By Kristen M. Daum
POTTERVILLE — At 65 years old, Penny Ruff is enjoying the days of retirement
she has spent her life planning for, saving for, budgeting for.
The Potterville woman and her husband, Ken, have accounted for every penny and bill payment they might face each month with no room to spare.
So imagine Ruff’s shock and anger when she heard from her insurance agent last week that her rates will go up $750 a year — or more than $60 a month — starting in September.
All because she turned 65 in December, is now on Medicare and bought a used van about six months ago to replace an old car that broke down.
“I wouldn’t have purchased a vehicle if I knew I’d be punished,” Ruff said. “It’s enough to tip the budget.”
Her predicament stems from a little-publicized aspect of Michigan’s complicated no-fault auto insurance law — and state and federal officials can’t agree on who has the authority to change it.
State insurance officials said efforts underway in the state legislature to reform Michigan’s auto no-fault might make some difference in Ruff’s case, but wouldn’t wholly prevent increased premiums for seniors on Medicare.
It’s unclear how many drivers in Michigan have or will experience the same premium shock Ruff has after hitting retirement age, but according to the U.S. Census Bureau, about 1.3 million Michiganders — or 14 percent of the state’s population — are age 65 and older.
Michigan’s 1970s-era no-fault law requires drivers to purchase certain basic coverage and guarantees unlimited medical benefits in the event of an accident.
Under no-fault, a driver usually can get discounts to their coverage if they can “coordinate” benefits with their health insurance. Coordinating benefits means the health insurer would pay eligible claims first and the auto insurer only would be responsible for the rest.
But participants of Medicaid, Medicare or any supplementary plans through those federal programs aren’t afforded the same luxury for an unknown reason.
A consumer’s guide to auto insurance published by the Michigan Department of Insurance and Financial Services states that Medicare and Medicaid participants can’t coordinate their auto insurance benefits with a private health insurer, such as one available through a former employer or a spouse.
But officials at neither the state insurance department nor the federal Centers for Medicare & Medicaid Services could explain Friday why that is the case.
Under federal law, Medicaid and Medicare programs are insurers of last resort — meaning if a person had coverage under another insurance, that provider would pay out claims first.
In Ruff’s case, that means no-fault auto insurance will always pay her claims first in the event of an accident, increasing the risk and cost for her auto insurer.
That inability to coordinate with Medicare means Michigan drivers, like Ruff, have no option but to see their rates jump once they join the federal health care plan, said Caleb Buhs, spokesman for the Michigan Department of Insurance and Financial Services.
“If health insurance doesn’t cover auto-related injuries, then that’s more that the auto insurance would have to pay in the event of an accident,” Buhs said. “Therefore, your risk to them is more.”
Buhs said Ruff’s increased insurance rates also could have been affected by other factors — such as purchasing the new vehicle, financing that purchase or changing coverage — but it’s up to each auto insurance company to determine how rates are adjusted.
Ruff said she’s turned everywhere she can think of for help: the state insurance department, the Michigan Department of Civil Rights, the offices of Democratic U.S. Sens. Debbie Stabenow, D-Lansing, and Carl Levin, D-Detroit, Gov. Rick Snyder’s office, the office of Rep. Pete Lund, R-Shelby Township — who introduced the no-fault reform bill pending in the legislature — and the offices of her state representatives: Republican Sen. Rick Jones and Democratic Rep. Theresa Abed, both of Grand Ledge.
But with each phone call she made last week, Ruff said she was either re-routed to a different agency, told to talk to her local lawmakers or, when she did that, told that they’d take her situation under advisement.
“What can I do about it?” she asked. “The only reason we had the money to purchase the truck (for Ken) and the van is because we paid off our house last year. We thought, it’s time to have new vehicles that are going to last us the next 10 or 15 years, so now is the time to purchase a good vehicle.”
“Had a known this, I wouldn’t have done it,” Ruff said. Ken Ruff’s truck is covered under insurance in his name and because he’s not yet 65 and on Medicare, his rates haven’t changed, his wife said.
Ruff tried to file an age discrimination claim with the Michigan Department of Civil Rights, but the complaint was never processed because state law allows for Ruff’s insurance to be adjusted based on her Medicare participation, department spokeswoman Vicki Levengood said.
It seems the only possible solution for Penny Ruff would be legislative action, but elected officials disagree on who has the authority to do so: the state or the federal government.
“Medicare is a federal benefit,” said Jones, the state senator from Grand Ledge. “I can’t control federal Medicare that, by their regulations, refuses to be the first insurance. ... If the feds don’t allow it, I don’t think I could stop it.”
The Michigan insurance department agreed.
“This provision is the result of federal regulations and the state legislature does not have the authority to address it,” Buhs said.
However, spokespeople for both Stabenow’s U.S. Senate office and the Centers for Medicare & Medicaid Services did not know of any federal restriction Friday that would prevent Michigan drivers from coordinating Medicare with other health insurance to supplement their auto policies.
In general cases, Medicare does allow for coordination of benefits, they said.
Michigan lawmakers plan to resume debate this fall on controversial legislation to reform Michigan’s no-fault law, which also prohibits drivers from suing each other except in extreme cases.
$1 million cap
House Bill 4612 would remove drivers’ guarantee of unlimited lifetime medical benefits and replace it with a $1 million cap, which is still 20 times higher than the next closest state with a no-fault law, Buhs said.
As approved by a House committee in May, the bill doesn’t appear to change the restriction on coordination of benefits for Medicare participants, but having a cap on the medical benefits could ease the burden for people in Ruff’s situation, Buhs said.
“There’d still be more of a risk (to the insurer) for someone who doesn’t have coordinated care than for someone who does,” he said, but “the risk could be significantly lessened if there was a cap.”
Jones said he favors a cap but thinks $1 million might still be too high.
“It seems reasonable to me that there needs to be some sort of a cap and it shouldn’t be so far from other states,” Jones said.
Abed, the Democratic House member from Grand Ledge, did not return a message Thursday seeking comment.
The House and Senate resume regular session schedules today, but it’s unclear how swiftly the House could vote on the no-fault bill.
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A complicated mess: No-fault and Medicare
» Michigan requires drivers to purchase no-fault auto insurance, which provides certain basic coverage and guarantees unlimited medical benefits in the event of an accident. It also prohibits drivers from suing each other except in extreme cases.
» Michigan drivers can “coordinate” their private health insurance policies with their auto insurance as a way to keep their premiums down.
» However, the Michigan Department of Insurance and Financial Services says Medicare, Medicaid and Medicare supplement participants don’t have the option to “coordinate” with a secondary health insurer and receive the same discount.
» State and federal officials disagree on whether the state legislature or the U.S. Congress has the authority to change this restriction.