by Jessica Sanchez
House Bill 4959 was introduced in September by Rep. Jeff Farrington (R- Utica) to decrease auto-insurance premium costs for seniors with Medicare. The Bill would exempt senior Medicare recipients over age 65 from the portion of Michigan’s No-Fault Law requiring drivers to purchase unlimited medical coverage. Opponents of the legislation argue the Bill will leave seniors stuck with high personal injury medical costs, and without access to all of the medical care needed following a severe car accident.
What is No-Fault?
Michigan follows a no-fault auto-insurance system. Meaning that in the event of a car accident, both parties involved are entitled to medical benefits from their own auto-insurance company, no matter which driver caused the accident. This is different from the majority of states, which follow a traditional tort liability system, in which recovery is determined by which party is deemed to be at-fault for the accident. The No-Fault system is meant to keep medical benefits from being held up while a dispute over who caused the accident plays out, and to keep administrative and legal costs lower. Under Michigan law, every driver must purchase No-Fault coverage, it’s a misdemeanor to drive without it.
The No-Fault Law and Coordination of Benefits
A provision in the Michigan No-Fault Law requires all drivers to purchase auto-insurance coverage that covers personal injury protection (PIP). Specifically, the law requires drivers to purchase coverage that guarantees unlimited medical benefits to cover personal injury costs following a car accident. Many people with private health insurance are able to choose an auto-policy which will coordinate their private health insurance with their no-fault medical coverage. Coordinating these benefits means that private health insurance pays eligible medical costs first, and the auto-insurance policy will only have to cover the excess. The coordination of these insurance benefits allows for a decrease in liability on the auto-insurance company, and results in a decrease in premiums for the driver.
Medicare and No-Fault
Under federal law, Medicare is a payer of last resort- meaning that if there is another insurer that insurer will pay first. Consequently, for those with Medicare their car insurance will cover the personal injury costs first, and since Michigan’s No-Fault law requires drivers to purchase unlimited medical coverage the auto insurance company will have to cover all of the costs. The auto-insurance company does not get to share the personal injury costs like it does with private insurers. Due to the fact that auto-insurance companies must cover all of the car accident related injury costs of Medicare recipients, seniors with Medicare represent a greater liability for auto-insurance companies. This increased liability on auto-insurance companies causes the premium rates paid by seniors with Medicare to increase. This is why most seniors experience an increase in auto-premium rates when they switch from private health insurance to Medicare.
House Bill 4959 and Supporters
House Bill 4959 was introduced to address the increased premium rates for seniors with Medicare. The Bill would allow seniors with Medicare the ability to opt-out of the provision of the No-Fault Law requiring individuals to purchase unlimited, lifetime medical coverage through their auto-insurance. The Bill would make purchasing unlimited medical coverage optional for Medicare recipients age 65 or older. For seniors with Medicare who choose to opt-out, the benefit would be a very likely decrease in their auto-insurance premiums. Supporters of the Bill argue that this system would be more fair to senior drivers, and would put money otherwise spent on auto-insurance premiums back into their pockets.
Opposition and Concerns Opponents of House Bill 4959 have concerns. They point out that seniors who are seriously injured in an auto-accident and have opted-out of purchasing unlimited medical coverage may find themselves unable to pay for the care they need. Medicare may not cover all of the healthcare an auto-accident victim may require, such as skilled nursing facility costs, rehabilitation, and certain prescriptions. Some opponents argue that the legislation will give seniors the false impression that all of their personal injury costs will be covered by Medicare, when they may not be, and for a nominal reduction in premiums.
Additionally, opponents argue that the shift from auto-insurance companies covering the personal injury costs for seniors with Medicare as is now, to a system where Medicare will provide coverage will further increase the burden on an already strained Medicare system, and onto Michigan taxpayers. They argue that taxpayers will pick up the tab for the personal injury costs that Medicare will not cover, and that the severely injured cannot pay for.
As of the time of publication, HB 4959 currently sits in the House Insurance Committee. No hearing has been scheduled.
Please advise the sponsors et al that auto insurers could offer an auto related medical expense “Medigap” provision (benefit) if the “opt out” legislation were to pass. Thus a concerned insured would be covered for those gaps in Medicare if they purchased that option.