Michigan Supreme Court invalidates parts of auto insurance law

David Eggert is a senior reporter covering politics and policy for Crain’s Detroit Business. He joined Crain’s in 2022 after a combined 15 years at The Associated Press in Lansing and jobs at MLive, the Lansing State Journal and various other newspapers.

LANSING — Portions of an auto insurance overhaul that slashed reimbursements for ongoing care provided to people seriously injured in crashes cannot be applied to those who were hurt before the law was enacted in 2019, the Michigan Supreme Court ruled Monday.

The justices, in a 5-2 decision, invalidated retroactive application of two parts of the no-fault statute — a big victory for rehabilitation centers, the home care industry and some 15,000 patients with long-term needs. It is a loss for the insurance industry, which defended the law.

One provision at issue, starting in July 2021, capped reimbursements to 55% of what providers were charging for post-acute services not covered by Medicare in January 2019. The limits fell to 54% in 2022 and 52.5% this month. Another provision restricted family-provided attendant care to 56 hours a week.

Justice Elizabeth Welch, writing for the majority, said plaintiffs Ellen Andary and Phillip Krueger "are covered by policies under which premiums were paid with the expectation that uncapped lifetime benefits would be provided for all reasonable and necessary medical expenses. Their vested contractual right to continuation of those benefits at pre-amendment levels cannot be stripped away or diminished when the Legislature has failed to clearly state its intent to do so."

Welch's opinion was joined by Chief Justice Elizabeth Clement and Justices Richard Bernstein, Megan Cavanagh and Kyra Bolden. It affirmed in part and reversed in part the Michigan Court of Appeals.

Justices David Viviano and Brian Zahra dissented.

Viviano wrote that no vested rights were affected by the reforms. Applying caps to medical expenses and services stemming from older crashes is not a retroactive application, he said.

"The majority's decision today undermines the Legislature's efforts to address one of the most significant issues facing the state. The result is troubling, not just for what it means in this case but also for what it portends," he wrote. "The judiciary's primary role in our system of separated powers is to faithfully apply the laws written by the Legislature unless those laws violate the Constitution. If we cannot be trusted to do so, then the democratic process breaks down, as it has today. The majority has eschewed a fair and reasonable reading of the statutory text and instead makes loose use of vague and open-ended concepts such as vested rights."

The ruling effectively reinstates higher insurance payments for long-term residential and in-home continuous care and nursing as well as vocational rehabilitation, school/academic support, transportation, recreational therapy, case management, durable medical equipment, home modifications and community-based therapy. It does not affect claims for crashes occurring on or after June 11, 2019.

The decision could force legislators to revisit the law that was passed with bipartisan support in what was then a Republican-led Legislature and signed by Democratic Gov. Gretchen Whitmer.

The measure is credited with lowering insurance premiums — $400-per-vehicle refunds were issued in 2022, for example — but has come under criticism.

Opponents say people are not getting the level of care for which premiums were paid and the changes have financially devastated home care providers, hurting those injured both before and after the law's enactment. Supporters say the limits have curtailed costs after years of health providers being allowed to overcharge auto insurers for treatment.

Barry Cargill, president and CEO of the Michigan HomeCare & Hospice Association, said the courts are not the complete solution.

"The Michigan Legislature needs to fix the auto no-fault reform law for all catastrophic crash survivors," he said, calling for a reasonable reimbursement and fee schedule as well as regulatory changes to ensure home-care companies are receiving adequate payment. "Unfortunately Michiganders have suffered serious crash injuries since June 12, 2019, and will continue to get injured today and tomorrow. The legislative fix is not expensive and will not undo many of the good reforms that were included in the 2019 auto no-fault reforms."

Any driver who chooses to purchase unlimited personal injury protection will not get the medically necessary care they paid for because the reimbursement for care services is too low, Cargill said.

The insurance industry criticized the ruling, which it called a "huge setback" for drivers, businesses and the economy.

"You can't reasonably expect to save Michigan drivers money while obliterating a key cost control measure like the fee schedule," said Erin McDonough, executive director of the Insurance Alliance of Michigan. "What medical providers charge for services and prescribe for care, above and beyond what''s medically necessary, can be controlled and has proven to reduce the cost of auto insurance. While the court struck down the fee schedule for those injured prior to bipartisan reforms, fortunately, the decision preserves the fee schedule going forward after enactment and that will continue to provide relief to drivers saddled with some of the highest insurance costs in the nation."

In their decision, the justice unanimously rejected the plaintiffs' challenge to applying the changes to claims for motorists hurt since the law went into effect. They said Andary and Krueger lacked standing to sue on behalf of future patients who are not part of the case. The other plaintiff, the Eisenhower Center, a brain-injury rehabilitation facility based in Ann Arbor, saw its constitutional challenge dismissed.

The Court of Appeals had revived the center's claim and remanded the case for discovery. The Supreme Court, however, agreed with the Ingham County Circuit Court's decision to toss the center's challenge.

"No further factual development is necessary to conclude that the prospective application of the new fee schedule in MCL 500.3157(7) is reasonably and rationally related to a legitimate legislative purpose, regardless of the effectiveness or wisdom of the policy," Welch wrote.

Since the appeals court ruled in favor of crash survivors last August, insurers have no longer applied the lower payment rates. They also are supposed to consider reprocessing requests for past claims "as expeditiously as possible," according to October guidance from Department of Insurance and Financial Services Director Anita Fox.

The Michigan Catastrophic Claims Association, which assesses an annual per-vehicle fee to cover the claims of people seriously injured in crashes, cited the ruling while raising fees by between $36 and $48.

David Eggert is a senior reporter covering politics and policy for Crain’s Detroit Business. He joined Crain’s in 2022 after a combined 15 years at The Associated Press in Lansing and jobs at MLive, the Lansing State Journal and various other newspapers.