by Daniel J. Schulte, J.D.
MDA Legal Counsel
Published in the August 2004 issue of the Journal
Dear Dan Schulte: A long-time patient of mine was injured in an automobile accident. She needs extensive restorative dental work. She has never had dental insurance. Her automobile no-fault insurer is telling her that she must receive treatment from a dentist who participates with a certain PPO (I do not) if she wants these dental services to be covered in full. This no-fault auto insurer is also telling her that if she wants me to provide these services she will have to pay a $500 deductible, and some of the services may not be covered. Can a no-fault auto insurer do this?
Answer: Not anymore. It sounds as though your patient purchased a no-fault auto insurance policy containing an endorsement similar to that offered by Farmers Insurance Exchange and Mid-Century Insurance Company. Under these policies the insureds pay a reduced premium in consideration of their agreement to obtain medical treatment only from dentists and other physicians, hospitals, other health facilities, etc., in a designated PPO Network.
Dentists who wish to treat patients with automobile accident-related injuries who have coverage under these policies must agree to participate with the PPO and accept the PPO fee schedule rates as payment in full. The PPO agreement does not allow balance billing of the patient, and PPO fee schedule rates are most often less than what dentists would otherwise charge for their services. The Michigan Court of Appeals in an opinion published on June 1, 2004 (Michigan Chiropractic Council, et al. vs. Farmers Insurance Exchange, et al.) ruled that this arrangement violates Michigan’s No-Fault Act.
Over the past five years or so, no-fault automobile insurers have tried to decrease their obligation to pay medical benefits to their insureds injured in automobile accidents by introducing the sort of managed care type controls that you are describing and that were employed in the Michigan Chiropractic Council case.
The Court of Appeals has now for the first time set binding precedent that the no-fault automobile insurers’ efforts to introduce managed care type controls violate Michigan’s No-Fault Act. (As of the writing of this article, the period of time in which Farmers Insurance Exchange and Mid-Century Insurance Company has to appeal this decision to the Michigan Supreme Court has not expired. Such an appeal is likely. We will continue to monitor the developments in this case if an appeal is filed and report on any developments.)
In the Michigan Chiropractic Council case, the Court relied on both § 3107(1)(a) of the No-Fault Act, which requires insurers to pay all reasonable charges incurred in connection with their insureds’ care, recovery or rehabilitation, and § 3157, which allows dentists and other providers of medical care to charge a reasonable fee for their services that does not exceed the fee that would customarily be charged for their services in cases where there is no insurance coverage. The Court of Appeals held that the introduction of managed care-type controls cannot be reconciled with these statutory mandates absent legislative changes to the no-fault act permitting such managed care controls.
The fight to preserve automobile no-fault in Michigan as a pure fee-for-service system goes on in the Michigan Supreme Court. We are awaiting a decision from that Court in the Advocacy Organization for Patient and Providers vs. Auto Club Insurance Association, et al. case. In that case, the Supreme Court will decide whether a no-fault automobile insurer may impose what amounts to a fee schedule by agreeing only to pay a dentist’s or other health care provider’s fee for a service if the fee does not exceed 80 percent of the fees being charged by other providers rendering the same service. The imposition of this maximum fee schedule is being utilized by the 15 no-fault automobile insurers named as defendants in this case. We will report on the Michigan Supreme Court’s decision when it is rendered.