Auto Insurance Reform Hits Roadblock in House

In November 2017, the political quagmire that is Michigan’s no-fault auto insurance reform swallowed up and spat out the most recent attempt at a legislative fix; leaving both sides at an impasse and wondering if a solution will ever be reached.

The result, a 45-63 defeat in the House of Representatives, reaffirmed skeptics’ beliefs that full support of the legislation (House Bill 5013) was nowhere near a majority and a long way from satisfying those who line up behind the current law.

Stephen Sinas, partner in the law firm of Sinas Dramis and general counsel for the Coalition Protecting Auto No-Fault (CPAN), was not surprised by the bill’s defeat.

“Legislatively, we’ve not been able to draft a solution quite simply because we don’t have a great leader in place who can solve the problem,” Sinas said. “We need the type of leadership that can rise above the fray and not choose sides.

“We need a comprehensive reform package that will provide an overall improvement to Michigan’s auto insurance system while continuing to maintain the lifetime coverage that is so critical to the quality of life for our state’s auto accident victims.”

Supporters of House Bill 5013 were trying to address the nation’s highest insurance rates primarily because of the unlimited medical benefits made available to people who are catastrophically injured in car accidents. Those benefits, along with insurance companies’ option to charge different rates based on where people live, make auto insurance unaffordable for many people, especially in Detroit.

The auto insurance reform would have:

  • Allowed drivers to choose the level of personal injury coverage: $250,000, $500,000 or the unlimited lifetime benefits that all Michigan drivers must now have;
  • Reduced premium rates by 10 to 40 percent in three tiers: a 40 percent cut for average drivers with comprehensive coverage and $250,000 in personal injury coverage; a 20 percent cut for people with $500,000 worth of PIP coverage; a 10 percent cut for unlimited coverage and a 35 percent cut for a retiree with full lifetime health care;
  • Required the state to regulate any rate increases for the next five years;
  • Set reimbursement rates at 160 percent of the rates charged for Medicare patients for medical services provided by health care providers to victims of car crashes. Right now, such schedules aren’t in place for car crash victims, leading to inflated prices for services to people hurt in auto accidents;
  • Allowed senior citizens to use Medicare coverage, rather than auto insurance, to cover medical bills, leading to savings of $800 to $1,000 a year.

“I’m here to say that my only interest is to the 90,000 plus constituents and 10 million residents in Michigan who need relief from the highest insurance rates in the nation,” Rep. Jason Sheppard, R-Lambertville, told the Detroit Free Press. “Offering a choice for drivers is something we all do in all other insurances we purchase for ourselves and our family. We’re finally here today to take a giant step toward meaningful reform.”

House Majority Leader Sam Singh, D-East Lansing, said in a statement that the
legislation wasn’t going to help drivers or accident victims.

“The only group that benefited from the bill was the auto insurance industry which would have seen benefits capped for accident victims and no permanent requirement to lower costs,” Singh said. “It is time for the Legislature to consider a real solution with strong bipartisan support that would provide rate relief for all drivers without gutting benefits.”

Pete Kuhnmuench, executive director of the Insurance Alliance of Michigan, told Gongwer News Service in November that the group will continue to advocate for what it believes is the best route to lower auto insurance rates.

“We are going to step back and take a look at our efforts and reassess if there is an opportunity to work on this again this term,” he said.

Kuhnmuench said the real cost savings occur only if medical benefits are changed, for example by giving motorists an option other than unlimited medical benefits contained in the failed House Bill 5013. He said if the Legislature were to pass smaller reforms, like a fee schedule, attendant care limitations and a fraud authority, it would not draw costs out of at a high level.

“The reason rates are so high is because of the unlimited and the extraordinary fee levels hospitals extract from the system,” said Kuhnmuench, who also cited a recent rise in uninsured drivers from 17 percent to 21 percent.

Michigan Chamber of Commerce President Rich Studley echoed the industry’s disappointment, in his statement to Gongwer.

“Lawmakers had a real opportunity today to drive down Michigan’s highest-in-the-nation auto insurance premiums,” Studley wrote. “Unfortunately, 63 members of the Michigan House chose to turn their backs on their constituents and the state’s 7.1 million drivers and side with a handful of greedy ambulance-chasing personal injury attorneys and hospitals that profit from the status quo.”

Brian Peters, CEO of the Michigan Health and Hospital Association, told the Detroit Free Press that the House did the right thing in rejecting a bad bill.

“We know that Michigan drivers want lower rates when it comes to their auto insurance premiums, and we would welcome the opportunity to work with legislators if and when they decide to go back to the drawing board when it comes to meaningful rate relief for drivers that protects benefits available to those seriously injured in auto accidents,” Peters said.

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