Medical Providers – PIP Benefits and Managed Care

A Fee-For-Services System

When the Michigan Legislature enacted the No-Fault Automobile Insurance Act in 1973, it did not draft a statute that utilizes managed-care concepts, as have other states that enacted a no-fault system. On the contrary, the Michigan No-Fault Act is purely a fee-for-services system obligating a no-fault insurer to pay all “allowable expenses” as defined in the statute.

The Michigan No-Fault Act does not contain any provisions that specifically grant no-fault insurance companies the authority to invoke principles of managed care or to act as “gatekeepers” regarding a person’s medical and rehabilitation treatment. Moreover, it is clear that, with certain exceptions, most persons injured in motor-vehicle accidents have a legally protected “right to choose” their own care providers. In this regard, the Michigan Supreme Court has held “the No-Fault Act preserves to the injured person a choice of medical service providers.”  See Morgan v Citizens Insurance Company, 432 Mich 640 (1989).

Based upon these principles, a no-fault insurance company cannot dictate what kind of medical treatment an injured person receives, the identity of the medical providers who will render that care, or the circumstances under which the care is rendered. On the contrary, the role of the no-fault insurance company is to honor its statutory duty to pay “all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation” as required by Subsection 3107(1)(a).

Coordinated Benefits Policies

There is one notable exception to the basic principle that no-fault is not a managed care system, which is the situation that exists for patients who are members of HMOs and who also have coordinated no-fault coverages. Patients in this situation must be careful to comply with the dictates of the Supreme Court’s opinion in Tousignant v Allstate Ins Co, 444 Mich 301 (1993), which held that a patient who is insured under a coordinated policy may not seek benefits from the no-fault insurer if his or her policy directs that coverage should be obtained from the HMO.

Pre-Authorization of Treatment

There is no legal authority in the Michigan No-Fault Act, or in any appellate-court decision, that authorizes a no-fault insurance company to require pre-authorization of payment before medical expenses are legally payable. Under the law, a no-fault insurance company must pay any and all “allowable expenses” regardless of whether the insurance company was notified about the expense before the service was rendered.

This is true because the Michigan No-Fault Act is not a managed-care system. Rather, it is a fee-for-services system. Patients and their medical providers are not obligated to obtain pretreatment authorization from no-fault insurance companies. If the patient’s medical providers are willing to verify that the prescribed services were “reasonably necessary,” this is typically sufficient to impose legal liability on the no-fault insurance company for payment of the charges, regardless of whether the insurer pre-authorized the treatment.