Michigan House Eyes No-Fault Reform Plan

Michigan House Speaker Tom Leonard, state Rep. Lana Theis and Detroit Mayor Mike Duggan on Tuesday, Sept. 26, announced a plan to reduce Michigan drivers' car insurance bills an average of 20 percent - and even more for seniors - bringing significant relief to residents paying the nation's costliest insurance premiums.

The bipartisan legislation to reform Michigan's no-fault insurance laws is sponsored by Theis, R-Brighton, and backed by Leonard, R-DeWitt, and Duggan, a Democrat. The plan would end Michigan's only-state-in-the-nation requirement that all drivers pay for unlimited lifetime health insurance through their auto insurers, no matter whether they already have health care coverage. Drivers who want to keep unlimited health care specifically through an auto insurance company could continue to do so.

This new plan would preserve the most generous auto insurance coverage in the nation, while driving down health care costs, rooting out fraud and abuse and reducing the rapidly growing number of lawsuits statewide that Michigan's 1973 no-fault law was supposed to prevent. The plan gives drivers options for lower rates and greater choice based on what they can afford.

"Everywhere I go traveling the state, people are demanding relief from their out-of-control auto insurance rates," said Leonard. "Michigan drivers are paying the highest rates in the country because we are the only state that requires everyone to buy bonus medical plans many don't want and others don't need. The families who are trying to make ends meet with this extreme burden deserve better. They deserve a plan that makes bold, long-term reforms. They deserve a plan that puts people first, not hospital lobbyists or insurance companies. They deserve a plan that will finally deliver real rate relief."

Michigan drivers pay the nation's highest auto insurance premiums, averaging $2,400 a year, according to insure.com, nearly twice the national average of $1,318. In the second highest state, Louisiana, premiums average $1,921.

"It's clear that no-fault is collapsing and not doing what it was designed to do, and that's costing Michigan drivers dearly," Mayor Duggan said. "People are paying too much, forcing them to cut back on other necessities so they can afford to drive. It leaves too many people driving uninsured or unable to drive at all because their insurance costs more than their car payment."

"Our plan provides affordability, flexibility and freedom for Michigan motorists," said Theis. "Michigan's current no-fault system is No. 1 for all the wrong reasons. It's time to let hard-working families and seniors choose their own PIP coverage level, saving hundreds of dollars on their premiums each year."

Insurance rates are highest in urban areas including Metro Detroit, Grand Rapids, Lansing and Flint. Detroit's average annual premium tops $3,000, the highest of any city in America.

Drivers would be able to choose options of $250,000 or $500,000 for personal injury protection (PIP), which covers medical care in the event of serious injury during auto collisions. These options provide coverage on a per person, per accident basis. The unlimited health care option will remain for those who want to keep it. PIP often accounts for as much as 50% of an insurance policy in Michigan.

New Jersey has the nation's second highest level of PIP coverage, at $250,000. Ten other states require $50,000 or less, and 38 states require no PIP at all.

Under the no-fault reform legislation:

* Insurers would be required by law to roll back rates for people who select the $250,000 coverage level to guarantee that the savings are passed to drivers and not kept in insurers' pockets. Future rate increases would be regulated by the State of Michigan for five years.

* Auto insurers would be subject to a fee schedule for health services, just like health insurers. Under the current law, car insurers pay three or four times more for services such as X-rays and MRIs than health insurance companies do, so the exact same MRI that costs health insurers $770 costs auto insurers $3,200 or more.

* Senior drivers who have lifetime health care coverage would be able to opt out of PEP since they're already insured through employee retirement plans, Medicare and the like.

* Lawyers would be prevented from filing liens against health care providers until an insurer has denied a coverage claim, preventing thousands of lawsuits from being filed. Lawsuits over auto crashes are skyrocketing across the state - accounting for 42% of all civil suits filed. Since 2010, the number of car-crash lawsuits has increased more than 50% in Oakland, Macomb and Kent counties. And in too many cases, lawyers are filing immediate suits for drivers against their own insurance companies for medical bills - before coverage decisions are even made - so the lawyers can pocket up to a third of those bills as attorney fees.

* Anti-fraud measures would crack down on those who abuse the system with unnecessary or excessive medical services. That would include banning lawyers or their families from abusing this system to profit from financial interests, direct or indirect, in medical care facilities, a conflict of interest that often creates a financial incentive for lawyers to drive up un-needed medical services.

* Any excess funding in the Michigan Catastrophic Claims Association that actuaries say isn't necessary to cover medical care would be returned to drivers who paid into it.