Michigan Republicans say car insurance reforms would slash premiums

Michigan Republicans want to allow drivers to opt out of unlimited medical benefits in their auto insurance.

May 24, 2019: Bipartisan Michigan auto insurance deal reached between Whitmer, GOP
May 21, 2019: Michigan inches toward no-fault deal, as Whitmer remarks add to optimism
May 16, 2019: Republicans and Whitmer move closer to no-fault auto insurance deal
Update: House Republicans pass Michigan no-fault reform with tweaks from Democrats

The Michigan Senate on Tuesday passed a Republican plan to reform no-fault car insurance policy by allowing drivers to opt out of unlimited medical benefits.

The bill would overhaul a decades-old system that has made Michigan’s auto insurance the most expensive in the nation by a long shot. Most notably, the bill would end the state’s distinction as being the only one in the nation to require unlimited personal protection coverage, known as PIP, which is the most expensive part of insurance policies.

“The goal is simply to provide consumers with options so they can choose how much they want to spend,” said Amber McCann, spokesperson for Senate Majority Leader Mike Shirkey.

The bill passed the full Senate 24-14 after earlier clearing a Senate committee by a 7-3 vote along party lines earlier Tuesday. But it faces murkier prospects in the House, and Gov. Gretchen Whitmer, a Democrat, is vowing a veto if the measure makes it to her desk.

Among other things, the bill would:

  • Allow drivers to choose between at least four tiers of PIP coverage: Unlimited; $250,000; $50,000 coverage plus $200,000 for emergency room or trauma treatment following crashes; or no coverage for those with health insurance.

  • Effectively eliminate the Michigan Catastrophic Claims Association, resulting in a savings of $180 beginning in July. (The program will continue to cover people who are currently in the system, but will not accept new patients 90 days after the law goes into effect.)

  • Create an Automobile Insurance Fraud Task Force inside the State Police that would investigate fraud by medical providers, attorneys, or others and report their findings annually to the Legislature.

Bill sponsor Sen. Aric Nesbitt, R-Lawton, said Tuesday he expects drivers who opt out of PIP could save 45 percent or more on premiums, while buyers of policies with $250,000 in medical coverage could save 15 percent.

Auto insurance prices will only continue to increase if legislators don’t take action, Nesbitt said.

“Drivers will be empowered, families will be empowered, seniors will be empowered to select the level of coverage they need and can afford,” Nesbitt said on the Senate floor

Sen. Aric Nesbitt discusses Michigan auto insurance reform bill

Though unlimited PIP coverage would legally still be an option, it’s unlikely that insurance companies will offer it because it would become too risky without the insuring MCCA body, McCann said.

Whitmer said the bill "creates more problems than it solves."

"It preserves a corrupt system where insurance companies are allowed to unfairly discriminate in setting rates and the only cuts it guarantees are to drivers’ coverage. I am only interested in signing a reform bill that is reasonable, fair and protects consumers and this is not it,” she said in a written statement.

Democrats contend  the bill doesn’t include enough guaranteed savings because it does not require that insurance companies reduce their rates because of the changes.

"It’s disconcerting to me that there’s nothing in (this bill) that would guarantee rate reductions,” said Sen. Mallory McMorrow, D-Royal Oak.

Sen. Jeff Irwin, D-Ann Arbor, agreed, saying “there’s a tremendous amount of trust in this chamber of insurance companies” and most drivers “don't have the same brimming cup of trust of insurance companies.”

Two of 16 Democrats, Sens. Adam Hollier and Sylvia Santana from Detroit, voted for the bill. Both are allies of Detroit Mayor Mike Duggan, who has long pushed for auto insurance reform.

The Democrats offered amendments to bar using gender as a factor in car rates and prohibit insurers from limiting coverage based on ZIP codes.

Hollier argued that the bill is not perfect, but “today we have an opportunity to make some difference.”

Nesbitt said the plan is similar to what is offered in other states with far lower rates.

“There’s going to be significant savings for our residents here in Michigan,” he said.

A Senate Fiscal Agency analysis of the legislation estimated the state would lose around $10-15 million in insurance premium tax and have to pay around $66 million more over ten years in Medicaid costs (about a 1.2 percent increase), depending on the availability of unlimited PIP coverage. The more available the coverage is, the lower Medicaid costs would be.

McCann said “there’s been a lot of back and forth” with the House over the package, and it’s not clear when they would take it up.

Just last week, Whitmer ordered the state insurance department to investigate the impact of non-driving factors on rates. Insurers often raise or lower rates for people depending on their credit scores, gender, marital status, and occupation.

But one of the biggest drivers is geography: insurers often charge double and triple for people in many parts of Detroit and its suburbs, in part, insurers say, because those areas have the highest claims for medical care under the unlimited PIP benefits.

In 2017, Detroit Mayor Mike Duggan was unsuccessful in getting the legislature to pass a multi-tiered insurance plan in an effort to lower rates in the city, which has some of the highest rates in the country.

The city then filed a lawsuit challenging no-fault in the state. The federal judge hearing that case called the state system “shameful” in February and hoped that legislators would address reform.

In a statement, Duggan’s chief of staff, Alexis Wiley, called the legislation a “step forward” but called for guaranteed rate rollbacks and prohibitions on non-driving factors like credit scores when setting rates.

“We will be working with members of both parties to try and get those protections added when the bill is taken up in the House,” she said in the emailed statement.

The Michigan Chamber of Commerce cheered the reforms, which drew criticism from advocates for the current system who called it a "giveaway" to the insurance industry that doesn't address the role of non-driving factors in rate-setting.

In a statement, John Cornack, president of the Coalition Protecting Auto No-Fault, largely supported by medical providers, said the reform leaves Michigan residents without protections they’ve long held.

The statement did not explain how it helps auto insurers, who would generate far less in annual premiums – and also pay out less for care, the basis for premiums.

Cornack and others, including many Detroit legislators, have long touted the health care and lifetime benefits that pays full costs of recovery for those who are critically injured.

Yet it is those benefits that have pushed the state’s rates so high. The amount required to pay for personal injury protection (PIP) is half of insurance bills, a Bridge analysis has found, and far more than collision or theft costs.

For AAA customers, for instance, PIP accounts for nearly 90 percent of base premiums –  no matter whether drivers live in Detroit or Kalkaska, according to company filings with the state.

Those unique benefits are the reason Michigan’s rates are, by far, the highest in the nation, said Eric Lupher, president of the Citizens Research Council of Michigan, a nonprofit that has offered non-partisan analysis of state issues, including auto insurance.

According to The Zebra, an insurance search engine, Michigan had the highest average rate ($2,693) last year, which is 15 percent higher than the second highest state, Louisiana, and $1,200 above the national average.

Michigan insurance law limits the ability of auto insurers to negotiate prices from health care providers and it is the only state to offer unlimited coverage, Lupher said. Other states with no-fault have hard caps on spending.

“It’s health-care that is escalating the cost,” said Lupher, whose group has not taken a position on the bill.

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Comments

***
Tue, 05/07/2019 - 1:09pm

I don't know it this is the best idea or not but something needs to be done, my insurance costs are ridiculous for two cars.

Fred J
Tue, 05/07/2019 - 5:38pm

Save the pennies you get to keep...Your local hospital will want them when insurance finds another reason to deny your claim.

Matt
Tue, 05/07/2019 - 1:14pm

It is confussing how requiring provisions to prevent an auto opperator and their passengers from becoming depedents of the State in the event of an accident isn't a conservative value (or even liberal for that matter). One can be certain that the system as run, is heavily abused by medical providers and yes the drivers (both isured and not), and could be substantially improved, but this is not to say the concept is bad. One wonders the rush to kill it when reforms are what's needed. Let's start with targeting uninsured drivers and capping medical fees.

middle of the mit
Thu, 05/09/2019 - 6:05pm

"It is confussing how requiring provisions to prevent an auto opperator and their passengers from becoming depedents of the State in the event of an accident isn't a conservative value (or even liberal for that matter").

That is what conservatives are arguing for. I would argue ,that is why the disability roles have been going up anyway. Giveaways to insurance companies. Did you know that if you file for disability for an insurance claim, you also have to file for Federal disability? Ha ha ha...

Is that an insurance giveaway?

"One can be certain that the system as run, is heavily abused by medical providers and yes the drivers (both isured and not), and could be substantially improved, but this is not to say the concept is bad"

Yes, Florida had a Governor and Now senator that was involved in the biggest Medicare fraud case in American History. Yet he is still a lawmaker. Could you tell me how it is that drivers are the fraudsters?

" One wonders the rush to kill it when reforms are what's needed. Let's start with targeting uninsured drivers and capping medical fees."

Reforms.......Isn't that what No Fault insurance was to Republicans a few decades ago? They told us it would stop lawsuits. You know, the ones where you didn't have to take responsibility for your bad driving and then defend your bad driving in a court of law?

And as for capping medical fees?

YOU told us that would make doctors slaves to patients when dems tried to use that argument for Heritage Foundation Care! AKA Obamacare!

When you get your talking points in order and together, maybe we can have a conversation.

David Waymire
Wed, 05/08/2019 - 8:36am

Substitute bill introduced in Senate, passed committee and passed the full Senate in one day. Nice deliberation and thoughtful consideration, that. Apparently we don't want folks to really understand what's in it and have a chance to inform members in public about the consequences. Nice democracy you have there...

Arjay
Wed, 05/08/2019 - 8:42am

If a person has designated their medical insurance as primary in case of an accident, haven’t they effectively removed themselves from unlimited medical insurance provided by the auto policy?

Keith
Wed, 05/08/2019 - 4:58pm

People on Medicare cannot opt out of pip insurance coverage . Medicare will come after you if you use Medicare for a care accident injury .

Barry Visel
Wed, 05/08/2019 - 9:12am

“Michigan insurance law limits the ability of auto insurers to negotiate prices from health care providers...”. And there it is. Let’s handcuff the insurance companies and then blame them for high rates. Just like the Feds not letting us buy prescription drugs in Canada where prices are lower. And on and on with government involvement. Instead of asking consumers to choose which lesser coverage option they want (blame the consumer) let’s figure out how to contain cost (although shifting that burden to private carriers may help with that problem). Oh, and what legal right do so-called credit bureaus have to collect information about anyone and then sell it for things like determining insurance rates?

Tea Elle
Wed, 05/08/2019 - 9:23am

I'm a Michigan resident that's been away from the state, serving in the military. Just about every state I've lived in provides a set amount for each accident, not unlimited. Why do it need to be different in Michigan? What's so spectacular (accident wise) about Michigan accidents?

Don
Wed, 05/08/2019 - 9:47am

did not Engler and them republicans tell us that NO fault would cut cost??? More lies from them Nazi republicans in Lansing!

William Bupp
Wed, 05/08/2019 - 9:58am

According to L. Brooks Patterson, the Catastrophic Claims program is "self sustaining" because it has the funds accumulated to be so. Is there truth to this comment? Could the answer to the auto insurance question be to place strict management requirements on this program to continue the "self sustaining" model? I am concerned that the survivors benefits currently afforded those who have suffered lifetime injuries will be eliminated and the result will be devastation to the families of those injured parties. The proposed bill described concerns me because the hospital industry will likely suffer uncompensated care costs and the bill will place an unnecessary a burden on Medicaid and Medicare to service those with lifetime disabilities. Ultimately, taxpayers will be required to pay more taxes to support the Medicaid and Medicare programs; the result is that insurance companies will dodge the problem, less coverage will eventually cost more and taxpayers will all pay more even if we don't drive. This appears to be a "tax shift." Placing limits on executive and sales compensation (trips etc.) may be another way to govern the increasing costs to the citizen.

John Pilon
Wed, 05/08/2019 - 10:21am

Slash premiums? Well see.

Jeffrey Kless
Wed, 05/08/2019 - 3:47pm

Just have every insurance company who provides auto insurance provide in writing the exact amount of savings that a policy would receive. Fat chance as this is just another Republican prostitution scheme, the Johns (Insurance Companies) pay (donate) to the pimps (Republicans) and the whores (the public) gets screwed and don't get paid!

angel
Wed, 05/08/2019 - 10:41am

What troubles me about these talks of reform/reduction in rates, is that our leaders have never addressed the fact that drivers who do not have EMPLOYER SPONSORED HEALTH INSURANCE or MEDICARE, are also assessed a higher premium. The insurance companies discriminate against drivers who have Medicaid and/or ACA health insurance. Case in point, one of my relatives was quoted $100/month for PLPD in the 'burbs. When they lost their employer sponsored healthcare and their new "small business" employer didn't offer health care, their auto insurance premium climbed from $100/mo to $250/mo, rendering them unable to drive their vehicle because they couldn't afford the increase in insurance. None of the changes discussed address this issue. Are our leaders/politicians ignorant of this blatant form of medical discrimination?

James Roberts
Wed, 05/08/2019 - 11:00am

As I understand it the dems want to eliminate all non-driver based pricing, with the result we all pay the same regardless of the risks inherent from where we live, never mind our poor credit confirms we have no money to handle any costs and teenage drivers and quite old drivers are demonstrably more likely to get in an accident. I guess the lucky ones are those of us who are in the lower risk categories as we will no doubt have the benefit of subsidizing the above just like the wonders of Obamacare. This plan does not address that much, but will have the impact of almost everyone choosing the lowest cost approach and again allow the rest of us, either thru higher insurance rates or state services to again subsidize them. Actuarial risk has its costs but I understand the Government approach to such things is to avoid, defer and kick the can down the road. This does nothing to address that.

Kerry Morey
Wed, 05/08/2019 - 11:01am

My concern is the elimination of the Catastrophic Care fund that covers the lifelong costs of the lasting financial impact of severe injuries. Just because the bleeding stops and the open wound heals many accident victims are still left with the permanent effects & the lifelong costs of living with traumatic brain injuries or learning to function without a limb. Originally, this was the promise of No Fault.
We have no business eliminating Catastrophic Care until either the state or the nation has transitioned to a universal, single payer system that prioritizes everyone's health over corporate profit motives.

Jeff Ferrari
Wed, 05/08/2019 - 11:27am

Why is the Govenor against lowering rates ??? Because it wasn't her plan?? Were is the bi- partians vote?? Michigan drivers suffer with highest rates in US.!!!! Rep. Beau Lafave actually has the best bills in process to ELIMINATE no- fault all together !!!! Jump on board Repubs and Democrats this is long over DUE !!!!!

Paul Jordan
Wed, 05/08/2019 - 1:28pm

Back in the late 60s the state itself sold bare-bones auto insurance. It was very affordable and, for most of us, entirely adequate. (Check it out.)

Andrew
Wed, 05/08/2019 - 8:57pm

She's not. This republicans bill doesn't mandate that the insurance companies lower their rates. Do you really think that the insurance companies will lower their rates without being forced to? No, they would keep the rates high and make an even bigger profit.

Andrew
Wed, 05/08/2019 - 8:57pm

She's not. This republicans bill doesn't mandate that the insurance companies lower their rates. Do you really think that the insurance companies will lower their rates without being forced to? No, they would keep the rates high and make an even bigger profit.

Diane Johnson
Wed, 05/08/2019 - 11:38am

This is the same GOP who said insurance rates would be slashed with no-fault. Why should we believe the same big business & insurance loving people on anything they say will help anyone else.

Don Sepanski
Wed, 05/08/2019 - 11:58am

Yes to ending PIP. Yes to gutting shyster lawyer loopholes. Yes to Michigan having significantly lower insurance rates. Yes to this bill!

Rick
Wed, 05/08/2019 - 12:31pm

The main reason the present system is so expensive:
'Michigan insurance law limits the ability of auto insurers to negotiate prices from health care providers and it is the only state to offer unlimited coverage, Lupher said.'
Health insurers negotiate prices and if they didn't we'd have higher health insurance premiums. The way it is now it's 'at cost' for the hospitals which means 'the sky is the limit'. Have you ever thought about why hospitals buy those helicopters? 'Swoop and scoop' - high cost patients make it worth it.
We're caught between being raped by auto insurance companies and hospitals. The GOP elected to go with the auto insurance companies because they're better 'campaign contributors' than hospitals (or us). Now the GOP will work to allow the auto insurers to become the #1 cost on us. They will keep the savings and not pass them on. Trust me.

nw
Wed, 05/08/2019 - 1:02pm

What will this do to health insurance rates?

Paul Jordan
Wed, 05/08/2019 - 1:24pm

Nobody should support any auto insurance 'reform' effort until the insurance companies cough up genuine historic data on fees, claims, and profits. Some of the often overlooked reasons that premiums are so high is that 1) insurance companies are in the business of maximizing profits; 2) regulators and Republican legislators have happily taken insurance companies at their word regarding their rate structures: and 3) despite being rabidly pro-business those two entities for some reason actually think that for-profit insurance companies exist for the purpose of providing services.
They do not. They exist to collect premiums (not to pay out claims).

TIM J
Wed, 05/08/2019 - 1:31pm

Change the law so auto insures & the state can negotiate rates with the hospitals & doctors the same as your medical insurer. Under the current system they get charged double,triple, or whatever the hospitals and doctors want to charge with no recourse. Also, who is divvying up the over 20 BILLION DOLLARS currently in the cat fund ?

Chris H
Wed, 05/08/2019 - 2:37pm

I read every comment waiting for someone to raise this last question. They dabble at the edges of this issue and retain the Catastrophic Injury Fund because to do away with it would require a systematic way of refunding it to the people who have paid into it - a troublesome issue. If it were refunded it wouldn't be available later to be misappropriated, redirected, confiscated or stolen (choose your word) most likely by Republicans. The Rs favor business too much and the Ds want to spend too much. With all things government, we need to hit the ball hard right over second base, favoring logic, reason and prudent spending. There has to be a middle road for auto insurance that does this - sensible pricing with reasonable consumer protections and vigorous public oversight. What individual citizen doesn't want this? The answer has to be only the individual citizens working in the insurance business who are getting rich off the rest of us.

John S.
Wed, 05/08/2019 - 1:50pm

I'd say that medical providers and lawyers, greedily eyeing the billions sitting in the MCCA pot, have been guzzling at this trough long enough. This legislation may not be perfect, but if it is enacted, no longer with the farm hand (Michigan auto owners) keep putting more slop (money) into the trough.

Keith
Wed, 05/08/2019 - 4:55pm

How will $180.00 savings add up to 45% savings ? Stop red lining . Stop treating every driver in a district the same . Bad drivers should pay more and good drivers less . Not at fault accident claims should not go against good drivers . Filing a claims for repairs caused by another driver or acts of god ( hail damage , deer ) should not be a negative on your insurance record . I personally would like to go back to at fault insurance again . That way bad drivers pay .

Keith
Wed, 05/08/2019 - 4:55pm

How will $180.00 savings add up to 45% savings ? Stop red lining . Stop treating every driver in a district the same . Bad drivers should pay more and good drivers less . Not at fault accident claims should not go against good drivers . Filing a claims for repairs caused by another driver or acts of god ( hail damage , deer ) should not be a negative on your insurance record . I personally would like to go back to at fault insurance again . That way bad drivers pay .

Joe
Wed, 05/08/2019 - 7:55pm

This is interesting. There was a Republican controlled House, Senate and Governorship for 8 years and they couldn't 'solve' this issue and now do it in a day with a bad bill that they know the Governor will veto to make her look like she is "against" insurance reform. This is how bad government looks. I am neither a D nor an R and this is a perfect example of why I am not. Another sad day for Michigan with no end in sight of sky high rates for regular people.

Sandy
Thu, 05/09/2019 - 8:47am

Insurance is big business and very competitive. I see no need to waste more time and tax payer's money haggling over wording to make the auto insurance comply with policy pricing. People will flock to the guy offering the better deal. Competeters will have to follow suit to remain competitive in the market. There is always a Geiko and Flo out there offering the great deal on auto insurance.