Bad “Credit Score” Means Michigan Auto Insurance Companies Pay More for Insured’s Medical Services

One of the many issues being debated in regards to potential reform of Michigan’s no-fault insurance laws is the claim by Michigan auto insurance companies that they are forced to pay more for the same medical services than health insurance companies, like Blue Cross, and Medicare. Michigan auto insurance companies believe they should be paying the same amount.

In our opinion, the issue was addressed succinctly by Oakland County Executive L. Brooks Patterson in an open letter regarding whether reform of the no-fault law is needed. In the letter, Mr. Patterson makes the point that auto insurance companies essentially have a bad “credit score” when it comes to paying their bills whereas Blue Cross, other health insurance companies and Medicare have excellent credit scores.

Because Michigan auto insurance companies don’t have a good reputation for paying their medical bills, medical services providers charge them more for services than they charge health insurance companies and Medicare. It’s akin to the fact that banks charge higher interest rates for loans to borrowers with poor credit scores than they do for loans to borrowers with great credit scores. People – and insurance companies – with poor credit scores represent higher risk and therefore banks – or medical services providers – charge them more to offset that risk and the additional costs of collecting on the loan or bill.

Why Do Michigan Auto Insurance Companies Have Bad Credit Scores?

As described in Mr. Patterson’s letter, the principal reason for Michigan auto insurance companies’ poor credit scores with respect to paying for medical services is that they try to avoid paying their bills. Auto insurance companies in Michigan routinely practice the three D’s: Delay, Deny and Defend when dealing with claims. First they delay responding to or processing claims hoping the insured won’t bother to contact them, and, if the insured does check into the claim progress, blame the delay on some formality that the insured allegedly didn’t follow correctly. Then they deny that the insured is injured or deny their responsibility for the bills related to the injury. Finally, when the insured or the medical services providers file a lawsuit to force the insurance company to action, the insurance company defends themselves aggressively. The bottom line is that when they send a bill to an auto insurance company, medical services providers never know whether they’ll get paid for their services or how long it will be until they’re paid or what additional collection costs will be involved.

Why do Michigan auto insurance companies do this? Because there’s no incentive to do otherwise, and since they often end up not paying the bill or paying less than the total cost of services, it makes sense for them to do so. Additionally, in Michigan there is no bad faith law to hold them accountable. State law does not permit judges and juries to award punitive damages to an accident victim when an auto insurance company acts with extreme disregard to a claim — even when that disregard leads to further harm to the victim. If Michigan’s no-fault laws need reform, it is in regard to this. Michigan needs bad faith laws that hold Michigan auto insurance companies accountable and encourage them to deal with victims’ claims honestly and prudently.

There are a couple of other factors that also contribute to the higher cost of medical services for auto insurance companies. These include:

1. Auto-insurers represent a smaller portion of business for the medical industry than health insurance and Medicare — While this is out of the control of auto insurers and something we should be glad for, it is a fact of business; the cost of goods and services is less when purchased in bulk.
2. Auto-insurers don’t provide pre-approval for medical services — The pre-approval process keeps medical services providers from providing services that the insurance company won’t pay for and allows the provider and insurer to discuss need for a particular treatment or services so they are in agreement before services are rendered. Pre-approval is not possible in cases involving emergency treatment for accident victims, but would be possible for ongoing care and treatment of injuries and could reduce the cost of services for both the provider and the auto insurance company paying for the services. But this would mean the insurance company would have to agree to pay the bill, which they don’t want to do.
3. Auto-insurers don’t allow electronic billing — Electronic billing, which Blue Cross, Medicare and other health insurance companies allow, speeds up billing and payment. But, again, since auto insurance companies don’t want to pay the bill in the first place, they don’t allow medical services providers to bill them electronically.

Essentially, Michigan auto insurance companies have themselves to blame for having to pay higher costs for medical services. They could easily reduce those costs and, ultimately, be able to reduce the cost of insurance premiums for drivers if they would just act responsibly and build a better credit score with the medical industry. Residents of Michigan should not be forced to suffer those costs, since they are not to blame, nor should medical service providers be forced to take a hit because of auto insurance company practices.

Get Help Getting Your Insurance Company to Pay the Bills They’re Responsible For

If you or a loved one has medical bills related to car accident injuries and your insurance company has been delaying or denying the claim, an experienced auto accident attorney can help you get the insurance benefits you’re entitled to.

In Michigan, the personal injury attorneys at Sachs Waldman, P.C. have extensive experience and success in obtaining insurance benefits and awards for damages related no-fault auto accidents in Michigan. Call our Detroit personal injury attorneys’ office at 1-800-638-6722 to schedule a free consultation.