Home Insurance News Uncertainty looms for hospitals under new auto insurance law – Crain's Detroit Business

Uncertainty looms for hospitals under new auto insurance law – Crain's Detroit Business

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MACKINAC ISLAND — A Beaumont Health executive says the suburban Detroit hospital system stands to lose “multiple tens of millions of dollars” in annual revenue through the fee schedule imposed by the auto insurance reform law Gov. Gretchen Whitmer signed at the Mackinac Policy Conference last week.

“We have early estimates and our estimates are concerning for us — in the multiple tens of millions of dollars of loss in revenue for Beaumont Health,” said Carolyn Wilson, chief operating officer of Southfield-based Beaumont Health. “It will be very significant for us and other health systems in the state of Michigan.”

Amid the celebration of a monumental legislative achievement by Whitmer and legislative leaders on both sides of the aisle at last week’s annual Detroit Regional Chamber confab, the multibillion-dollar medical industry that’s been built up over four decades around the limitless medical benefits of auto no-fault is bracing for an upheaval 13 months from now, when the new law takes effect.

Beaumont Health will “likely be forced to” close or downgrade some of its emergency trauma centers at its eight metro Detroit hospitals, Wilson said.

“Frankly, for a lot of us in health care, we’re going to have to look at how many sites or locations can (remain) trauma (centers),” Wilson said.

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.

“It’s a vast improvement on the original bills that came out of the House and the Senate,” Whitmer said Friday. “I worked with the hospitals to make sure in our rural and urban centers where these facilities are, that we’re mindful of keeping them open.”

The law signed Thursday by Whitmer on the porch of the Grand Hotel will allow motorists to begin opting out of unlimited personal injury protection medical coverage in their auto insurance plans on July 1, 2020. Motorists will have an a la carte menu of options that require insurers to reduce premiums for eight years: $500,000 of PIP, $250,000, an unlimited plan or $50,000 for certain Medicaid recipients.

Motorists, including Medicare-eligible seniors, will be able to completely opt out of PIP coverage only if they have a qualified health care plan that covers auto injuries.

And that may pose some new challenges for employers and their health care benefits managers as exposure to medical bills from auto accidents shifts to their health insurance plans. Most federally regulated self-funded plans automatically exclude auto injuries, posing even greater challenges for motorists who may want to shed PIP coverage.

The one-year implementation timeline for the new law was added to the bill to give businesses time to make changes to their health care plans, said House Minority Leader Chris Greig, D-Farmington Hills.

“There’s going to have to be a complete review of health care plans that businesses offer as well … and see are we shifting costs or are we actually just having more options?” Greig said.

One potential issue is employer health care plans run on a calendar year with open enrollment in the fall. Auto insurance plans run on six-month cycles that start when the motorist purchases the plan, which could complicate implementation of the new law and when motorists start seeing mandated savings to the PIP portion of the auto insurance premiums, Greig said.

“Here’s just a lot of things that we really have to spend the time and work with both business and consumers to make sure we’re rolling this out appropriately,” she said.

Quicken Loans Inc. and its family of companies have a self-funded health insurance plan for its 17,000 employees that doesn’t cover auto injuries.

Jared Fleisher, vice president of government affairs for Quicken Loans, said the Detroit mortgage company would be adding auto injury coverage to its health care plan to adapt to the auto insurance reform law the company advocate for in the Legislature.

“As soon as a I take my horse and buggy back down to the ferry and get to Detroit, our first meeting is with our benefits people,” Fleisher said. “We plan to be at the head of the curve in making that change.”

Quicken Loans and affiliated companies owned by businessman Dan Gilbert have not historically covered auto injuries because employees were required to purchase unlimited medical PIP coverage under the 1973 no-fault insurance law, Fleisher said.

“Anything that we did through our company health plan we believed would have had certain additional costs for our team members without certain cost savings to offset them,” Fleisher said. “And now that we are sure that by Quicken Loans covering auto-related accidents, folks can save hundreds and in many cases thousands of dollars, you better believe we’ll be at the forefront of adding that to our plan.”

Fleisher downplayed the potential cost shift to employers, calling it “indiscernible.”

In its work on auto insurance reform, Quicken Loans employees studied the cost of auto injuries for employers in other states that rely on health insurance plans to cover auto injuries instead of the separate and unique insurance Michigan has long required motorists to purchase.

“We believe — having studied the issue extensively — that the cost shift onto employers will be marginal,” Fleisher said.

While the benefits managers of employers study the implications of auto insurance reform, the businesses that have long charged no-fault carriers their highest rates are preparing for a change in their business model.

Hospitals are uncertain about whether private health insurance plans will reimburse for the expenses they incur treating patients critically injured in a vehicle or motorcycle accident who opted out of personal injury protection coverage on their auto insurance.

“The more pertinent part of that question relates to what will happen to the bill on the back end,” said Wilson, the COO of Beaumont Health. “… We are worried that Michiganders will end up with large copays, large unpaid bills by their insurance companies that could impact their financial situation in the long run.”

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