into serious car accidents and sustain life-altering, traumatic injuries, are out of luck. The $250,000 in emergency care services that would provide care up until a patient is “stabilized” may not last long, depending on the injury. The paltry $25,000 in PIP benefits is even worse. As you may recall, no-faultPIP benefits cover allowable expenses, work loss benefits, attendant care, and replacement services. Depending on the extent and nature of the injury, these funds may also be exhausted quite quickly – especially since the coverage applies to an individual’s spouse or relative domiciled within the household.

What about health insurance coverage? Health insurance only covers medical expenses, not work loss benefits, replacement services, or any other charge that isn’t strictly “medical.” Further, there are caps placed on the number of visits a patient can make to a therapist under his or her plan. What happens when that number is exhausted?

Finally, the preauthorization requirement within Michigan SB 288 (S-3) essentially allows insurance companies to claim that they are in a better position to know when their insured needs (or does not need) certain medical treatment – more so than the patient’s own doctor or therapist! The potential for abuse and fraud associated with this provision is great . . . as is the potential for increased litigation on this issue.

If there is one thing the parties in this D-Insurance debate can agree on, it’s that the cost of auto insurance in Detroit is much too high. The Mayor of the Motor City should be applauded for attempting to tackle this issue for his constituents. However, SB 288 (S-3) and this D-Insurance plan is not the answer, and may end up hurting the very people it is supposed to help.

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