June 9, 2019
May saw continued movement of appropriation bills, conclusive activity on auto no-fault insurance reform, and the legislative and executive branch leadership decamping to Mackinac Island for the annual Detroit Chamber of Commerce Mackinac Policy Conference.
AUTO NO-FAULT INSURANCE PASSES
Following decades of efforts led by the auto insurance industry to end mandatory unlimited medical coverage for those catastrophically injured in auto accidents, a recent threat of a possible voter-initiated law ballot proposal to circumvent the Governor’s veto from billionaire Quicken Loans founder Dan Gilbert, and resistance from trial lawyers, health care providers and auto crash patients who have benefitted from the current system of lifetime unlimited care, lawmakers finally passed auto no-fault insurance reform. For 46 years Michigan had the only total care benefit, but also the highest auto insurance premiums in the country and Detroit had the highest premiums of any city in the U.S. The result was world-class care for the catastrophically injured but the highest national rate of uninsured motorists.
Quick Review — At 11 p.m. on Thursday, May 23, Republican legislative leadership and Michigan’s Democratic Governor announced an unspecified deal had been cut and that there would be a rare Friday session beginning at 8 a.m. to consider a substitute Senate Bill 1. This was the last session day before many lawmakers would be leaving for a week at the Mackinac Island conference. By 11:30 a.m. the bill itself made an appearance. By 5 p.m. Friday, the bill was passed in both chambers with bi-partisan support (94-15 in the House and 34-4 in the Senate) to make sweeping changes to the Insurance Code for Michigan’s auto no-fault insurance system. On May 30 while on the Island, Governor Whitmer performed a ceremonial signing of the bill.
Coverage Options — Senate Bill 1 would create five coverage level options for automobile Personal Injury Protection (PIP) issued or renewed after July 1, 2020 with promised PIP premium rate reductions until July 1, 2028:
The coverage level selected would apply to the insured, his or her spouse, and any relative living in the same household, as well as to any other person with a right to claim PIP benefits under the policies. If selecting less than unlimited coverage, insurers would have to offer an option for the consumer to buy a policy rider that would provide coverage for attendant care in excess of the applicable coverage limit.
House Republicans said drivers could see savings ranging from $120 to $1,200 based on an average premium of $2,400 per year with 50 percent of the premium being personal injury protection.
Premium Savings — The premium savings are largely due to the new law establishing dollar and lifetime limits and new provider reimbursement schedules for medical and other treatment (including products, services, accommodations, and rehabilitative occupational training). The new law contains a complex and variable fee schedule that would go into effect July 1, 2021, and start ranging from 200 percent to 240 percent of Medicare rates and then be reduced to 195 percent to 235 percent of Medicare in 2022, followed by an additional reduction to 190 percent to 230 percent of Medicare rates in 2023. Hospitals with Level 1 or 2 trauma centers would get the higher rate, and hospitals in Detroit, Flint and Saginaw would receive a reimbursement rate of 250 percent of Medicare rates. Beaumont Health announced that it will #8220;likely be forced to#8221; close or downgrade some of its emergency trauma centers at its eight metro Detroit hospitals because of the new fee schedule.
Attendant Care Rate — Reimbursement for attendant care rendered in an injured person’s home by his or her relative or housemate or a person with whom he or she had a social or business relationship would be limited to 56 hours per week. Currently 24/7 care reimbursement is permitted, a major cost of care for those with severe, long-term injuries such as spinal cord or brain injuries. Insurers could offer a more generous schedule for an increased premium.
Rating Factors — There are additional prohibitions in the new law on basing auto insurance rates on sex, marital status, ZIP code (but other territory rating would still be permissible), occupation, educational level (excluding group discounts), home ownership, or credit score (but use of information from credit reports would still be permissible).
Medicare Recipients Choosing No PIP Option — A Senate Fiscal Agency analysis of SB 1 says:
While Medicare-eligible individuals who completely opted out would be fully covered for hospital, pharmaceutical, and physician services, they would have limited coverage for long-term care (up to 100 days under certain circumstances) and attendant care, so those costs would be shifted to Medicaid for those Medicare recipients who were injured in accidents, required long term or attendant care, and spent down to Medicaid eligibility.
Although Medicare Part A covers most hospitalization costs, Medicare Part B only picks up 80 percent of some costs thereafter. Even with a Medicare supplemental policy or employer-provided retiree health insurance (such as defined benefit state employee retirees have to cover the other 20 percent), there are always out-of-pocket costs such as deductibles, co-pays, co-insurance, and miscellaneous expenses.
LTC Insurance — Private long-term care insurance, if purchased separately, could cover some of the costs for Long-Term Care Supports and Services for those with catastrophic auto accidents who require custodian care (loss of the ability to do the activities of daily living) after the initial Medicare-covered 100 days post-hospitalization in a rehab facility. LTC policies typically have waiting periods, dollar and/or time-period limits, whereas current auto no-fault PIP insurance has unlimited lifetime LTSS included with no waiting period or limits. By the time one is Medicare age, it is very expensive to buy a reasonably-priced LTC policy.
Fraud — The Attorney General and the Department of Insurance and Financial Services will have increased authority to go after the estimated $800 million in fraudulent no-fault claims each year.
SOM Costs — The State of Michigan will lose revenue from the insurance company premium tax by about $15 million to $20 million per year according to the Senate Fiscal Agency analysis. The state Medicaid program costs would increase to the extent that the bill would shift health care costs from private automobile insurers to Medicaid: $2.5 million in the first year that would steadily grow to approximately $72 million in annual state costs within 10 years.
Trailer Bills — By the week following passage, there were already trailer bills to correct technical errors in the hastily composed and passed bill.
SERA will continue to monitor developments on the new law. We have asked the Civil Service Commission Benefits Division for a dialogue on how our health care benefits and premiums might be affected by the new auto no-fault auto insurance law.
On May 24, the U.S. Supreme Court stayed the order of a Michigan federal district judge panel in a lawsuit brought by the Michigan League of Women Voters to re-draw new political boundaries for Michigan’s Congressional districts, State House and State Senate by August 1 based on the 2010 Census. The high court took the action because of its expected ruling in two redistricting cases argued before it this term — Rucho v. Common Cause from North Carolina and Lamone v. Benisek from Maryland. Those decisions will determine whether the Michigan district court order goes forward; the USSC decisions are expected this month.
BALLOT SIGNATURE REQUIREMENTS
PA 608 of 2018 passed during 2018 Lame Duck session made it more difficult to get a voter-initiated law, referendum, or Constitutional amendment on the ballot because it required no more than 15 percent of a ballot petition’s signatures from any single congressional district, required each petition to identify whether circulated by a volunteer or paid individual, required the 100-word summary on the petition and on the ballot be identical and invalidated a whole sheet of signatures if one signature was invalid, among other provisions.
New Secretary of State Jocelyn Benson asked Michigan Attorney General Dana Nessel for a formal opinion, which she issued on May 22. Her opinion struck down two main provisions of the law: limiting signatures gathered in a single congressional district to no more than 15 percent of the total signatures collected and requiring the signatures be collected by congressional district instead of the traditional method by county. Her reasoning was that the Michigan Constitution does not include a distribution component with respect to signatures. The law also disqualified any voter signatures collected before a paid circulator had filed an affidavit with the state. Nessel said this, too, is unconstitutional as it violates free speech rights guaranteed under the First Amendment to the U.S. Constitution. She ruled the other provisions were not unconstitutional.
The next day the Michigan League of Women Voters, Michiganders for Fair and Transparent Elections, and three individuals filed a lawsuit claiming the entire law was unconstitutional because it #8220;will impose formidable obstacles to the exercise of direct democracy.#8221; The lawsuit disagrees with the AG opinion on invalidation of whole petition sheets for circulator errors or omissions, calling the law’s new standard a violation of petitioners’ rights to free speech and association and right to petition under the Constitution.
On June 5 Republican legislative leaders filed two lawsuits against Secretary of State Benson, one in the Michigan Court of Claims and one in the Michigan Court of Appeals, for refusing to enforce the fair-representation and anti-fraud requirements in P.A. 608, which they claim is duly enacted and entirely constitutional. Meanwhile two ballot committees are in the process of getting their 100-word summaries approved and need to know what is expected.
HB 4275 which would require the state to offer annuity options for current state employees in the defined contribution 401(k) retirement savings plan had another hearing in the House Financial Services Committee on May 8. Governor Snyder vetoed a similar bill in December 2018, stating the State of Michigan Investment Board that he established by Executive Order last fall has the sole responsibility for determining these kind of offerings. The Michigan Department of Treasury, Bureau of Investments testified on April 17 in opposition to the bill as introduced for several reasons, among them the low returns compared to other investments, difficulty in evaluating and monitoring annuities, and irrevocability of them.
At the May 8 hearing, the Life Insurance Association of Michigan testified in support of the bill with a PowerPoint presentation concerning annuities. The Michigan Corrections Organization testified in support of the bill saying it might help with retention of current employees; the American Federation of State, County and Municipal Employees Council 25 testified that it was neutral on the bill; Michigan Public Employees – Service Employees International Union Local 517, submitted a card in support of the bill, but did not wish to speak.
Michigan SERA is neutral on the bill as introduced at this point. Upon retirement, a defined benefit state employee retiree may purchase an annuity. Any person can purchase an annuity at any time through a financial services organization qualified to sell them.
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