Limiting Medical Coverage For Accident Victims

When it comes to car insurance, Michigan drivers are fortunate to have the best medical coverage in the nation — at least for now. Lawmakers are currently considering a move that would limit coverage to accident victims, despite a recent survey indicating that two-thirds of voters want to keep the system the way it is.

Michigan is one of a handful of states that use a no-fault insurance system, which was introduced in 1973 as a way to streamline the claims process and reduce the legal costs involved in collecting payments.

Recently, the Coalition Protecting Auto No-Fault, which is a group made up of personal injury lawyers, hospitals, health groups and other interested organizations, filed a lawsuit in Ingham County. The Coalition is seeking information about the cost of claims and the age of those making insurance claims. They believe this information is necessary for lawmakers to make informed decisions about the proposed changes.

Michigan's No-Fault Insurance System

What makes Michigan's no-fault system unique is that it provides unlimited medical and rehabilitation benefits to accident victims. After a car accident, insurance policies cover the first $500,000 in medical costs, and the Michigan Catastrophic Claims Association covers the rest — no matter how much. The MCCA is a reinsurance fund managed by the car insurance industry. The MCCA is funded by everyone in the state of Michigan that purchases an auto insurance policy.

The proposal, if passed, would do away with universal unlimited medical coverage. Under the proposed system, unlimited coverage would be available only to drivers who are willing and able to pay more for it. Other drivers could purchase policies with limits as low as $50,000. Critics of the proposed legislation argue that young drivers with limited income will opt for the slightly cheaper policies. And it is these same young and inexperienced drivers who most need the unlimited lifetime medical benefits. Taking care of a catastrophically injured 16-year-old costs more than taking care of a catastrophically injured 50-year-old, simply by the number of years that care is required.

As catastrophically injured victims of serious accidents almost always discover, $50,000 will not pay for the initial hospitalization, which quickly reaches in excess of $100,000 after surgeries and intensive care and rehabilitation at a trauma center. Once discharged, those patients opting for the minimal policies will not have any funding for the years of rehabilitation that are frequently required.

People who support the proposed changes are quick to point out that removing unlimited coverage will reduce the premiums for drivers who choose lower limits. However, taxpayers will end up footing the bill for accident victims whose injuries exceed their insurance limits, forcing them to rely on publicly funded programs like Medicaid and Medicare. With the large number of uninsured Americans, auto accident victims will be one more unfunded burden foisted onto major trauma centers who will struggle to deliver quality care without additional taxpayer support. Because low-limit policies will be cheaper under the proposed scheme, the drivers with the most limited policies are also likely to be those least able to pay for their medical costs out of pocket in the event of an accident. And, critics of the bill also point out that there are no mandated premium reductions and expect that the per person savings will be minimal and short lived.