Michigan Embarks on ‘Historic’ Overhaul of Its Auto Insurance, Ending Unlimited Medical Benefits

By David Eggert | June 6, 2019

Michigan Gov. Gretchen Whitmer last week signed a “historic” overhaul of the state’s car insurance system that, beginning in 13 months, will let drivers choose their medical coverage instead of them being required to buy unlimited benefits.

Her signature, delivered at the Detroit Regional Chamber’s Mackinac Policy Conference, capped an intense three-week period in which the Republican-led Legislature proposed bills, the Democratic governor threatened a veto and a compromise was reached.

Starting in July 2020, motorists will be able to pick among levels of personal injury protection — which on average accounts for half of premiums in a state with the country’s most expensive auto insurance. PIP rates will be cut entirely for those who fully forgo the coverage and instead use qualifying health insurance for crash injuries.

Insurers will be required, for eight years, to reduce — on average— the PIP portion of policies by 10% (unlimited benefit), 20% ($50,000), 35% ($250,000) and 45% ($500,000). They will be prohibited from using non-driving factors such as home ownership, educational level, occupation, ZIP code or credit scores in setting rates.

And health providers, beginning in 2021, will charge auto insurers less than they have been for treating and rehabilitating injured drivers.

“Today truly is a historic day for Michiganders. These are important improvements as we move forward in the state,” said Whitmer, who was joined by lawmakers and Detroit Mayor Mike Duggan. “They’ll help Michiganders from Detroit all the way to the Upper Peninsula, because people across our state are sick and tired of paying these outrageous rates.”

Duggan estimated that most people will save $500 a year, while Detroiters will save at least $1,000 with many saving “a lot more than that, in significant part because we will no longer have to double pay for medical insurance.”

The legislation cleared the House and Senate with overwhelming support but has come under criticism from insurance companies, patient advocates, hospitals, brain injury facilities and others. The negligence law section of the State Bar of Michigan this week laid out several concerns. It called the bill a trade-off between quality care and premiums, predicted a negative impact on long-term care and rehabilitation providers, and said the measure will shift risk to drivers, health insurers and taxpayers in the form of Medicaid spending.

“The likelihood is that this bill will result in negligible savings to the average driver, and it comes at the cost of being a devastating blow to severely injured accident victims and the caregivers that currently treat them,” said section chairman Robert Raitt, a personal injury lawyer at a Farmington Hills firm that specializes in serious car accidents. “We could have done so much better.”

Michigan is the only state to require unlimited PIP coverage. And unlike several other no-fault states, providers treating crash victims are able to charge auto insurers far more than they do for other patients covered by private or government health plans.

The average premium in Michigan is $2,693, according to the most recent report from insurance comparison website The Zebra — 83% higher than the national average of $1,470. Detroit’s premium on average is $5,464, far surpassing any other U.S. city.

House Speaker Lee Chatfield, a Levering Republican, defended the new law, saying critics “have built their entire business model around auto no-fault, and there’s going to have to be an adjustment made.” Republican Senate Majority Leader Mike Shirkey of Clarklake said the current system provides “unbelievable services and unbelieveable costs,” and “was unsustainable.”

“To have actual real, measurable reform, we had to break that up,” he said. “Forty-nine other states to one degree or another have figured this out. I don’t see a lot of people on gurneys in the streets because they aren’t being treated as a result of an auto accident. So we shouldn’t expect anything different.”

Senate Bill 1: http://bit.ly/30SAbXs

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