Michigan House passes rate relief for no-fault auto insurance

May 09-- May 9--A day after the state Senate passed drastic changes to Michigan's no-fault auto insurance system, the House of Representatives passed its own version shortly after 2 a.m. Thursday, guaranteeing reductions in auto insurance rates.

The House plan was similar to one passed by the Senate, but provided more options for auto insurance coverage and guaranteed rate reduction on the personal injury protection (PIP) portion of insurance bills ranging from 10% to 100%. PIP accounts for about 50% of an insurance bill. The rate reduction would last for five years.

Republicans said the bill would not only provide desperately needed rate relief, but would allow people to afford insurance and stay in Michigan, rather than cross borders to find cheaper insurance and bring even more economic development in the state. On a 61-49 vote, all 58 Republicans and three Democrats -- Reps. Sarah Cambensy of Marquette and Karen Whitsett and Leslie Love of Detroit -- voted for the bill.

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"People in every corner of Michigan are talking about this broken system and the need for real reform," said Rep. Jason Wentworth, R-Clare. "We're giving Michigan families choice and control over their insurance plan. We've been over paying for decades and it's time for a change."

Bur Democrats said the rate relief was an illusion and that the bill didn't adequately address insurance companies using non-driving factors to determine rates.

"Do we stand with insurance companies to give them what they want," asked Rep. Yousef Rabhi, D-Ann Arbor. "These are the companies who have been screwing our constituents time and time again and we're letting them off the hook."

The five coverage options:

-- Totally opting out of personal injury coverage, which would result in a 100% guaranteed rate reduction in the PIP portion of an insurance bill. A driver would have to have health care coverage that would cover treatment of injuries caused in a car crash;

-- A $50,000 coverage plan that is accompanied by a guarantee of 80% reduction in the PIP portion of insurance bills;

-- A $250,000 coverage option that would also result in a 60% reduction in PIP costs;

-- A $500,000 plan that comes with a 30% reduction in PIP;

-- And an unlimited medical benefit option similar to what is offered now under the no-fault system. This option would guarantee a 10% rollback in PIP rates.

Like the Senate plan, the House bill also requires health care providers to use rates for services that are in place for workers' compensation claims. Under the current no-fault system, medical providers are allowed to charge different, much higher rates for services if auto insurance was paying the bill.

Prohibiting insurance companies from using non-driving factors, such as credit scores, gender and ZIP codes -- was a big requirement for Democrats. And an amendment was added to the bill directing the state Department of Insurance and Financial Services to develop rules that would define and prohibit insurance companies from using non-driving factors to determine rates. Insurance companies, for example wouldn't be allowed to use ZIP codes to decide whether they would offer insurance to drivers, but no language about the price of that coverage appeared in the bill.

Rep. Cynthia Johnson, D-Detroit, said the bill didn't go far enough to address the disparities between the drastically higher rates charged in different parts of the state, especially in urban areas like Detroit where many drivers pay at least $5,000 for their insurance.

"Until you, my white brothers and sisters, stand up and be real honest about what's happening in cities like Detroit, we're always going to be fighting like this," she said. "I get it. Your constituents don't want to be where I am, paying $800 a month, while they're paying $100 a month."

The quick consideration of the bills -- the Senate bill passed in less than one day on Tuesday afternoon and the House of Representatives passed its version of no-fault reform after 2 a.m. Thursday -- sets up a test of wills with Gov. Gretchen Whitmer, who said Tuesday that she would veto any plan that didn't provide significant and guaranteed rate relief for drivers.

"If the governor is looking for rate reduction, I'm all for it. I'm very open to compromise," said Rep. Aaron Miller, R-Sturgis, noting he'd also support prohibiting insurance companies from using non-driving factors, such as credit scores and ZIP codes, to determine rates. "I'm very open to compromise. If it means getting the whole thing done, I'll sign up for it."

The Senate plan passed on a 24-14 vote with two Democrats joining all the Republicans to support the proposal. Republicans had an ally in Detroit Mayor Mike Duggan, who supported a similar plan last year that failed in the House. Duggan vowed to support state House and Senate candidates who would back insurance reform and several of those candidates who won their races were expected to vote for the insurance bill.

Two Detroit Democrats, Reps. Leslie Love and Karen Whitsett, offered key amendments to the bills -- the guaranteed rate reductions and prohibiting insurance companies from using non-driving factors from being used by insurance companies to determine rates -- that helped provide some bipartisan support for the bill.

Other Democrats decried how the bill was written on Wednesday and rushed through with no public hearing and little bipartisan input. And the rate relief in the bill wasn't enough.

"We need guaranteed rate reduction of 25%, not just on your PIP, but on your entire bill," said Rep. Kyra Harris-Bolden, D-Southfield. "That would be real money for our residents."

Rep. Rachel Hood, D-Grand Rapids, told members about her husband Dave who was hit by a car while riding a bike, suffering multiple fractures, enduring several surgeries and months of recovery, which resulted in his losing his job.

"The $250,000 option is a joke. We went through that before the first surgery," she said. "Without no-fault, people will simply be doomed to poverty. And we'll just pay for it on the other side of the problem with escalating and out of control health care costs."

The primary difference between the House and Senate versions of the bill was the Senate didn't guarantee any rate relief other than the partial elimination of the annual fee that funds the Michigan Catastrophic Claims Association's mission of providing unlimited medical benefits beyond $500,000 for people severely injured in car crashes. The MCCA also would be phased out under the Senate plan.

The House version guaranteed rate relief, but requires insurance companies to offer a plan that would provide unlimited medical benefits to people critically injured in accidents. The MCCA would stay in place, but is expected to shrink as fewer drivers would choose that option. The MCCA fee would also be reduced from the $192 per year charge now to a lower amount -- roughly $43 a year -- for drivers who opt out of unlimited medical benefits. People who decided to get insurance policies with unlimited medical benefits would continue to pay the MCCA fee.

Other elements that were included in both versions of the bills were:

-- A fraud unit within the Michigan State Police to investigate cases of fraud across the insurance industry and its customers.

-- Ending lawsuit abuse by tightening up rules against attorneys having conflicts of interest with medical care providers and ending the practice of agencies selling long-term care annuities to car crash victims.

-- Limits on attendant care for health care workers providing help to car crash victims.

Rep. Jason Sheppard, R-Temperance, sponsored the legislation and noted that Michigan has the highest rates in the nation.

"Auto insurance works in 49 other state," he said. "And no other state is pushing to move away from their system to match what we do in Michigan. "Our state's auto no fault system is broken and Michigan families are paying the price."

The Michigan Health and Hospital Association was quick to criticize the bill.

"It's a sad day in Lansing when legislators are celebrating jamming through a bill on a serious and complex issue under the cover of darkness," said the association's CEO Brian Peters.

Tricia Kinley, CEO of the Insurance Alliance of Michigan, said she hopes some of the flaws in the bill get ironed out when it moves back to the Senate.

"We have serious concerns with the arbitrary rate and regulatory mandates that will be counterproductive to the goal of saving drivers money," she said. "We are hopeful House and Senate leadership can iron out the differences in their two no-fault reform proposals and reach a compromise that will give consumers the savings they deserve without crippling a growing industry in the state."

The bill -- HB 4397 -- now has to go back to the Senate for consideration. If it passes and is signed by Whitmer, the new rates would go into effect six months after the bill is signed into law.

Contact Kathleen Gray: 313-223-4430, [email protected] or on Twitter @michpoligal.

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