SUMMARY ANALYSIS OF HB 4612 (H-3)
By: George T. Sinas
CPAN General Counsel
Sinas Dramis Law Firm
March 7, 2014
On Thursday, February 20, 2014, HB 4612 (H-3) was offered as a substitute to H-1, which has been stalled on the floor of the Michigan House for almost one year. Like H-1, H-3 imposes unprecedented limitations on medical benefits and significantly restricts what treatment and services are available to persons injured in motor vehicle accidents. In addition, many of the benefit limitations contained in H-3 were contained in Proposal C, a referendum which was resoundingly defeated by Michigan voters in 1994. This analysis seeks to focus on the specific limitations placed on medical care; other key elements dealing with the Michigan Catastrophic Claims Association (MCCA) and fraud will be addressed in subsequent documents. The medical limitation highlights of H-3 are summarized below:
A. Caps On Benefits—H-3 imposes four separate caps on benefits, which are as follows:
- A Lifetime Cap—H-3 eliminates lifetime, medical and rehabilitation coverage and replaces it with a $10 million cap (pg 40).
- A Motorcycle Cap—H-3 imposes a $250,000 lifetime cap on persons sustaining accidents between motorcycles and motor vehicles. This cap requires the motorcycle victim to first exhaust applicable health coverages. The cap applies regardless of whether the motorcyclist purchased a separate auto no-fault policy.
- A Non-Resident Cap—H-3 imposes a $50,000 cap on medical care rendered to any non-resident injured in a motor vehicle accident occurring in Michigan. Therefore, unless a non-resident has other health and accident coverages, Michigan hospitals will be required to render “free care” to non-residents who incur expenses in excess of $50,000. Such a cap is likely to result in a major cost shift to Michigan taxpayers.
- An Assigned Claims Cap—H-3 imposes a $250,000 cap on any no-fault PIP claim processed through the Assigned Claims Plan. Therefore, senior citizens and others living alone who do not own motor vehicles and are injured in accidents where there is no applicable PIP coverage, will be subject to this cap. For many, this may very well result in their admission to nursing homes and other government funded facilities.
B. Restrictions in Medical Care and Benefits—H-3 imposes numerous and substantial limitations on the scope and availability of medical and rehabilitation care. These are summarized below:
- The Plateau Cutoff—Nothing is payable under H-3, unless it is “reasonably likely to result in meaningful and measurable lasting improvement in the injured person’s functional status.” (pg 44)* Therefore, permanently injured patients who reach a point where they will not meaningfully improve, will be subject to a complete termination of benefits increasing likelihood of regression. This may also result in an inhumane cycle where medical treatment will be withheld until the patient regresses, at which time medical treatment could resume until the patient re-attains a level of maximum improvement, when treatment will again be discontinued.
- The Pre-Existing Need Disallowance—Nothing is payable under H-3, if it “would have been needed or used by the injured person or a member of the injured person’s household regardless of the loss occurrence.” (pg 43)* Therefore, institutionalized patients who incur expenses for food and other room and board items may not have coverage for such pre-existing needs.
- The Location of Care Limitation—Nothing is payable under H-3, unless the product, service, or accommodation “is provided in the most appropriate location where the service may, for practical purposes, be safely and effectively provided,” and that the product, service, or accommodation is not “primarily for the convenience of the individual, the individual’s caregiver, or health care provider.” (pg 45) Therefore, patients who are presently cared for at home may be forced into institutions on the basis that home care is simply a “convenience” and that institutional care would be the most “appropriate” and “practical” location.
- The Rehabilitation Cutoff—No rehabilitation services are payable under H-3 unless they are “reasonably likely to produce significant rehabilitation” and those services cannot be received longer than two years unless “it is reasonably likely that longer treatment may produce significant measurable improvement.” (pg 44)* The restrictive requirement of “significant rehabilitation” and “significant measurable improvement” are not defined and, therefore, the amount of rehabilitation services will be reduced and highly disputed.
- Increased Restrictions on Home Modifications—No home modifications are compensable under H-3, unless those modifications satisfy a multi-level eligibility test that requires they be “directly necessitated by and related to the injured person’s injuries” and are “functionally necessary to meet the injured person’s treatment, rehabilitation, maintenance, and daily living needs.” (pg 45)* This multiple level test is more restrictive than the current “reasonably necessary” standard. If any one of the criteria are not met, then there is no coverage for this benefit.
- Household Rendered In-Home Attendant Care Restrictions—No in-home attendant care rendered by family or household members is compensable under H-3 for more than 56 hours per week (i.e., 8 hours per day), nor is it compensable at a rate exceeding $15 per hour, “regardless of the level of care provided,” and “regardless of whether the family or household member is licensed or otherwise authorized to render the attendant care under Article 15 of the Public Health Code . . . “ (pg 46)
- Commercially Provided In-Home Attendant Care Restrictions—No in-home attendant care provided by outside agencies is compensable under H-3 that is in excess of one caregiver per 24-hour cycle, regardless of the number of caregivers that are needed to take care of the patient. This benefit is subject to a “co-payment of 20% up to a maximum of $200.00 per month.” (pg 47) Therefore, patients with special needs requiring more than one caregiver will receive inadequate care.
- Medical Fee Reimbursement Limitations—Under H-3, when an insurer pays a bill within 30 days after receiving it, the insurer is only required to pay a maximum of “125% of the amount that would be paid under . . . schedules of maximum fees for worker’s disability compensation . . .,“ and said amount must be accepted by the provider as full payment. (pg 58) Therefore, providers who are not willing to accept such a reduction in reimbursement may refuse to treat auto accident patients thereby resulting in auto accident patients not being able to access the best quality of medical care. This also increases the power of the government to establish price controls over private industry.
- Full Retroactivity For All Fee Limitations—All limitations on fees contained in H-3 are applicable to any accident occurring before the date of passage, as per language that states, “for loss occurrences under motor vehicle accident policies issued or renewed before January 1, 2015 . . . payment to providers for those products, services and accommodations are subject to the limits in Section 3107C and the limits on charges in Section 3157.” (pg 40) Therefore, patients injured many years ago who were receiving full benefits will be subject to the fee limitations set forth in this bill.
C. Insurer Control of Medical Treatment and Intimidation of Providers—Insurance companies will be able to exercise unprecedented control over the nature and extent of medical care that is rendered to patients. Medical providers who render that care may likely be intimidated from doing what they believe is in the medical best interests of their patients. This occurs in several ways described below:
- Control of Treatment by Utilization Review—An insurer must conduct, under H-3, “a utilization review for each individual on whose behalf the insurer pays benefits.” The review is to be conducted pursuant to “criteria or standards established by the department . . .” (pg 59) Therefore, insurers will be able to significantly control the nature and extent of a patient’s medical care.
- Mandatory Provider Participation—By accepting payment of benefits under H-3, providers are deemed “to have consented to submit necessary records and other information . . . for utilization review . . .” (pg 59) Moreover, if an insurer believes that a doctor or provider is treating a patient too frequently or for too long, the insurer “may require [the provider] . . . to explain in writing” why the treatment was necessary.
- Insurer Determination of Unjustified Treatment—If an insurer unilaterally determines under H-3 that “a physician, hospital, clinic, or other person lawfully rendering treatment or rehabilitative occupational training has required unjustified treatment, hospitalization, or visits, an insurer is not required to pay . . . and the physician, hospital, clinic, or other person is liable to return to the insurer the fees or charges already collected.” (pg 59) In addition, if an insurer unilaterally determines under H-3 that a provider “improperly overutilized or otherwise rendered or ordered inappropriate health care or health care services” a hearing may be conducted by the insurance department. (pg 60)
- Criminal Threats—A provider who submits “false or misleading records or other information to an insurer” is guilty of a misdemeanor and is subject to imprisonment. However, there is no definition of what is “false or misleading.” (pg 59) Therefore, the ambiguity regarding these terms will likely inhibit a providers willingness to advocate for the patients best interest.
D. Managed Care Insurance Policies—H-3 allows insurance companies to offer “managed care options” for reduced premiums. However, such policies are problematic for the reasons summarized below:
- No Statutory Protections—Although H-3 authorizes insurers to sell “managed care options” for payment of PIP benefits, the bill contains no consumer protections with regard to what may be included in those policies. (pg 5) Therefore, these policies could be written in such a manner that would severely limit a patient’s right to receive no-fault benefits.
- No Premium Discount Guarantee—Although H-3 requires that managed care options “must provide a discount that reflects reasonably anticipated reductions in losses or expenses,” it contains no specific requirements as to what that reduction should be or how it should be calculated. (pg 5)
E. Immunization of Insurers From Unfair Claim Practices—H-3 contains several devices that protect insurance companies who engage in unfair claim processing practices. They include the following:
- Loss of Jury Trial Right—There is no longer a right to jury trial under H-3 when the issue is “whether a charge is reasonable or whether a product, service, or accommodation is reasonably necessary.” A judge, not a jury, will determine this issue. (pg 58)* The evidence of an insurer’s unfair policy decisions regarding denial of benefits would not be admissible in court.
- Inadmissibility of Improper Claim Handling Evidence—If a trial occurs to recover PIP benefits, H-3 provides that “evidence of the manner in which an insurer processed a claim for benefits is not admissible.” (pg 57)
- Virtual Elimination of Attorney Fee Penalties in Attendant Care Disputes—In disputes regarding the payment of attendant care benefits, H-3 provides that insurers are only subject to penalty attorney fees “for services rendered in the 12-month immediately preceding the date the insurer is notified of the dispute.” In other words, any legal services rendered by an attorney representing a patient or provider after the insurer receives notice of the dispute are not recoverable. (pg 57)
F. Premium Reductions—Although H-3 requires minimal reduction of premiums, it is problematic for the reasons summarized below:
- Ten Percent (10%) Reduction for 24 Months—Although H-3 requires insurers to reduce premiums by approximately 10% for 24 months, it permits premiums to be increased again after that period without further limitation. (pg 66) Therefore, in the third year premiums could double while benefits could be cut in half.
- No Future Reduction in Premiums Reflecting Claim Savings—H-3 does not require any future correlation between reduction in benefits and reduction in premiums. In other words, the loss of benefits is permanent, but premium savings are not. (pg 66)
G. Discriminatory Low Cost Auto Policies—H-3 attempts to assist low- income families to afford no-fault insurance, but does so pursuant to some very disturbing limitations summarized below:
- Ineligibility for PIP Benefits—Qualifying low-income insureds who buy a low cost policy lose the right to purchase PIP coverage on other owned vehicles and lose the right to collect PIP benefits in all types of accidents, regardless of the circumstances. Unlike other motorists, poor people who buy these low cost policies receive far less than other Michigan citizens who are able to afford a regular auto no-fault policy. (pgs 48 and 68) Therefore, this appears to be fundamentally inconsistent with the ruling of the Michigan Supreme Court in the famous case of Shavers v Attorney General, where the Court held that all Michigan citizens are constitutionally entitled to purchase auto no-fault insurance policies at “fair and equitable rates.”
- Medical Benefit Cap of $50,000—H-3 limits benefits under low cost policies to $50,000 for medical expenses. There is no exception and there is no coverage for wage loss, replacement services, or other losses covered by PIP benefits. (pgs 69 and 72) Therefore, people who purchase low cost policies are actually penalized by their choice to buy a low cost policy.
- Virtual Ineligibility for Tort Damages—Qualifying low income insurers who buy low cost policies, also lose their tort rights to hold drunk and reckless drivers liable for expenses that exceed what is covered by the low cost policy, and are further limited to only $20,000 of noneconomic damages, regardless of the severity of their injuries. (pgs 54 and 55) Such prohibitions are clearly discriminatory and likely unconstitutional.
This document provides a critical outline of the severe restrictions in PIP benefits being proposed under H-3. The other key elements proposed in H-3, such as the restructuring of the MCCA so as to totally eliminate all liability of insurers for medical expenses after the $500,000 threshold is reached, is under close examination. Also, the proposed Fraud Authority remains problematic in scope with its one dimensional strategy of fighting fraud perpetrated by providers and consumers with no attempt whatsoever to address wrongful denial of claims and other unfair tactics utilized by insurers to restrict or cut off benefits. CPAN will address those issues in upcoming updates of this document.
*Previously included as part of Proposal C, which was overwhelmingly defeated by Michigan voters in 1994.