Aaa Scheme To Short-change Crash Victims

ELECTION EDITORIAL

This past year, the legislature debated various proposals to reduce medical benefits paid by auto insurers for catastrophic injuries. In May, the state senate considered Senate Bill 692, which would have gutted Michigan's Auto No-Fault Law by capping medical benefits for a person injured in an auto accident at $250,000. It would have also imposed reimbursement fee schedules and limited a consumer's right to sue.

Then AAA of Michigan gathered over 600,000 signatures to place its purported insurance rate-cutting proposal ("Lower Rates Now") on the November ballot. The proposal would change Michigan's Auto No-Fault Law by capping medical benefits at $250,000. Presently, we have unlimited lifetime benefits.

This issue is of concern to all citizens, not just people with disabilities, because severe injury due to an auto accident can happen to anyone. Most catastrophic injuries easily exhaust $250,000 in medical costs, leaving no funds available for rehabilitation. According to Gaylord Walker, Executive Director of the Michigan Head Injury Alliance, "For a person with a severe head injury, the cost of rehabilitation, including long-term care, is in the area of $4 million. With the $250,000 cap, many injured people will be sentenced to a life without hope of returning to the community as independent, productive citizens. "

Walker also pointed out that the state Medicaid system presently can't afford or adequately provide coverage for care and rehabilitation of the catastrophically injured. Cost would shift from insurers to taxpayers. Since many accident survivors' medical needs would exceed their insurance benefits, they would likely seek recourse from Medicaid. "Essentially, you're talking about transferring a responsibility that is the insurance company's, where it belongs, to a state social services delivery system that right now, because of financial reasons, cannot take care of what it's got," said Walker.

People aged 17-24 are most at risk to acquire head injuries. However, these young people are least likely to be able to afford additional catastrophic medical insurance coverage.

Michigan's No-Fault Law, passed in 1973, is described by many experts as the finest in the country. In addition, our premiums are $8 under the national average.

Why change something that has worked so well?

The answer seems to lie in greed- the profits AAA stands to gain from the proposed changes.

What many consumers don't realize about AAA's proposed rate rollback is that after the flrst year, insurance companies would be able to once again raise rates 20%, 30%, or even 40%. The consumer would then have limited coverage and higher premiums.

Rep. Gregory Pinoniak (D-Taylor) analyzed how much AAA would profit if their proposal was approved. He concluded that AAA would receive $16.9 million windfall in profits in the flrst year alone.

• AAA focuses primarily on health care, auto theft and legal costs to justify high insurance premiums, when, in reality,
• health care represents less than 1 5% of premiums
• auto theft represents about 12% of the premium
• insurance company profits and administrative costs make up about 35% of a consumer's insurance premium
• auto insurance constitutes about 60% of insurance premiums.

Some people believe that AAA's overhead and administrative costs could be reduced/contained to lower auto insurance rates instead of reducing consumers' medical benefits.

"The insurance industry has repeatedly insisted that any reductions in rates would have to be accomplished by a corresponding sacrifice of ratepayers' benefits. Numerous studies, however, have indicated that rates can, in fact, be significantly reduced in other areas. Anumberof provisions have been proposed to accomplish such savings without cuts in benefits," states Sen. Lana Pollack (D-Ann Arbor). Consumers should strongly oppose any legislation which would:

• reduce or limit medical benefits, impose fee schedules,
• make Personal Injury Protection (PIP) coverage optional.

Gaylord Walker is organizing a coalition of advocacy organizations to oppose AAA's proposed changes to the state's auto Insurance laws. For more Information, contact him at (313) 229-5880. This articie was adapted from the Fall, 1992 "Independence Issues," the newsletter of the Ann Arbor Center for Independent Living (CIL). To receive "Independence Issues," contact the CIL at 2568 Packard Rd., Ann Arbor, MI 48108; (313) 971-O277, (313) 971-0310 (TDD).