Michigan Senate Approves Plan to Cut Car Insurance Rates

LANSING, Mich. — Michigan’s Senate passed legislation Tuesday aimed at cutting the country’s highest average auto insurance premiums by eliminating a requirement that drivers buy unlimited medical benefits to cover crash injuries.

No other U.S. state has such a mandate. Motorists could instead choose among lower levels of personal injury protection, including no coverage if they have other qualifying insurance.

The Republican-backed measure won largely party-line Senate approval on a 24-14 vote, but Democratic Gov. Gretchen Whitmer pledged to veto it without changes.

“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,” she said in a statement. “I am only interested in signing a reform bill that is reasonable, fair and protects consumers and this is not it.”

Legislative stalemates have blocked such overhauls from passing before.

“The current system’s really failing Michigan drivers and families,” said Republican Sen. Aric Nesbitt of Lawton, the bill sponsor who pointed to a recent study showing that the state’s estimated annual premium of $2,610 is almost double the national average. “Thousands of Michiganders have been priced out of driving, and thousands more risk driving without insurance.”

The measure also would stop car insurers from having to pay much more than health insurers do for the same medical services _ another factor driving overall claim costs _ crack down on fraud with a task force and make other changes such as limiting “judge shopping” by people who sue insurers.

The GOP-led House is working to craft legislation, too, while Whitmer has ordered her administration to study how insurers use non-driving factors such as education levels to price premiums.

The Senate plan faced Democratic criticism because it would not include a mandated rate rollback, nor would it eliminate the use of credit scores or other non-driving components in rate-setting.

“I don’t think anybody in the state benefits if we reduce the coverage and your costs stay the same, especially for such a drastic reduction” in PIP coverage, said Sen. Mallory McMorrow of Royal Oak.

Nesbitt said a government-ordered reduction is not needed because insurers’ costs would be lowered under the proposed law and they would have to justify their new rates to the state Department of Insurance and Financial Services and stay competitive with other insurance carriers.

Under the bill, drivers could opt out of personal injury coverage or choose between at least two required offerings from insurers _ $50,000 (including $200,000 only for emergency trauma care immediately after a crash) or $250,000 total. Insurers could offer lower or higher amounts of coverage, though unlimited benefits would effectively go away prospectively because the Michigan Catastrophic Claims Association would no longer reimburse insurers for medical costs exceeding $580,000 for new or renewed policies.

Nesbitt estimated the per-vehicle fee that drivers pay toward the MCCA _ which will rise to a record $220 annually this summer _ would drop to $40. Premium prices could fall by between 14% and 46% depending on what PIP plan motorists choose, he said.

Health providers, plaintiffs’ lawyers and patient advocates joined Democrats in opposing the legislation, calling it a “giveaway” to the insurance industry.

“Instead of rushing to eliminate essential care for critically injured accident victims, Michigan legislators should be looking at increasing consumer protections and holding the auto insurance industry accountable for its discriminatory practices,” said John Cornack, president of the Coalition Protecting Auto No-Fault.

The Michigan Chamber of Commerce, however, applauded senators for tackling what it called the “primary cost-drivers” of high rates.

Auto insurers complain that they are forced to pay hospitals and other providers way more than health insurers do, and those expenses are passed on to drivers. The bill would create a fee schedule similar to what exists for workers’ compensation injuries.

Rep. Jason Wentworth, a Clare Republican who chairs a special House panel working to cut rates, said it will combine its findings with the Senate plan and “deliver results together very soon.”

The Senate vote came against the backdrop of increasing angst over the state’s expensive premiums. Detroit Mayor Mike Duggan and others filed a lawsuit last year asking the 1973 no-fault law to be declared unconstitutional for failing to provide “fair and equitable” insurance rates. Detroit businessman Dan Gilbert has talked about backing a 2020 ballot initiative if lawmakers do not act.

Two Democrats from Detroit joined with GOP senators to support the bill Tuesday.

Senate Insurance and Banking Committee Chairwoman Lana Theis, a Brighton Republican, said residents are “very, very angry” over paying the nation’s highest premiums.

“We mandate they buy unlimited lifetime medical insurance whether they want it or not,” she said. “They have choice in every other area of their lives except this one.”