Michigan court limits scope of no-fault reform. Will insurance rates rise?

• Car crash survivors injured before 2019 no-fault law aren’t subject to its restrictions on medical fees, Michigan Supreme Court rules
• The reform cut reimbursements for services not provided by Medicare by 45 percent
• Some Democrats want to revisit the law further as clinics for those with catastrophic injuries close

Car crash survivors critically injured before sweeping changes to Michigan’s auto no-fault insurance law took effect are not subject to the law’s limits on medical benefits, the Michigan Supreme Court ruled Monday. 

In a 5-2 ruling authored by Justice Elizabeth Welch, the court sided with a lower court’s decision determining legislative changes to health care reimbursements for crash victims, including a 45 percent cut to the reimbursements for services not covered by Medicare, can’t be applied retroactively to people who were injured prior to June 11, 2019.

The Supreme Court’s decision marks a victory for thousands of people with severe and long-term injuries from crashes, who have long argued the changes to medical fees interrupted their access to high-quality care.

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• Court: Past crash survivors not subject to Michigan auto no-fault limits

Insurers and other supporters of the no-fault overhaul approved in 2019 by Gov. Gretchen Whitmer and the Republican-majority Legislature have argued that not including past crash survivors in the reforms would do little to bring down the state’s auto insurance costs.

The two plaintiffs before the Supreme Court, Ellen Andary and Phillip Krueger, sustained traumatic brain injuries in crashes prior to 2019 and now require around-the-clock care. 

Their attorneys argued the new health care limitations shouldn’t apply to them because their benefits took effect prior to the law’s enactment, and that capping reimbursements for their care violates the terms of their insurance contracts at the time they signed them.

Joining Welch in agreement were Chief Justice Elizabeth Clement and Justices Richard Bernstein, Megan Cavanagh and Kyra Harris Bolden. The court’s two reliable conservatives, David Viviano and Brian Zahra, dissented. 

The insurance policies covering Andary and Krueger “bind the insurance companies to their promise to provide PIP benefits under the law that existed at the time of injury to those individuals covered by the policies,” the majority opinion reads. 

“The 2019 no-fault amendments do not clearly convey an intent to retroactively modify these vested contractual rights,” it continued.

In dissent, Viviano wrote that the majority decision “thwarts the will of the Legislature” and undermines the effectiveness of the no-fault changes, arguing that lawmakers’ goal of reducing auto insurance rates relied on including all accident survivors in the changes.

“As a result, the efforts of the Legislature and the Governor to reduce costs and make insurance more affordable for all the residents of our state will not come to fruition for many decades,” Viviano wrote. 

The court declined to address the constitutionality of the law itself, meaning the decision only applies to crash survivors injured prior to its passage. Providers caring for crash survivors injured after June 11, 2019 will continue to be subject to the fee schedules outlined in the latest law. 

Prior to 2020, Michigan was the only state where drivers were required to pay for full personal injury protection insurance. It offered catastrophically injured crash survivors unlimited medical benefits, but it came at a cost: Michigan consistently topped the nation in highest average auto insurance rates, and costs were especially high in metro Detroit. 

Unlimited coverage became optional when the new law took effect, and drivers are now allowed to pick from varying levels of coverage. 

An analysis from Insure.com found Michigan now ranks fourth in the nation for highest auto insurance rates. 

Insurance providers have argued that the medical fee schedule is necessary to keep costs down, and claimed in court arguments that regardless of when the injuries happened, insurers and medical providers should be subject to the new cost limitations. 

“No-fault reform is sort of like a sweater — you pull one thread on it and the whole thing is going to collapse,” Lori McAllister, an attorney representing the United Services Automobile Association insurer, told justices during oral arguments on the case.

The Insurance Alliance of Michigan, an industry group representing insurance providers, contends the lower fee schedule for medical providers provided in the reform law has been a crucial part of reining in costs and saving drivers billions of dollars in auto insurance fees. 

Erin McDonough, the group’s executive director, on Monday called the ruling “a huge setback” that could result in overcharging for medical procedures and higher auto insurance rates.

“You can’t reasonably expect to save Michigan drivers money while obliterating a key cost control measure like the fee schedule,” she said in a statement. “Fortunately, the decision preserves the fee schedule going forward after enactment and that will continue to provide relief to drivers saddled with some of the highest insurance costs in the nation.”

The Michigan Catastrophic Claims Association — an industry-led nonprofit that collects annual fees from Michigan motorists to cover accident victims’ medical care — reduced its fees and issued $400-per-vehicle reimbursement checks to Michigan drivers at Whitmer’s urging in the aftermath of the 2019 law.

The association boosted its annual per-vehicle assessments to at least $48 per vehicle per year after the Court of Appeals decision finding patients who began receiving care for auto injuries prior to the 2019 law’s passage aren’t subject to the changes.

Auto crash survivors and their health care providers said the decision would ease some of the suffering caused by the law and temporarily stem the tide of providers dropping long-term auto crash patients or closing down altogether. 

In all, 4,082 health care worker jobs out of 19,994 have been eliminated since 2021, while 6,857 crash patients have been discharged from care since the policy took effect, the Michigan Public Health Institute concluded in a study of 209 health organizations.

Tim Hoste, president of CPAN, a coalition of groups that support the state’s no-fault system, called the decision an “enormous victory” for crash survivors. 

“The Supreme Court has issued a strong affirmation that accident victims who were injured prior to the passage of the new law cannot have the rights and benefits they purchased through their auto insurance premiums stripped away by this legislation,” he said in a statement.

Advocates say they also want legislative changes to the free schedule to guarantee care. . Republican leadership last session rebuffed efforts to revisit the law, and the Democratic-majority legislature hasn’t taken it up yet, either. 

Bob Mlynarek, co-owner of 1st Call Home Healthcare in Clinton Township in Macomb County, said the Supreme Court ruling will help somewhat but doesn’t address overall problems with the reform.

“We'll be able to stay in business and operate, but it will be a slow death for the providers because the patient census is limited,” he said. “The bottom line is there’s just not enough patients from pre-2019 to maintain a long-term agency.” 

Republicans and Democrats alike have introduced proposals to tweak the policy since 2021. Gov. Gretchen Whitmer has said she’s open to adjusting the law, and Rep. Julie Rogers, D-Kalamazoo, told Bridge she still wants lawmakers to revisit the fee schedule.

The court’s decision is a “wonderful help for the pre-2019 survivors, but it doesn't fix the situation for people that were injured in a crash post-2019,” Rogers said. “It's certainly not my intent to throw out the entire 2019 law. I think there's specific pieces of it that need to be changed.”