Mich. No-Fault Insurers Have Right, Obligation to Review Medical Bills

September 9, 2004

A Michigan court of appeals was reportedly correct in its determination that no-fault insurers have the right to review medical bills, and to pay lesser amounts if they deem any procedures to be unreasonable or unnecessary. The Property Casualty Insurers Association of America (PCI) on Thursday filed an amicus brief with the Michigan Supreme Court requesting that they uphold the appellate court’s position.

“If the Supreme Court reverses this decision, as plaintiffs have requested, medical providers will truly have carte blanche to charge whatever fees they want,” Robert Hurns, legislative database manager and counsel for PCI, said. “Under the current Michigan No-Fault Act, no-fault insurers have not only the right but the obligation to review medical bills for fairness and necessity. If this were reversed, the negative impact on Michigan insurers and consumers would be severe.”

The original case involved the Advocacy Organization for Patients & Providers, which filed suit against Michigan-based Auto Club Insurance Association, claiming that they could charge whatever fee they deem appropriate as long as they charge each of their uninsured patients the same fee.

After the appeals court ruled in favor of the insurer, plaintiffs argued that the methods insurers use to evaluate bills are improper, focusing solely on the so-called “80th percentile test,” which uses a computer database and a percentage-based figure to evaluate medical charges.

Although Michigan courts have held this type of bill review was a lawful way to determine reasonableness, it is not the only method insurers use, Hurns noted. “Insurer claim adjusters still use their independent judgment in evaluating claims,” he said. “The ‘percentile test’ and other bill review methods are merely tools to assist in that evaluation, and adjusters can, and often do, override the recommendation.”

However, this argument is a “red herring” in light of the fact that state law unequivocally mandates insurers to review medical bills, according to Hurns. “The specific intent of the law is to contain no-fault insurance premiums, and the law even states that insurers are required to police costs by conducting the very bill reviews to which the plaintiffs objected.”

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