No-fault's stealthy return

Senate bill would revive failed auto insurance system

Thursday, March 22, 2007

If you've been driving in Colorado for any length of time, you'll remember that the state's gold-plated "no-fault" auto insurance system was so badly broken that the legislature finally let it die in July 2003.

Since then, drivers have experienced lower average premiums and increased competition, reversing the soaring costs of no-fault's last years. Complaints are down, and even the percentage of uninsured drivers has fallen now that premiums are more affordable.

All good. Alas, the legislature might yet consider bringing back the same kind of expensive medical mandates that ultimately made no-fault unworkable in Colorado - and without any of its benefits.

Senate Bill 193, was scheduled for a hearing in the Senate Appropriations Committee on Friday, and would have required that auto insurers offer coverage for $50,000 in medical payments and rehabilitation.

The sponsor, Sen. Lois Tochtrop, D-Thornton, pulled it off the table late Wednesday, but vowed she would reintroduce it after fixing some technical issues and reducing the $50,000 requirement to some degree.

As it is, customers who want to buy this additional coverage can already choose to do so, and about 30 percent do. But typically they buy around $5,000 worth of coverage, enough to handle co-pays and other out-of-pocket expenses that aren't covered by their health insurance.

Coverage of many times that amount is necessary for virtually nobody, and because it will be expensive, it will probably be rejected by precisely the group most likely to need it, those without health insurance and with limited financial resources.

Let us remind legislators of what went wrong with "personal injury protection" under no-fault. First, it was a huge pot of money; $130,000 in coverage. And no-fault notwithstanding, once someone who was injured had medical bills of $2,500 or more - not a difficult threshold to meet these days - he could sue anyway for "pain and suffering."

Second, the kind of services auto insurers were required to pay for were far broader than under most health insurance plans. Companies had to pay for various kinds of alternative and complementary medicine, some of them of dubious medical value, and in some egregious cases for items such as fish tanks and hot tubs.

Yes, watching fish swim may be soothing; that's why tanks often burble away in doctors' offices. But your health insurance won't buy you a fish tank.

Third, auto insurers have less scope to manage costs than health insurers do.

One company executive reported spending $14,000 for one patient's night in an emergency room, while the amount charged to a health insurer would be $1,200.

Auto insurance was not designed to be a bill-paying operation. Its function is to protect car owners from liability in case of an accident, so they don't lose their homes, their retirement savings and everything else they have.

Only 12 states require some kind of medical-payments coverage, and the average amount required is less than $7,000.

Colorado doesn't need to go back to the era of lavish benefits and the onerous premiums it took to pay for them.