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Michigan Chiropractic Council v Commissioner of the Office of Financial and Insurance Services and Farmers Insurance Exchange and Mid Century Insurance Company; (COA-PUB, 6/1/2004, RB #2463)

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Michigan Court of Appeals; Docket Nos. 241870 and 241874; Published    
Judges Fitzgerald, Neff, and White; unanimous; Opinion by Judge Neff
Official Michigan Reporter Citation: 262 Mich. App. 228, Link to Opinion


STATUTORY INDEXING:  
Not applicable

TOPICAL INDEXING: 
Legislative Purpose and Intent 
Private Contract (Meaning and Intent) 


CASE SUMMARY: 
In this published opinion by Judge Neff, the Court of Appeals held that Farmers “preferred provider organization” option for its no-fault insurance policies was invalid because it inherently conflicted with Michigan’s No-Fault Act.

The essential question on appeal was whether Farmers’ implementation of PPO endorsement option under Michigan no-fault automobile insurance, by which policyholders received a reduction in their personal injury protection (PIP) premium in exchange for agreeing to obtain medical treatment exclusively from providers in Farmers’ PPO network, violated Michigan’s no-fault insurance statute. The Court of Appeals concurred with the circuit court conclusion that the PPO endorsement inherently conflicted with Michigan’s no-fault insurance scheme, which was enacted as a fee-for-service system with regard to medical expenses. Petitioners argued that because there is no statutory authority for the PPO endorsement it is illegal. Farmers argued that the No-Fault Act does not proscribe a PPO option and, therefore, it does not violate the statutory provisions of §3107 because it meets the requirements for no-fault medical benefits, i.e., reimbursement of all reasonable charges for reasonably necessary products, services, and accommodations.

The Court of Appeals held that managed care, in the form of a limited provider network, clearly was not contemplated in the no-fault range of choice system for medical benefits prescribed under §3107. Farmers’ system of PPO limited medical benefits inherently conflicts with Michigan’s No-Fault Act. Because the PPO endorsement at issue is inconsistent with the Act, the Insurance Commissioner was obligated to withdraw approval of the policy form incorporating the endorsement, pursuant to MCL 500.2236. In this regard, the court held:

“Managed care, and in particular, the PPO option at issue, fundamentally alters the essential premise of Michigan no-fault insurance and is inconsistent with the no-fault act general benefit provisions. Incorporating managed care into the no-fault scheme, however beneficial or desirable from a policy standpoint, cannot emanate from the innovations of insurance companies or the courts, but only from the Legislature itself.

Managed care, in the form of a limited provider network, clearly was not contemplated in the no-fault range of choice system for medical benefits prescribed under §3107. Farmers’ system of PPO-limited medical benefits inherently conflicts with Michigan’s no-fault act. Because the PPO endorsement at issue is inconsistent with the act, the commissioner was obligated to withdraw approval of the policy form incorporating the endorsement, pursuant to MCL 500.2236. The circuit court’s reversal of the commissioner’s decision was therefore not error.”

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