Part two of our series on debunking myths from the insurance industry

While it is hard to move on from the outrageous and offensive dismissal of suffering, our next segment will focus on perhaps the most often-used rhetoric by the insurance industry regarding the fee cap system: their go-to labeling of the reimbursement system as “common sense.”

As the Supreme Court noted in its Andary decision, “one does not need an advanced degree in economics to recognize that reducing reimbursement for those providing care for an insured is likely, at least to some degree, to reduce the quality and availability of such care.” Let’s take this sentiment a step further and break down the reality of an arbitrary 45% reduction in reimbursement.

A real life example

Consider the case of a home health care company charging a modest $30 per hour for around-the-clock supervision and health care aide duties in 2019. The responsibilities of these aides would include tasks such as dispensing medications properly, providing assistance with bathing, changing clothes, transferring and toileting, ensuring that the person is making safe decisions, and all the other basic activities of daily living. Prior to the implementation of the new fee schedule, this company was getting paid consistently by various insurance companies because the charge was deemed “reasonable and customary.” Yet, starting July 2, 2021, this company’s reimbursement for these services was capped at 45% of that $30 charge. Here’s how the math adds up:

2019 Charge
$30/hour

Required Reduction
X 0.45

New Required Reimbursement Cap
$16.50/hour

The math is clear: There is nothing common sense about slashing reimbursement rates by nearly 50%. The insurance industry knows this—they do everything they can to not specifically mention this aspect of the “fee schedule.” Instead, they use broad language without ever explaining the basis for considering this ill-conceived system as common sense.

Economically laughable and clearly not sustainable

As you drive through your town, notice the help wanted signs hanging outside places like McDonald’s and Taco Bell—in many cases, they offer starting wages at $15-$17/hour. This is for people with the required skill set to take an order, prepare food, and perhaps make change for customers paying with cash. Not to disparage those skills or the need for those jobs; but juxtapose those skills with those of a home health care aide working independently inside the home with a person needing constant care and supervision.

Now consider that the company employing that person is only getting paid $16.50 for every hour of service provided. Then, tack on the other necessary costs of recruiting and retaining quality people for this role, including but not limited to extensive training, health care benefits, overtime and holiday pay, continued education, social security and workers’ compensation taxes, and the potential for annual wage increases.

It should be clear to any reasonable person that the new reimbursement rate is lower than the cost of providing service to the injured person. It is economically laughable and clearly not sustainable.

“Common sense” means passing a reasonable fee schedule solution

It is absurd that the insurance industry has been able to get away with calling this system “common sense,” and it is astounding that our state regulatory agencies, the Michigan Catastrophic Claims Association, and elected officials have not emphatically countered this rhetoric with a reasonable understanding of the math and the impact it has on access to care for car crash survivors.

The Insurance Alliance of Michigan—the voice for big auto insurance—should be challenged by the media and our elected officials to explain precisely how the 45% reimbursement reduction is common sense; it would be interesting to see their logic and math skills on full display. In the meantime, our legislature and Governor need to use their common sense and pass a reasonable fee schedule solution that eliminates the 45% reimbursement cap and replaces it with a system that ensures service providers are reimbursed at an equitable rate so that car crash survivors have access to the rehabilitation and care they need and paid for through their insurance premiums.

Sincerely,

Tom Judd
Executive Director

This article first appeared on the Michigan Brain Injury Provider Council website.