Michigan Bill to Reduce Auto Insurance Premiums is in Peril

Legislation to reduce Michigan’s high auto insurance premiums by letting drivers opt out of mandatory unlimited medical coverage is in peril, with majority Republicans lacking enough support to pass it on their own and many Democrats pushing an alternative plan.

House Speaker Tom Leonard openly says he needs 10 to 15 of the chamber’s 45 Democrats to help move the bill to the Senate. That means 19 to 24 of the 63 House Republicans are opposed.

He is relying on Detroit Mayor Mike Duggan, whose city residents face the highest rates in the U.S. and who is a leading proponent of the plan, to bring Democrats on board this fall. Some are open, but many remain resistant weeks after the measure was introduced, which suggests the proposal could stall like many before it have.

The legislation seeks a 40 percent cut, for five years, in personal injury protection fees for motorists choosing $250,000 rather than unlimited PIP coverage. That could equal an estimated 20 percent reduction in the overall cost of a comprehensive policy and a nearly 50 percent discount on a basic policy.

Drivers age 62 and older who have Medicare or other retiree health insurance – whom the bill’s supporters say should not be double billed for injury coverage – could opt out entirely of PIP, saving an estimated 35 percent. There also is a provision stating that pricing for $250,000 and $500,000 coverage levels must “reflect savings expected” from the bill.

Michigan is the only state to require unlimited lifetime coverage for medical expenses resulting from auto crashes. A $170 annual per-vehicle fee is assessed to reimburse auto insurers for expenses surpassing $550,000.

Rep. Sherry Day-Dagnogo, a Detroit Democrat who opposes the legislation, said she is concerned insurance companies could “wiggle out” of requirements to lower rates and that the discounted rates would not last. She also worries Detroiters who pick less injury coverage and who are seriously hurt would be put in a “vulnerable state” after leaving the hospital. Day-Dagnono is backing alternative measures that would, among other things, prevent the use of non-driving factors to set rates – a practice that critics say unfairly discriminates against lower-income motorists.

The $250,000 PIP option would include $225,000 for emergency care and $25,000 for other care and benefits such as wage loss replacement, which detractors say is inadequate. Backers counter that any medical costs exceeding the caps would then be covered by people’s private or government health insurance.

One Democrat opposing the bill, Rep. Tim Greimel of Auburn Hills, said it would “gut benefits,” shift costs to Medicaid and “only provide a rate reduction to some Michigan drivers and only then for a five-year period, after which insurers could jack up rates willy-nilly.” Everyone, not just those picking less expensive coverage, should benefit from other cost-saving provisions that would reduce reimbursements for health providers’ treatment of people injured in crashes and create a fraud authority, he said.

The measure’s supporters contend that auto insurers could not simply pocket those savings if they want to stay competitive.

The entire House GOP caucus discussed the legislation for two hours behind closed doors this past week. Another meeting is expected this coming week, after which the House Insurance Committee could send the bill to the floor. Leonard said he may ultimately have the full House vote, even if the measure would go down in defeat.

“I’m not taking that off the table,” he said. “This is an issue that many folks have campaigned on. This is an issue that many folks are passionate on. But most importantly, this is an issue that I believe is one of, if not the biggest, one facing the citizens of this state. Ultimately, I think each legislator … within this chamber needs to let the residents that they represent know where they stand.”

The panel’s chairwoman, Republican Rep. Lana Theis of Brighton, said Michigan has the highest car premiums in the country because auto insurers are paying medical bills that mainly instead go to health insurance companies in the 49 other states

“We’re mandating that people purchase something that they may or may not need,” she said. “Why wouldn’t we offer them choice? They get choice in every other area of their life.”

Some of the state’s biggest political spenders and lobbyists – hospitals, business groups, plaintiffs’ attorneys, health providers, insurance companies and insurance agents – are lining up for and against Theis’ bill. Political action committees and executives tied to organizations or businesses that have taken past stances on auto insurance legislation have given more than $700,000 to accounts tied to members of the House and Senate insurance committees over the past five years, according to the Michigan Campaign Finance Network.

Rep. Leslie Love, a Detroit Democrat, said her constituents “need a break” and should be able to buy less PIP benefits because some savings are better than nothing. She said it costs her $4,200 a year to insure her 2009 Saturn Aura that has logged more than 100,000 miles.

She called the Theis-Leonard-Duggan bill a “good beginning” and said a separate bipartisan package of bills – backed by hospitals, brain injury rehabilitation centers and trial lawyers – has “really good elements.”

“What I’m hoping is that what doesn’t happen is what’s happened over the last 20 years – that they collide and then nothing happens” Love said. “We all get our heels dug in.”