Capitol News
November 5, 2017
Auto no-fault insurance reform grabbed most of the attention in Lansing’s Capitol this month with a few exceptions. Mandatory auto insurance coverage is a significant expense in Michigan for our members.
AUTO NO-FAULT INSURANCE REFORM
The Proposal — HB 5013, the auto insurance no-fault reform legislation backed by Speaker of the House Tom Leonard (R-DeWitt Township) and Detroit Mayor Mike Duggan, would establish a three-tier system of Personal Injury Protection coverage: $250,000, $500,000 and the current unlimited coverage.
Seniors 62 and older would have been able to opt-out of PIP entirely if they had Medicare and/or employer-provided retiree health insurance. The insurer would be required to offer a reduced insurance premium rate for a person who opted out so that other parties affected by an auto accident would be covered up to $250,000.
The bill would have required an average of 40, 20, and 10 percent premium savings and would establish a reimbursement rate to medical providers of 160 percent of the Medicare rate. The bill would have sunset after five years unless the legislature extended it.
SERA’s Position — Over 18 percent of Michigan drivers are 65 or better. Over 14 percent of the claimants serviced by the Michigan Catastrophic Claims Association are individuals who were 65 years or older at the time of their accident. Michigan SERA opposed the original bill and sent a letter to all House members pointing out the flaws in the senior opt-out provision as we understood it:
- The provision in the bill allowing those 62 and over with retiree health insurance to completely opt out of Personal Injury Protection premiums (and therefore all PIP benefits) is over simplistic, misleading and would leave those choosing it vulnerable to inadequate coverage for serious or catastrophic auto injuries. It would subject them to significant cost sharing and potential medical bankruptcy. More research, information, and analysis is needed on what Medicare offers compared to the proposed $250,000, $500,000 and unlimited policies proposed in the bill.
- PIP covers much more than emergent medical expenses such as long term care and aftercare special therapies, supports and services. Medicare and Medicare supplement policies or their equivalent have no or limited LTC and aftercare special therapy, supports and services coverage. They often have significant cost sharing for the limited coverage they provide.
- Medicare and Medicare supplement policies or their equivalent are not always legal entitlements guaranteed for life by the federal government or the lucky retiree with employer-provided supplemental retiree health insurance. Employers such as the State of Michigan have ended retiree health care insurance. Additionally, our current U.S. Congress is intent on passing budget measures to voucherize Medicare and cut its budget by $500 billion over 10 years. It also intends to significantly cut Medicaid, the main financing for nursing home or equivalent care for indigent seniors who have exhausted their own financial resources.
Michigan SERA also urged House members to pass a provision to coordinate health care insurance benefits so that we are not paying twice for the same coverage. That is, primary coverage from Medicare and/or employer-provided retiree health insurance if the retiree has it, then PIP as secondary for remaining additional coverage with, of course, significant PIP premium rate reduction.
We also urged coordinated benefits if the retiree has Long Term Care insurance with a commensurate PIP premium rate reduction. Quite a few seniors have LTC policies as they anticipate potential costs associated with declining health and the need for assistance with daily living.
Finally, we thanked House members for working toward auto insurance reform and urged them to work together to address the concerns we have raised about senior auto-insurance coverage and rates.
Defeat — In a dramatic late night session on November 2 after days of negotiations, amendments, and substitute bills, the Michigan House defeated the seventh substitute version of the bill 45 – 63, with 41 Republicans and 4 Democrats voting for it while 41 Democrats and 22 Republicans voted against it.
Alternative Proposal — Meanwhile a competing bi-partisan 15-bill package backed by the Coalition Protecting Auto No-Fault sits in the House Insurance Committee. The bills are HB 4049, 4672, 5101, 5102, 5103, 5104, 5105, 5106, 5107, 5108, 5109, 5110, 5111, 5115, and 5124. The package provides for coordination of an insured’s current medical benefits and gives a premium rate reduction for those 65 and older with other health care coverage.
The proposals would put in place a medical fee rate of 185 percent of the worker's compensation schedule (which critics say is too high), create a fraud authority, establish some cost controls on attendant care, stop non-driving related factors such as credit score, gender and job title from unfairly impacting auto insurance rates, and make the Michigan Catastrophic Claims Association transparent among other features. See www.fairandaffordable.com for a description of the bills and a comparison with HB 5013.
Future — Michigan has the highest auto insurance premium rates in the nation, largely because we are the only state with unlimited lifetime medical and aftercare coverage for injuries caused by auto crashes. HB 5013 was yet another opportunity for all sides to air their viewpoints, establish priorities, and exchange their financial estimates of the impact of the various proposals.
The practice of territorial rating makes premiums so high in some urban areas that many people drive without insurance. Some want premium decreases, no matter what the reduction in benefits or cost shift to the state portion of Medicaid estimated at $150 million a year in 10 years. The medical providers want profitable reimbursement rates, somewhat to make up for uncompensated care and low reimbursement rates from Medicaid. Others want choices and piecemeal or moderate reform.
SERA’s proposal for coordination of health and long-term care insurance with auto insurance coverage would lower our auto insurance PIP premium, but cause a cost shift to Medicare and the state’s retiree health insurance programs. How to wring out of the auto no-fault system excessive costs is no easy task.
OTHER LEGISLATIVE ISSUES
Homes For The Aged Revisions — Passed almost unanimously in both chambers and headed for the Governor’s desk is SB 378 that revises the definition of “home for the aged” to lower the age of persons receiving care in an Home for the Aged from 60 to 55, places a cap on the number of employee background checks which the Department of Licensing and Regulatory Affairs would have to finance, and clarifies which facilities would need to be licensed as an HFA. The bill would also create certain licensure exemptions for HFA facilities and a less stringent licensing process for currently operating unlicensed facilities.
Apparently, there has been some confusion regarding when, or if, a facility that provides care to the elderly must be licensed as a home for the aged. HRAs provide supervised care for 21 or more unrelated individuals aged 60 years and older (or 20 or fewer if operated in conjunction with, but as a distinct part of, a nursing home). The confusion stems from changes in interpretation of the HFA statute when regulation of the facilities was transferred from the Department of Health and Human Services to LARA. Further, there have been facilities who wish to be licensed as an HFA but, due to how the building is constructed, fail to meet certain requirements. Meanwhile, other facilities would like to be exempted from licensure requirements. In addition, capping the number of background checks LARA would be responsible for could reduce costs to the department and ease a financial burden on its budget.
Prescription Limits — Also headed to the Governor’s desk is SB 360 to allow pharmacists to use their professional judgment in deciding whether to fill additional refills for a 30-day prescription at the time they are filling the initial prescription. The bill would take effect 90 days after enactment.
LTC Study — HB 4674 sponsored by Rep. Jon Hoadley (D-Kalamazoo) and Rep. Beth Griffin (R-Mattawan) would require the Michigan Department of Health and Human Services to contract for an independent feasibility study and actuarial model of public, private, and public-private hybrid options to help individuals prepare for, access, and afford long-term services and supports. A hearing on the bill was held October 25 but no vote was taken.
According to the House Fiscal Agency, the study would include a model for all of the following:
- An affordable annual long-term care benefit available to all who meet the minimum eligibility of needing assistance with two activities of daily living, with the maximum benefit to be determined by actuarial analysis.
- A public-private reinsurance or risk-sharing model, with the purpose of providing a stable and ongoing source of reimbursement to insurers for a portion of their catastrophic long-term care services and supports losses in order to provide additional insurance capacity for the state. The entity would operate as a public-private partnership supporting the private sector’s role as the primary risk bearer.
- A long-term care benefit paid for and open to those that are not currently eligible for the state Medicaid program.
The study would also include a report of its findings, which would include all of the following:
- An analysis of public and private long-term care programs that exist in the state, the participation rates for those programs, and any clear gaps that exist, including, but not limited to, gaps in coverage, affordability, and participation.
- The expected costs and benefits for participants in a new long-term care benefit program, when accounting for a living wage rate for home care workers and compliance with the Fair Labor Standards Act of 1938 and related federal regulations and state labor laws.
- The total anticipated number of participants.
- The impact on the current workforce.
- A recruitment and retention plan to meet the anticipated shortage in the workforce due to the increasing aging population.
- The impact of current services, access to a paid workforce, and affordability of care on family caregivers, including the impact that providing care has on a family caregiver and other considerations.
- The projected savings to the Michigan Medicaid program, if any.
- Legal and financial risks to Michigan.
The bill would require MDHHS to provide oversight and direction for the analysis of public and private long-term care programs and to convene interested stakeholders, including consumer and worker representatives, to provide ongoing input on the feasibility study design. MDHHS would have to hold at least one meeting to obtain this input before initiating the study, one during the study’s implementation, and one after the study is completed.
Finally, the bill would require that the feasibility study and its included actuarial analysis be completed and submitted to MDHHS no later than nine months after the study’s start date. At that time, MDHHS would have to hold a public hearing to present its findings. Additionally, MDHHS would have to submit a report to the legislature no later than 60 days after the completion of the feasibility study, which would include its director’s findings and recommendations based on the study and analysis.
The House Fiscal Agency analysis said the study could cost the state between $500,000 and $750,000. But Rep. Hoadley said it could potentially cost less, as Washington, a state similar to Michigan's size, recently did a similar study for $300,000.
Signed by the Governor — HB 4396 (now PA 149) to amend the Income Tax Act to extend to a person born after 1952 and retired as of January 1, 2013, an increased deduction for retirement or pension benefits from governmental employment that was not covered by Social Security. The new law would also allow a taxpayer to deduct from adjusted gross income pension benefits, as well as retirement benefits, received for service in the United States armed forces.
FEDERAL BUDGET AND TAX REFORM
In early October, the U.S. House passed a budget bill that would cut Medicare by $487 billion over the next decade, raise the Medicare eligibility age from 65 to 67 and begin transforming Medicare into a voucher program for new beneficiaries. Additionally, the proposed budget slashed Medicaid and other health programs by $1.5 trillion over 10 years. Medicaid helps pay for health care and long-term care services for 17 million poor elderly, children and adults with disabilities.
In early November, the U.S. House proposed a sweeping tax overhaul that would affect millions of older taxpayers by eliminating several popular tax deductions, rewriting the income tax brackets for individuals and cutting corporate taxes. The corporate tax rate would be cut from 35 percent to 20 percent. The measure would also collapse the 7 tax brackets to four (12, 25, and 35 percent, with the top rate of 39.6 percent unchanged) and increase the standard deduction from $5,350 to $12,000 for individuals and $12,000 to $24,000 for married couples.
But the plan would also eliminate the medical expense deduction, which would mean a tax increase for many older taxpayers with high medical costs. Affecting Michigan residents would be the limitation on the deduction for state and local income and sales taxes. Property owners would be limited to writing off up to $10,000 in state and local property taxes.
House Republicans decided against tinkering with 401(k) retirement plans after a public outcry and a Presidential Tweet about that possibility. Workers 50 and older would still be able to contribute up to $24,000 a year in pretax income under the proposed Tax Cuts and Jobs Act.
The House intends to send the tax plan to the Senate before Thanksgiving and to the president’s desk by year’s end.
BALLOT PROPOSAL UPDATE
Redistricing — The ballot proposal to end gerrymandering in Michigan which has been endorsed by the SERA Coordinating Council Executive Board reports that it has collected over 300,000 voter signatures of the 400,000 it is hoping to gather. Michigan SERA Executive Board encourages its chapters and members to get involved by inviting a speaker from the ballot committee Voters Not Politicians to chapter or other meetings. Members can volunteer to help collect signatures this fall by signing up at the Web site. Information is available at www.votersnotpoliticians.com.
SERA Recent News — If you are a SERA member, you are eligible to receive SERA Recent News, a periodic e-mail about breaking news and links to media stories of interest to state employees and retirees. Write to michigansera@comcast.net, giving your name, email address, and chapter name.
Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail michigansera@comcast.net.
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