THE FEE CAP DOES NOT APPLY TO ALL ALLOWABLE EXPENSES

Rachel A. Bissett

What is an Allowable Expense?

As most of you reading this article know, Personal Protection Insurance (PIP) benefits consist of allowable expenses, replacement service and wage loss benefits. Allowable expenses are a somewhat amorphous category that most commonly include medical bills and attendant care benefits. However, allowable expenses also include things such as housing accommodations, vehicle accommodations, case management services, guardian and conservator services, and durable medical equipment, among other things.

With No-Fault Reform and the new fee cap under MCL 500.3157, which is often incorrectly referred to as a fee schedule, questions have arisen regarding the application of the fee cap to non-traditional allowable expenses like housing accommodations and the like. The Department of Insurance and Financial Service (“DIFS”) recently issued a bulletin shedding light on this issue and giving direction to insurance companies on the fee cap’s application to what this author defines as non-traditional allowable expenses.

What Is MCL 500.3157?

While MCL 500.3157 was actually effective on June 11, 2019, many of its provisions were explicitly applicable to care and treatment rendered after July 1, 2021, including what many in the legal community have referred to as the fee schedule. However, MCL 500.3157 is more accurately described as a fee cap because it tells an insurer the maximum amount a provider can be paid for its services. Arguably, an insurer can pay less than the cap, if that amount is reasonable.

To determine how to apply the MCL 500.3157 fee cap, an insurer must first determine if there is an applicable Medicare rate. If there is, then the provider will receive at most 200% of the Medicare rate. This maximum percentage decreases to 195% in 2022 and to 190% in 2023. If there is no Medicare rate then an insurer must look at a provider’s charge master, and if they do not have a charge master, then they must look at the provider’s average charge on January 1, 2019 for that service. The insurer will then pay a maximum of 55% of that amount (this percentage decreases to 54% in 2022 and 52.5% in 2023).

How Does The Fee Cap Affect Non-Traditional Allowable Expenses?

Confusion arose when the fee cap went into effect in relation to non-traditional allowable expenses such as, inter alia, housing accommodations, vehicle accommodations, case management services, guardian and conservator services, and durable medical equipment due to the definition of treatment found in MCL 500.3157(15)(k).

The fee cap indicates it applies to “treatment”. MCL 500.3157(15)(k) defines treatment as follows: “’Treatment’ includes, but is not limited to, products, services, and accommodations.” This broad definition appeared to encompass many of the non-traditional allowable expenses and insurers were left with reducing the amount charged for said “treatment”. This caused difficulty when, for example, a contractor had bid out a housing accommodation project, but was only going to be paid 55% of the total amount of his bid, effectively causing the project to stall when the amount paid could not even support purchasing all of the materials needed for the project.

What Did DIFS Do and How Does it Affect My Claims?

On October 11, 2021 DIFS issued DIFS Bulletin 2021-38-INS to help clear up confusion on the fee cap and non-traditional allowable expenses. The key provision states that the fee cap does not apply to “Products, services, and accommodations that are not provided by physicians, hospitals, clinics or other like persons, but which are otherwise compensable as “allowable expenses” under PIP…” It goes on to call out specific examples including services related to:

• Guardianship or conservatorship.
• Vehicle modifications.
• Home modifications.
• Computer equipment and supplies.
• Generators
• Non-emergency medical transportation.
• Non-prescriptions drugs and over the counter medical supplies.
• Certain case management services.

Now What?

DIFS has said that insurers that applied the fee cap to the services outlined in its bulletin should re-process any such claim immediately and instead apply MCL 500.3107(1)(a) which simply notes the charge must be “reasonable”. Moving forward an insurer should not apply the fee cap to the enumerated services and any others that might fall under the exception in this bulletin, i.e. to any product, service or accommodation that is not provided by a physician, hospital, clinic or other like persons, but which are otherwise compensable as an “allowable expense”.