At first glance, Michigan’s 2019 no-fault reform legislation’s introduction of utilization reviews for no-fault medical claims signaled promising days ahead for insurers and providers. Insurers could avoid lengthy and costly litigation if it challenged the frequency of, or indications for, treatment. Providers could likewise challenge denials in an efficient manner through the same process. However, the process only provides those benefits if it is a mandatory administrative process.
The Court of Appeals’ recent decision in True Care v Auto Club Group upended the utilization review process by finding that it is not a mandatory administrative process, placing the future of the utilization review system in doubt.
Law Underlying Utilization Reviews
Under MCL § 500.3157a, insurers are permitted to conduct utilization reviews—initial evaluations of the appropriateness of the treatment being provided to claimants. If an insurer determines the treatment provided was not medically necessary or beyond the reasonable amount of treatment, it can deny the claim based on a Utilization Review Determination. While this may appear as a viable means to ferret out fraud, an insurer’s Utilization Review Determination is only as useful as the weight it carries.
When crafting MCL § 500.3157a, the Michigan legislature ensured the buck would not stop with an insurer’s initial utilization review determination. Pursuant to subsection (5):
If an insurer…determines that a physician, hospital, clinic, or other person…rendered or ordered inappropriate treatment, products, services, or accommodations, or that the cost of the treatment, products, services, or accommodations was inappropriate under this chapter, the physician, hospital, clinic, or other person may appeal the determination to the department under the procedures provided under subsection (3).
However, the statute’s use of “may” raises the question: Is filing an appeal of an insurer’s utilization review determination to the Department of Insurance and Financial Services (DIFS) a mandatory precondition to filing suit against the insurer, or instead, is it merely an alternative means of resolution? The Michigan Court of Appeals was presented with this question in True Care.
Case Background
In True Care, Rozarta Vukaj underwent treatment with True Care Physical Therapy for injuries arising out of a 2018 motor vehicle accident. Pursuant to Vukaj’s no-fault insurance policy with Auto Club, True Care submitted its bills to Auto Club for payment. Auto Club paid True Care for nearly two years until ceasing payment pursuant to a utilization review that determined True Care’s treatment exceeded ACOEM guidelines. Auto Club sent explanations of benefits (EOBs) to True Care explaining the utilization review determination with information on how to appeal to DIFS.
Significantly, however, True Care did not appeal to DIFS. Instead, True Care filed a complaint in circuit court alleging Auto Club breached its contractual obligation to provide no-fault insurance benefits. Auto Club filed a dispositive motion arguing that the No-Fault Act and Michigan’s Administrative Code required True Care to exhaust administrative remedies and appeal to DIFS before filing a lawsuit. However, the circuit court denied Auto Club’s motion, ruling the statutory language that “a provider may appeal a determination” indicated a permissive, alternate mechanism of resolution rather than a mandatory one.
Court of Appeals’ Analysis and Ruling
On appeal, the crux of Auto Club’s argument was that the trial court lacked subject matter jurisdiction over True Care’s claim because True Care failed to exhaust administrative remedies by not filing an appeal of the utilization review determination to DIFS. When presented with this argument, the Court of Appeals’ analysis focused on whether a mandatory appeals process of all utilization review determinations to DIFS could be reconciled with the plain language of the No-Fault Act, as well as legislative intent.
First, the court addressed MCL § 500.3112, which grants medical providers a direct cause of action against insurers as long as benefits were “overdue.” The court reasoned that, because the plain language of this statute does not identify an appeal of utilization review determinations to DIFS as a precondition to a medical provider’s direct cause of action, it is clear the legislature never envisioned a mandatory administrative appeals process of utilization review determinations.
Second, the court considered MCL § 500.3145(1), which provides a one-year limitations period to pursue First-Party PIP benefits. The court recognized that if the administrative appeals process to DIFS was intended to be mandatory, the one-year limitations period would be abrogated by Regulation 500.65(1), which states that any appeal to DIFS must be made within 90 days of the utilization review determination. Therefore, to prevent a regulation from overruling a statute, the court reasoned that the language contained in MCL § 500.3157a—specifically that “a provider may appeal a determination”—indicated a permissive, alternate mechanism of resolution rather than a mandatory one.
Driving Forward
The Court of Appeals’ holding in True Care effectively removed the teeth of utilization review determinations. While the enactment of MCL § 500.3157a guarantees insurers the right to conduct utilization reviews, the statute did nothing to ensure that utilization review determinations carry any weight. In the wake of True Care, when claimants are faced with an unfavorable utilization review determinations, the next move is clear: simply ignore it and file suit.
In this light, True Care stands as another impediment in the way of no-fault insurers across this state as they continue to navigate the sometimes troubling waters of Michigan’s No-Fault Act. Because utilization review determinations are not as promising as originally anticipated, it is not clear that the process is a viable option going forward for the resolution of provider disputes.