Michigan’s No-Fault Overhaul Faces Rough Road Ahead

Oct. 26--LANSING -- An overhaul of the state's pricey no-fault auto insurance reform passed a state House committee Thursday, but faces a tougher climb in the full House of Representatives.

On a mostly party-line 9-5 vote in the House Insurance Committee, the overhaul was amended to guarantee rate reductions for all drivers.

The original bill guaranteed a 40% reduction in insurance rates for people who choose a lower level of coverage -- $250,000 in personal injury protection. But the amended bill also includes a required 20% cut for drivers who choose $500,000 in PIP coverage and a 10% reduction for the unlimited coverage that all drivers in Michigan now get.

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It's a plan that has been pushed by Detroit Mayor Mike Duggan and Speaker of the House Tom Leonard, R-DeWitt, as a way to lower astronomical rates paid by drivers, especially in urban areas.

Michigan's drivers pay the highest insurance rates in the nation, in part, because of the unlimited medical benefits for people who are catastrophically injured in car accidents that is a part of the state's no-fault auto insurance. Those benefits, along with insurance companies' ability to charge different rates based on where people live, make auto insurance unaffordable for many people, especially in Detroit.

Duggan has called it an issue of civil rights for residents in his city and Leonard said he's inching closer to having the 55 votes needed to pass.

"We're going to need 10-15 Democratic votes. (Duggan) is working diligently on the Democrat side of the aisle. The Democrats represent areas that need this reform much more than other areas," Leonard said. "This is the biggest legislative issue facing the citizens of this state. And I believe all 108 members of this chamber need to let the constituents of their district know where they stand."

Guaranteeing rate relief for all drivers no matter what coverage they choose should help gain more votes for the final product, Leonard said.

But many Democrats, the state Senate and the insurance industry aren't on board with the changes.

State Rep. Tim Greimel, D-Auburn Hills, offered an amendment that would have required the 40% rate reduction for all drivers no matter what level of coverage, but it failed on a party-line vote.

"This really just pads insurance company profits," he said. "The purported rate savings in the bill are only in effect for five years after which insurance companies can raise their premiums willy-nilly."

And Peter Kuhnmuench, executive director of the Insurance Institute of Michigan, said the additioinal mandated rollbacks that were included in the bill on Thursday were troublesome.

"We support the movement of the legislation to the floor, but we have some serious concerns with the mandatory rate rollbacks," he said. "They weren't properly analyzed before they were proposed and I'm concerned that they're not based upon reality."

In the Senate, Majority Leader Arlan Meekhof, R-West Olive, has said the he's opposed to anything that mandates the rates that insurance companies can charge their customers.

The auto insurance reform would:

* Allow drivers to choose the level of personal injury coverage: $250,000, $500,000 or the unlimited lifetime benefits that all Michigan drivers now have to have

* Cut premium rates 10% to 40% in three tiers: a 40% cut for average drivers with comprehensive coverage and $250,000 in personal injury coverage; a 20% cut for people with $500,000 worth of PIP coverage; a 10% cut for unlimited coverage and a 35% cut for a retiree with full lifetime health care

* Have the state regulate any rate increases for the next five years.

* Set medical fees at either 100% or 125% of the rates charged for Medicare patients for medical services provided by health care providers to victims of car crashes. Right now, such schedules aren't in place for car crash victims, leading to inflated prices for services to people hurt in car accidents.

* Allow senior citizens to use Medicare coverage, rather than auto insurance, to cover medical bills, leading to savings of $800 to $1,000 a year.

A bipartisan package of bills has been offered that primarily would prohibit insurance companies from using any non-driving factors, such as zip code or credit scores, when they determine rates. But a hearing has not been scheduled for those bills.

State Rep. Sherry Gay-Dagnogo, D-Detroit, offered that amendment on Thursday, but it was defeated on a party line vote with Democrats supporting it and Republicans opposing.

The bill -- HB 5013 -- now moves to the full House of Representatives for consideration.

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

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