How the current fee cap controls access to care, not costs

Part 3 of our series on debunking myths from the insurance industry

Our last two segments of Diving Deeper with MBIPC dispelled the myths created by the insurance industry that everyone is still receiving care and that an arbitrary reduction in reimbursement rates is “common sense”. Another prominent piece of misinformation consistently put forward by the insurance industry is that the fee schedule is a necessary “cost control.” When we look closely at this claim, we quickly see that the 45% reduction in reimbursement only controls access to long-term care with little impact on the overall cost of car insurance.

The post-acute services targeted by the 45% reimbursement cap consist of essential long-term services such as residential programming (provided in an accredited and state-licensed facility that specializes in serving people with catastrophic injuries), in-home nursing and health care aides, case management, community-based programs and transportation services. These services do not have payable Medicare codes because the Medicare system is not designed for the long-term care of catastrophically injured people who may be disabled at a young age. However, they are necessary and purchased by consumers under insurance policies with unlimited personal injury protection (PIP) benefits.

95% of the average auto insurance premium has nothing to do with long-term care

The Michigan Catastrophic Claims Association (MCCA) was designed to ensure that Michigan drivers with unlimited PIP benefits had access to all reasonably necessary products, services and accommodations for an injured person’s care, recovery, or rehabilitation. Drivers purchasing unlimited benefits pay an assessment fee to access these funds. The assessment fee comprises less than 5% of the total premium paid by drivers, as the graph below demonstrates (thank you to Bob Mlynarek for this graph, which has been shared with over 100 legislators):

So, for about $12 per month (the cost of a couple of coffees from Starbucks), drivers are purchasing policies that they believe protect them and their families in the case of a tragic, catastrophic car crash. At its height, the assessment fee reached $220 per year (or less than $20 per month). Unfortunately, now injured drivers in need will not be able to access those reasonably necessary services because the reimbursement level is less than the cost to render the services (as demonstrated in our last segment).

How the auto insurance industry worked to legislate away lifetime benefits

Looking at it through this lens, we can clearly see that the “cost control” impact of the 45% reimbursement reduction is minimal at best. The real control implemented by this aspect of the no-fault reform law is over access to care. Insurance companies continue to sell policies with unlimited PIP benefits – but those benefits are essentially capped by the reimbursement level imposed on providers. The most accurate metaphor for this system is to imagine purchasing collision insurance, expecting to have coverage for replacement parts and labor in the event of a car accident. But after a crash, you quickly find it impossible to utilize those benefits with no auto repair company able to provide services because the cost of labor and parts is more than what they are going to get paid by the insurance company.

It is clear that the insurance industry couldn’t legislate away unlimited lifetime benefits because Michigan drivers continue to want that option. So instead, they support legislation that essentially makes those policies moot when it comes time to pay for long-term care. If the insurance companies truly had the best interest of their consumers in mind, they would advocate for legislation that would ensure the policies they are selling uphold the promises of lifetime coverage their consumers think they are getting. Instead, they put their resources, influence, and power to misguide the public and deter our legislators from making necessary changes in the law.

A reasonable fee schedule will not impact the cost of insurance

Our legislators intended to give consumers a choice—allowing them to decide whether they want to pay the additional $12 per month for the protection and promise of lifetime care for themselves and their loved ones. Now, it is the responsibility of this legislature to make the necessary changes to the law to ensure those protections and promises are upheld, and people have access to the services they need for their recovery, rehabilitation, and care. Implementing a reasonable fee schedule for the post-acute services targeted by the 45% reimbursement reduction will not impact the cost of insurance, but it will ensure that consumers get the benefits and access to care they paid for.