Measure to repeal state's no-fault auto insurance faces a rough road

Minnesota's 37-year-old no-fault auto insurance law survived a repeal attempt Tuesday at the State Capitol, but a Senate committee later approved a series of significant changes to the law.

Deputy Senate Majority Leader Geoff Michel, R-Edina, said that with Minnesota witnessing more uninsured motorists, higher insurance premiums and at least anecdotal evidence of increased insurance fraud, the law needed to be scuttled. "This might be the nuclear bomb," Michel said of repealing the law. "[But] I think it calls into question, members, what are we getting out of our no-fault system?"

Michel said nine states have no-fault insurance -- down from 24 -- and that Minnesota is a "high-cost Midwestern island" surrounded by states without no-fault insurance and with lower premiums.

The Senate's Commerce and Consumer Protection Committee, after hearing from hospital and ambulance service officials Tuesday, voted to at least temporarily set aside Michel's proposal. The panel instead endorsed two alternatives and sent them on for further Senate review.

One, from Sen. Paul Gazelka, R-Brainerd, who owns an insurance agency, would limit benefits for "soft-tissue injuries" treated by chiropractors and physical therapists to workers' compensation.

Gazelka, whose proposal was backed by insurance industry officials, said his private business was not a motive for pushing the changes. He said, however, that chiropractic and physical therapy visits represent 69 percent of all medical bills.

"There's very little accountability of how much is charged, and how the process works," said Gazelka, who acknowledged that his approach falls short of the "broad, comprehensive reform" that he initially sought. That, he said needed more study.

Under her plan, an injury would have to result in a "serious permanent impairment of an important bodily function" in order to warrant damages.

"It's a significant change," said Jim Carey, president of the Minnesota Association for Justice. The proposal, he added, would create "the most stringent standard for a threshold that I know of" and negatively impact "innocent people" injured in auto accidents.

The state's no-fault insurance law, passed in the 1970s as the approach gained in popularity, requires motorists to have insurance that covers anyone injured in an accident without regard to fault. Anyone injured in an accident, the law states, has a right to "basic economic loss benefits." Currently, that includes a minimum of $40,000 for losses from injury -- $20,000 for medical expenses, and another $20,000 for losses of income, replacement services, funeral expenses and survivor's economic loss.

Michel said Colorado saw a 27 percent drop in premiums after eliminating no-fault insurance in 2004, but he acknowledged that Minnesota ranked 28th among states in terms of auto insurance premium costs. Sen. Chris Gerlach, R-Apple Valley, the committee's chair, said that anecdotal evidence suggested that there was no proof that no-fault insurance led to more lawsuits.

A series of repeal opponents, including Mary Krinkie, a lobbyist for the Minnesota Hospital Association, said eliminating the law would shift many costs to the state and have a "significant fiscal impact" at a time of daunting budget deficits. Dr. William Heegaard, a physician at Hennepin County Medical Center, said that as the nation debates health care costs, the law ensures that hospitals and ambulance services are paid for responding to injuries from auto accidents.

John Wolfe, representing the Minnesota Chiropractic Association, said that repealing the law could have unintended consequences.

Wolfe said that caregivers could be forced to decide "are we going to go pick up the uninsured people first [in an accident, or] are we going to pick the insured people first? That doesn't seem consistent with the Minnesota I grew up in."