Duggan testifies on Detroit auto insurance rates: What he said

Feb. 13--LANSING -- He has tried for years to get the state Legislature to understand his city's unique and costly position as the place with the highest auto insurance rates in the country.

But Detroit Mayor Mike Duggan has been unsuccessful in trying to get significant changes to the state's no-fault insurance system. He told members of the Senate Banking and Insurance Committee on Wednesday that he hopes this year will provide the tipping point for change.

"It seems like we've been at this for a while," he said. "This is a burning issue across the state, but no place is it more important than in Detroit. To me it's one of the fundamental civil rights issue facing this state."

While the last attempt to reform no-fault auto insurance was defeated in the state House of Representatives in 2017, the 2019 legislative session may be more successful. The leaders in the House and Senate, where Republicans still hold a majority, have pegged reforming the system as their top priority.

And Gov. Gretchen Whitmer, an East Lansing Democrat, signaled a willingness to tackle the problem during her State of the State address Tuesday evening.

"I am eager to engage with any and all people of good faith about ideas and priorities, including your ideas on bringing down car insurance rates," she said.

That's not enough, though, said Speaker of the House Lee Chatfield, R-Levering, saying the lack of details was one of the "missed opportunities" in her speech.

At a Wednesday roundtable with reporters, Chatfield said he wanted to hear more details about Whitmer's plan to lower Michigan's highest-in-the-nation auto insurance premiums.

"My goal is to ensure that car insurance rates are lowered. It's the single-largest issue facing this state and saddling our residents with burdensome costs," he said. "I shared with all the stakeholders that their opinion matters, but if you're there to simply become an obstructionist, you're no longer at the table."

But reaction to the State of the State from CPAN -- the Coalition Protecting No Fault --revealed the difficulty of getting substantive change with so many competing special interests involved in the debate.

"Michigan can maintain high-quality care while lowering premiums through effective rate regulation, implementing a fee schedule for health care providers, cracking down on fraud, and enacting other commonsense, bipartisan reforms," said Tom Constand, a CPAN board member and president of the Brain Injury Association of Michigan. "We remain steadfastly opposed to any plan that limits the essential care that auto accident victims can receive. Capping essential care means families will go into bankruptcy because they can't pay their medical bills."

If the Legislature wants details to bolster the argument to reform no-fault auto insurance, Duggan provided them during his testimony Wednesday. The primary problem, he said, is the astronomical cost of medical care -- which is also known as Personal Injury Protection or PIP -- in auto insurance policies, which has risen from 6 percent of auto insurance policies before no-fault was adopted in 1972 to 42 percent of the cost in today's insurance policies.

And in Detroit, where many residents can't afford full auto insurance coverage, which can run up to $4,000 a year or more, and choose basic policies, that health care component can be 50 percent or more of a driver's policy.

"When we passed the law that said you have to buy unlimited medical coverage for your car insurance, we shifted the health care costs away from Blue Cross, from your employer, away from Medicare or Medicaid, and we stuck it on the poor suckers who are writing the premium checks," Duggan said. "We shifted the entire medical costs and it drove up the costs in an amazing way."

He blamed the inequity on medical care providers, who can charge much higher prices for services that are paid for by auto insurance, and trial lawyers, who are increasingly soliciting clients who have been in car accidents and suing the insurance companies over medical bills.

"Now we've got this unholy alliance, where we have a group of lawyers and a group of medical providers and their goal is to run up the bills as high as they can because they both benefit," Duggan said.

With a Power Point, he showed that:

-- Medical providers have a three-tiered pay fee schedule for services that, for example, will charge a Medicare patient $262 for a CT scan, a commercial insurance patient $419 for the same service and a car crash victim $1,821 for the scan.

-- Both suburban and Detroit drivers have the same rate of accidents -- eight out of 1,000 drivers -- but that Detroiters are being targeted by trial lawyers to file more lawsuits as a result of those accidents -- 5 out of 1,000 suburban drivers filing lawsuits, versus 12 out of 1,000 Detroit drivers.

-- The courts are becoming overwhelmed with these lawsuits. Wayne County's docket of car crash-related lawsuits has grown from 39 percent in 2010 to 57 percent in 2017. In Macomb County, the car crash docket has grown from 26 percent in 2010 to 52 percent in 2017 and in Oakland County, it has gone from 13 percent to 33 percent.

Duggan's solution has been multi-faceted. He's trying to get the law declared unconstitutional in federal court and is hoping that a judge's claim last week that the state's auto no-fault system is "shameful" will help spur legislators to act.

He would prefer the Legislature act on fixing the problem with several initiatives: allowing drivers to choose varied levels of coverage instead of the lifetime medical coverage that no-fault provides for drivers catastrophically injured in car crashes; letting at least senior citizens and perhaps more people have either Medicare or their employer-provided insurance cover car crash-related medical costs, and prohibit medical providers from charging higher prices for medical services that are paid for through auto insurance.

He had a receptive audience with the Senate committee. Sen. Tom Barrett, R-Charlotte, said the state's no-fault system puts poor people in an impossible position.

"I feel very strongly that we've criminalized the act of being poor in Michigan because if you're poor, there's absolutely no way you can afford auto insurance," he said. "They can't afford even the minimum amount of coverage to legally drive themselves to work and they're stuck in a position of breaking the law to provide for their family. That, to me, is an absolute shame. It's the biggest pocketbook issue facing our state."

Although no specific proposals have been introduced on reforming the no-fault auto insurance system, both the Senate and House of Representatives are holding multiple hearings on the issue before introducing detailed bills on the matter. The House of Representatives has even created a new committee -- the Select Committee on Reducing Car Insurance Rates -- to also look at the issue in the coming weeks and months.

Contact Kathleen Gray: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal

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