Michigan can lower auto insurance premiums without making major changes to the state’s no-fault system proposed in legislation that has stalled for months, according to a nonpartisan report issued Oct. 14.
The Citizens Research Council of Michigan, which studied medical costs stemming from car accidents, said auto insurers pay much higher health care bills than private insurers and government programs like Medicare and Medicaid. Injured motorists also get more medical care in Michigan than in other states because it offers “expansive and nearly unlimited coverage.”
The study outlines 11 options to address escalating health costs and in turn reduce auto premiums. Some would diminish benefits, but others may keep intact the quality and comprehensiveness of current benefits, according to the report.
Ideas include creating a fee schedule similar to what exists for workers’ compensation injuries or Medicare, designating motorists’ health insurer as the primary payer for auto accidents and the auto insurer the secondary payer, and letting auto insurers pay the amount doctors and hospitals customarily receive instead of what they charge.
The study also says auto insurers, unlike other health insurers, cannot implement co-pays and deductibles.
“Uniquely, Michigan’s auto insurance does not contain cost containment measures related to medical spending and some provisions make it difficult or impossible for auto insurance to initiative such changes on their own,” said the study, which says medical providers’ claim for reimbursement for care related to auto accidents were 24 percent higher than in other states.
Michigan is the only state that offers unlimited medical benefits for catastrophic injuries and rehabilitation, currently costing motorists $186 per car per year.
The report concludes the unlimited benefits are a reason for higher medical spending in Michigan, but bigger factors include auto insurers having the primary responsibility for paying the bills, their lack of market power to negotiate lower payments and their inability to implement cost controls.
A bill backed by Gov. Rick Snyder would cut insurance premiums by $125 in the first year and cap unlimited lifetime medical benefits at $1 million for newly injured motorists. Victims whose care surpasses $1 million could be covered by government-subsidized insurance or their private plan, or they could sue.
The legislation is opposed by Democrats and even some majority Republicans in the House. The CRC report says changes that might impact medical costs the most include capping benefits, requiring all auto medical costs to be covered health insurers and repealing the no-fault system.
“No-fault reform is going to be dealt with by the House this year, though probably not in the form the bills are in now,” said Ari Adler, spokesman for House Speaker Jase Bolger, R-Marshall.
The options outlined by the CRC will be looked at closely, he said.
“Speaker Bolger wants to address no-fault reforms because he wants to save no-fault while protecting Michigan’s drivers from exorbitant prices. How we do that is still up for discussion, but we need to take action and solve this problem,” Adler said.
The GOP-led Senate also is considering whether to tackle the issue this fall.