Cost of car insurance, care for the catastrophically injured at stake as Supreme Court hears no-fault case

The Michigan Supreme Court heard oral arguments today in a case that will determine the kind of medical care received by nearly 15,000 people who were catastrophically injured before the state’s No Fault Insurance Act was amended in 2019.

It will also determine whether Michigan drivers will get the kind of savings on their auto insurance promised by the architects of those reforms.

The case, originally brought by two car crash victims against USAA Casualty Insurance and Citizens Insurance Co., hinges on whether newly imposed limits on payments for medical treatment apply to those whose injuries occurred before the new law was passed.

The Michigan Court of Appeals ruled in August that they did not, saying nothing in the law signaled the legislature’s clear intent that it applied retroactively and that, even if that had been what lawmakers wanted, such an action would violate the Contracts Clause of the Michigan Constitution.

That decision allowed those who had suffered catastrophic injuries to resume receiving the sort of care they’d gotten prior to the new fee schedules going into effect in July of 2021, particularly care from specialized rehabilitation centers, which had seen reimbursement rates slashed by 45 percent .

It is also derived in the Michigan Catastrophic Claims Association Increasing its annual assessment on all Michigan drivers by $48, saying the additional money was needed to cover an estimated $3.7 billion deficit the decision created.

Lori McAllister, the attorney representing the insurance companies, opened her argument by pointing to the costs.

“We all know auto insurance in Michigan is anything but affordable,” she said. “We get the highest rates in the country. People in urban areas struggle to buy insurance at all at affordable rates.”

The unlimited medical care that was part of the state’s previous law was a significant part of those costs, she said, and created “a perverse incentive for predatory pricing by providers.

“They can charge most of their patients one price, but yet charge a multiple of that price when they were dealing with their no-fault patients,” she said.

The rate caps set in the overhaul of the no-fault law “are substantially more generous than we see under any other applicable system,” he said. “They’re more favorable than Medicare, Medicaid, workers comp and even private insurance.”

The first argument at the center of her case was that the rights in question were created by the statue, and are thus open to change by the legislature, and not by insurance contracts.

“These are always statutory rights,” she said under questioning by Justice Elizabeth Welch, “and the fact that they get mandatory put into contracts because that’s what the law requires does not convert them into contract rights that are recoverable and protected under the Contract Clause .”

The second was that a requirement to apply to pass on any savings was realized by provisions on the revamped law to “motor vehicle accident that occurred before July 2, 2021″ was a clear indication that lawmakers intended for it to apply retroactively.

But Mark Granzotto, the attorney representing Ellen Andary, who was a passenger in a car struck head-on by a drunk driver in 2014, and Philip Krueger, who was injured in a pickup truck crash in 1990, argued that the legislature back and forth indicates that the legislature never clearly intended for the revised law to apply retroactively.

A version of the legislation approved by the Senate specified that the new cost structures would apply “regardless of when the accidental bodily injury occurred,” he said. That language never made it into the final bill.

The passage about applying cost savings from accidents that occurred before July 2, 2021, he argued, referred to the one-year window between the time the law took effect on July 1, 2020, and the time the new fee schedules took effect on July 1, 2021.

Lawmakers “know how to make their intent to make something retroactive” known, he said, and know they have to do it clearly. In this case, they didn’t.

Justice David Viviano pressed Granzotto on one of the arguments put forward by insurance companies, that changing the amount of medical reimbursement didn’t amount to apply the law retroactively because the new fee schedule only applied to future treatments.

The statute says “the benefits payable for accidental bodily injury accrued not when the injury occurs but as the allowable expense, work loss or survivors’ loss is incurred,” he said. “How do you how do you get around that?”

“The obligation to pay…” Granzotto revised, “vests much earlier.”

A decision from the court is expected to come before the end of the court’s term on July 31.

The cost controls included in the revamped law are generally limited reimbursement twice what Medicare pays. For services without a Medicare billing code, a category that includes specialized rehabilitation providers and in-home attendant care, reimbursement was set at 45 percent less than they were in 2019.

The cuts caused some rehab facilities to close and many to lay off staff.

A 2022 survey of brain injury service providers commissioned by the Brain Injury Association of Michigan, for example, found that they had discharged nearly 7,000 patients with auto insurance funding, about 42 percent of the total, and eliminated more than 4,000 jobs.

The revamped law also limited the amount of in-home attendant care that can be provided to a patient’s friends and family at 56 hours.

After the Court of Appeals decision, insurance companies resumed paying for those and other services at pre-2021 rates and many have reimbursed patients and providers for the difference between the new fees and the old.

If the Supreme Court reverses the Court of Appeals decision, those would be recast as overpayments and it’s likely that at least some insurance companies will seek to get that money back, something the Michigan Catastrophic Claims Association warned about in a filing in the case.

“Such reimbursement will be difficult, if not impossible, for carriers to recover from providers if the Court reverses the Andary decision in whole or part,” the association said, “leaving the MCCA in a deficit position that will be funded by the insurance- buying public.”