House Bill 5013: The End Of No-Fault As We Know It

Editor’s Note: House Bill 5013 failed to pass the Michigan House of Representatives on November 2, 2017, by a 45-63 vote.

House-Bill-5013As part of the ongoing no-fault reform efforts in Lansing, House Bill 5013 was introduced in the Michigan Legislature on September 26, 2017. The no-fault reform proposal has primarily been touted as a way to slash auto insurance rates for Michigan motorists.

However, upon a thorough review by Lansing car accident lawyers George Sinas, Stephen Sinas and Tom Sinas — who comprise the legal team for the Coalition Protecting Auto No-Fault (CPAN) — it turned out that House Bill 5013 did not guarantee auto insurance rate relief for Michigan motorists.

So what exactly did House Bill 5013 do? Basically, the measure would have been “the end of no-fault as we know it,” according to the CPAN legal team. In addition to not guaranteeing auto insurance rate reductions, House Bill 5013 would have:

  • authorized unprecedented dollar cap limitations on no-fault benefits.
  • given insurance companies substantial control over a patient’s medical care.
  • increased the power of insurance companies, while taking away the legal rights of patients.

House Bill 5013 Would Have Shattered Existing No-Fault Coverage

If passed, House Bill 5013 would have destroyed the promise of lifetime medical care that’s currently at the core of the Michigan no-fault insurance system. Basically, the bill would have resulted in a severe loss of benefits for thousands of Michigan auto accident victims. Here’s how.

First, House Bill 5013 would have allowed insurance companies to sell no-fault PIP benefit policies with woefully inadequate lifetime benefit caps. Policy options would have been:

  • a lifetime benefit cap of $25,000. Note: contrary to some reports, this is not a $250,000 cap and, instead, is a $25,000 lifetime cap with a narrow exception for $225,000 in emergency medical care.
  • a lifetime benefit cap of $500,000.

These two caps would have applied not only to medical expenses, but to all PIP benefits, including work loss and replacement services. This means that people who suffered a serious car accident injury and incurred medical expenses that exceeded their selected PIP benefit cap (which will happen in most serious injury cases where the $25,000 cap has been chosen) would have no PIP work loss benefits available to them.

House Bill 5013 also jeopardized the care of children injured in a car crash by completely altering the current no-fault law. Right now, children have access to lifetime medical care if they’re hurt in a Michigan auto accident, even if the parents did not purchase no-fault insurance. But because House Bill 5013 allowed consumers to purchase limited benefit caps, children who suffered severe injuries in a Michigan car accident would have faced a loss of lifetime care if their parents purchased limited benefit coverage — especially if they selected the $25,000 benefit cap.

Another significant change was that House Bill 5013 explicitly prohibited victims of reckless, negligent or drunk drivers to recover any uncovered medical expenses from the at-fault driver. How so? The proponents of House Bill 5013 deliberately deleted the words “allowable expenses” from §3135(3) of the No-Fault Act.

House Bill 5013 was also problematic for the following reasons: 1) it dramatically reduced reimbursement to medical providers that treat car accident victims; 2) it severely cut family-provided attendant care benefits; 3) it drastically reduced benefits for motorcyclists injured in crashes with negligent motorists; 4) it imposed medical transportation limitations; and 5) it allowed senior citizens to opt out of coverage. In fact, according to the House Fiscal Agency, House Bill 5013 could have increased costs for Medicaid by some $150 million each year after 10 years.

House Bill 5013 Did Not Guarantee Slashing Of Premiums

According to the CPAN legal team’s analysis, House Bill 5013 did not guarantee a reduction in Michigan auto insurance rates, auto-insurance-benefit-paymentalthough the measure was presented as such.

Why no guaranteed rate reduction? Two reasons:

  • the premium reduction required by the bill applied only to the premium for PIP benefits — it didn’t apply to the total premium, which, in reality, is comprised of coverage far more costly than the premium for PIP benefits.
  • no premium reduction was necessary if an insurance company could convince the Insurance Bureau that the failure to reduce the premium was “justified” by “using generally accepted and reasonable actuarial techniques.”

Meanwhile, Michigan taxpayers would also have taken a hit under House Bill 5013. This is because the medical expenses no longer covered by PIP benefits would have been shifted to other payment systems … and ultimately to taxpayers and employers. This could have potentially created the need for higher taxes, and employers would have faced the possibility of increased healthcare coverage costs.

In the end, House Bill 5013 would have caused financial ruin for many Michigan families. Why? Because those seriously injured in auto accidents who chose the $25,000 PIP benefit cap, and who incurred substantial medical expenses in excess of that cap, would have likely been unable to pay their medical bills. For many, this would have meant filing for bankruptcy, further impairing Michigan’s economy and financial recovery.

House Bill 5013 wholly benefited the insurance companies. The proposal gave insurance carriers more power and unprecedented control over an injured person’s medical care, while at the same time taking away the rights of Michigan auto accident victims. Here’s how:

  • it called for restricted care through a “utilization” review.
  • it allowed the use of intimidation tactics against medical providers, potentially causing their reluctance to provide treatment to car crash victims.
  • it all but eliminated an injured person’s right to penalty interest and fees in no-fault benefit disputes.
  • it let an insurance company recoup its fees and costs if benefits were found to be “not medically necessary” or if the claim was for “an excessive amount.”
  • it offered careless insurance agents immunity from any liability.
  • it did absolutely nothing to help eliminate abusive and unfair practices by insurance companies, including auto insurance redlining and using credit scores, income and gender as factors to assess Michigan auto insurance rates.

CPAN Legal Team’s Testimony On Now-Failed House Bill 5013

At an October 3, 2017, House Insurance Committee hearing on House Bill 5013, Lansing car accident lawyer Stephen Sinas and Grand Rapids auto accident attorney Tom Sinas presented joint testimony on the legislation.

Tom emphasized to the committee that House Bill 5013 did not guarantee any insurance rate reduction. “As a matter of fact, all it does is it intends to reduce rates by 40 percent for those people who buy the cheapest policies that have only $25,000 in general coverage,” he said.

Tom also pointed out the bill did nothing to address underlying insurance concerns, including how insurers set their rates. “There are things that we don’t do in this state — for example, we don’t make it illegal for insurance companies to charge people different amounts of money based on their zip code,” he told the committee. “If we want to tackle rates, we’ve got to be honest about the problems that are driving up rates, before we decide to get rid of all these protections we’ve had for over 40 years.”

Stephen added that House Bill 5013 afforded “very little power” to Michigan consumers. “The power goes to insurance companies, and I don’t know quite frankly how anybody could vote for that,” he said. “It looks like it was completely drafted by the insurance industry. There’s nothing but favors in it for the insurance company.”

Fair And Affordable No-Fault Reform Is Needed In Michigan

In the end, what Michigan really needs is the “Fair and Affordable No-Fault Reform Package” that has been proposed by a bipartisan group of state lawmakers.

Whether you are a driver, an accident survivor, a healthcare provider or an insurance company, the Fair and Affordable No-Fault Reform Package has something in it for everyone.

Key components of the package (House Bills 5101-5111) include:

  • implement a fee schedule for medical providers. The schedule would be set at 185% of the workers’ compensation rate, which reflects the complex treatment and increased attention that car crash victims require.
  • establish an hourly rate schedule for family-provided attendant care. The schedule would allow for rates that are reasonably related to the nature and extent of the patient’s disability and needs, including patients who require 24/7 care.
  • keep insurers from using non-driving related factors (such as credit score, gender and job title) to determine auto insurance rates. These factors have nothing to do with how cautious someone drives or how expensive their vehicle is to fix.
  • require the Michigan Catastrophic Claims Association be more transparent with its annual per vehicle fee assessment, and require the MCCA’s rate-making data be made available to the public.
  • create a meaningful Fraud Prevention Authority that will address fraud committed by claimants and providers, as well as prevent insurance companies from denying legitimate claims, which increases litigation and expenses.
  • amend wage loss benefits to better align with the auto accident victim’s actual salary loss.
  • correct the Admire v Auto Owners court decision, which has been used by insurance companies to deny paying for legitimate expenses needed by auto accident victims.
  • correct the court decision in Bahri v IDS Property Casualty Ins Co, which lets insurance companies void an entire policy if a claim submission was made in error, or if the insurance company alleges fraud.
  • reinstate the “innocent third-party rule,” which came to a screeching halt in the case of Bazzi v Sentinel Ins Co, thereby protecting innocent third-party claimants who did not participate in the fraudulent procurement of a policy.
  • correct the May 2017 Michigan Supreme Court decision in Covenant Medical Center v State Farm, which prevents medical providers from suing insurance companies on behalf of auto accident victims when insurers refuse to pay for treatment that has been rendered.

In the following FOX 17 “Know the Law” segment, Tom Sinas talks about the problems with House Bill 5013.


Stay with the Auto No-Fault Law Blog for updates on no-fault reform in Lansing. Meanwhile, if you have questions about no-fault reform or have been injured in a Michigan auto accident, our experienced attorneys are here to help. Contact our Michigan accident lawyers today for a free initial consultation.

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