MIG Schmig

What is all the fuss about?

When major reforms to Ontario’s Statutory Accident Benefits Schedule (SABS) were introduced in 2010, probably the most critical component to reducing the cost of automobile insurance at that time was the introduction of the Minor Injury Guideline (MIG).

Multi-disciplinary medical experts globally had opined that about 80% of soft-tissue injuries from motor vehicle accidents should resolve with limited or no treatment within six to eight weeks. However, under the prior SABS, the average cost of medical treatment had escalated to unacceptable levels in the tens of thousands of dollars.

Is the system doing a better job today of maintaining the cost of treatment in line with the expected medical outcomes?

The MIG provides up to $3,500 of medical and rehab treatment incurred, eliminating the previous treatments plans. A regimen of treatment for sprains, strains and associated sequelae is deemed pre-approved, totalling $2,250. By focusing on active treatment to facilitate prompt recovery and to contain the costs of treatment for minor injuries, the goal is to manage the ever-increasing cost of auto insurance in Ontario.

MEETING EXPECTATIONS?

The Financial Services Commission of Ontario (FSCO) previously reported its rate proposal calculations for the 2010 changes to the SABS assumed that 55% to 65% of injury claims would stay within the MIG. It was not clear if “stay” meant to stay within the $3,500 cap or within the actual prescribed treatment modules, totalling $2,250.

Some insurers have been firmly interpreting the MIG in line with medical evidence and treating 80% of their SABS claims (the soft-tissue injuries) within the MIG. Others have moved closer to FSCO’s expectation of 55% to 65%.

If insurers at the outset of a claim are treating 80% of their clients in the MIG, what happens as these injuries mature? If the claim is open, and the claimant has or intends to dispute the MIG determination, or seeks or attends more treatment outside the MIG parameters, what goes on? Are insurers being flexible and responsive to allowing more treatment outside the MIG to get the injury healed and the claim closed? If not, do they continue to dispute the treatment claims through mediation and arbitration?

The Health Care Auto Insurance (HCAI) system tracks all treatment activity and invoicing of health care services provided to auto accident victims. It became mandatory for insurers and treatment facilities to use HCAI in February 2011.

Through Insurance Bureau of Canada (IBC), HCAI provided statistics on injuries assessed by health care practitioners that strains and sprains represent 67% to 75% of all injuries reported through that facility. Interestingly, however, as the claim and injury matures, fewer claims are identified as MIG.

As a result, for accident year 2011, only 23% of the claims for strains and sprains remained in the MIG, with 47.5% receiving MIG and non-MIG treatment.

The chart on page 61 – courtesy of Willie Handler of Willie Handler and Associates – offers some numbers with respect to claimants by type of treatment.

If the claim starts in the MIG, it stays in the MIG; if the injury does not recover or takes on a psychological component, this takes it outside the MIG.

Insurers still do not have a clear ruling on the MIG determination and neither do claimants. The claimant’s counsel feels that it is in the client’s best interest to introduce issues that defy the MIG guideline. Insurers may practise cost containment and not recognize pre-existing conditions that are alleged to take a client outside of the MIG. The claimant’s counsel then files the dispute resolution process documents.

The claim, if it fails in mediation, will fall into the backlog of about 15,000 arbitration matters or into the growing number of SABS claims in litigation.

INSIDE OR OUTSIDE?

What is the impact of a claim being outside the MIG? Increasing costs and availability of health care, as well as access to as much as $50,000 of medical and rehabilitation costs.

Attendant care, one of the most rapidly increasing costs of the SABS prior to 2010, is not available for claims that fall within the MIG. If the claim falls outside the MIG, these benefits become available and may be assessed retroactively – or this may make for a more fulsome tort claim, as health care costs not paid by the SABS insurer become part of the tort claim.

For plaintiff counsel, why not pursue the SABS carrier? The medical evidence gathered at the expense of the SABS may, in turn, allow the argument that the injury pierced the tort threshold for a bodily injury (BI) claim?

The question is: What are insurers reserving for? What are the leading indicators that a claim is not MIG-treatable? How many insurers actually know how the MIG is performing? How many of the closed files were closed within the MIG? Is the system meeting the 55% expectation by FSCO in the 2010 rates? Will the system see significant loss development on those claims as they crawl through the arbitration process?

Desjardins Insurance, Aviva Canada and others are growing their in-house counsel groups to help manage their costs of arbitrating or litigating. The older the claim, the more exposed an insurer is to increasing loss costs and defence costs.

WHAT IS THE EXPOSURE?

Where are the reserves for this exposure? Are they in the case reserves, in the actuarial calculation of incurred but not reported, or in a provision for adverse development? For example, Company A has 1,000 claims open for accident year 2012, but at end of 2014, 70% of the open claims are identified as still within the MIG.

Compare this to FSCO’s 55%, and the difference between a MIG claim at $3,500 and a non-MIG maximum of $50,000, and this results in a calculation of $47,500 times 150 claims. That totals $7.125 million.

Even using IBC’s figure of the average cost of a SABS claim in Ontario in 2011 ($28,978), this number is $3.8 million. These are very significant numbers even before adding legal costs. Are the reserves reflected as the industry complies with rate reductions?

This is a question that should be a concern to all insurers. Are the right discussions happening between the claims department and the actuaries? Are the right statistics being tracked? How many of the more than 15,000 cases still in dispute are MIG challenges?

The Ontario Rehab Alliance, a non-profit organization of 97 health care firms employing more than 4,000 professionals, concluded from the stats that “people with injuries that are more serious than a simple strain are being treated inappropriately in the MIG.”

The alliance argues that money would be better spent on treatment than disputes, and point out that “delays in treatment generally result in poorer outcomes over time.”

TREATMENT OR MONEY?

Justice Donald Cunningham, former justice with Ontario’s Superior Court of Justice and author of the then interim (since finalized) report on the Ontario Automobile Insurance Dispute Resolution System Review, spoke at a recent seminar on the current disputes (more than 15,000 cases) that have moved from the mediation process to arbitration. Cunningham opined that the pursuit of accident benefits should be about treatment, not about money.

However, if the dispute is still ongoing three years after a claim is made and that dispute is about whether or not a treatment request for an injury could be in the MIG, it is too late for treatment unless already incurred. It can only be about money.

What happens if too many injuries are taken out of the MIG during arbitration? Commenting on Scarlett v. Belair, a recent decision of the Court of Appeal for Ontario, plaintiff’s counsel Littlejohn Barristers concluded the following: “Overall the Scarlett decision is significant, as it creates a framework to defeat the MIG.”

The worst-case scenario is that the MIG outcomes fall below 55%. A series of bad outcomes in arbitration or court cases could be a major setback.

Add to that that these expectations were calculated well before the most recent politically motivated implementation of a further 15% reduction in rate.

Among FSCO’s goals, as expressed in its just-released Statement of Priorities for 2014, is to review the MIG protocol. FSCO has contracted scientists and medical experts to develop an evidence-based protocol to treat auto accident claimants who sustain minor injuries. The protocol will help to inform the Superintendent when developing a revised MIG.

FSCO also promises to review the HCAI system to determine what reports are necessary to provide additional information on statutory accident benefits treatment trends.

Both of these efforts may assist the industry and government to get it right.

In the interim, everyone is talking about adverse developments in Ontario auto BI claims. But is enough recognition being given to the potential for adverse development in the MIG?