OUR TAKE – No-fault reforms are working for most Michigan drivers

Dear Gov. Gretchen Whitmer, Senate Majority Leader Mike Shirkey and House Speaker Jason Wentworth,

This week marks the annual Detroit Regional Chamber Mackinac Policy Conference — and the three-year anniversary of the historic signing of bipartisan auto no-fault reforms. The organizations listed below want to thank you for supporting these important reforms after decades of inaction, and for working together to finally address Michigan's broken auto no-fault system.

As we reflect on Michigan's previous broken, outdated, and expensive auto no-fault system, we again realize why these bipartisan reforms were so necessary. For too long, Michigan was the only state in the nation to require that drivers purchase unlimited, lifetime medical benefits with their auto insurance policy. This was the main culprit in Michigan's exorbitant auto insurance premiums. Michigan's outdated auto-no-fault system was also a welcome mat for fraud, and it encouraged massive overcharging by hospitals and other medical providers.

Bipartisan auto no-fault reforms have cracked down on fraud, stopped the overcharging and finally gave Michigan consumers a choice. Recently, more than 7 million insured Michigan drivers, including businesses across the state with vehicle fleets, received the largest refund in state history. The $400 per-vehicle refunds from the Michigan Catastrophic Claims Association (MCCA) would not have been possible without the bipartisan auto no-fault reforms signed into law three years ago. That's approximately $3 billion in savings going into Michiganders' pockets at a time of rising prices on everything from groceries to gas to prescription drugs. This is in addition to the $1 billion in savings drivers are already receiving because of reduced MCCA fees resulting from reforms. The health and viability of the MCCA to cover long-term claims remains sound while millions of Michiganders are saving money.

While Michigan retains the unlimited lifetime medical benefits coverage option, we are seeing drivers explore the new less expensive options finally made available to them under reform. According to insurance industry data, nearly 1 in 4 Michigan customers are choosing coverage other than unlimited, giving them the flexibility to choose what works best for their family and their budget. Across all Personal Injury Protection (PIP) benefit levels, Michigan drivers are saving money, according to publicly available data from the Michigan Department of Insurance and Financial Services (DIFS). Bipartisan auto no-fault reforms required insurers to cut rates, creating more savings for Michigan drivers.

Other successes of bipartisan auto no-fault reforms shouldn't be overlooked. Since reforms took effect on July 2, 2020, more than 202,000 Michigan drivers have purchased auto insurance and nearly half were Michigan drivers who didn't have car insurance for at least three years. Despite the COVID-19 pandemic and uncertainty in the worldwide economy, 42 new insurance companies have entered the Michigan market since auto no-fault reforms were enacted We believe this competition is good for consumers and having more options — as opposed to fewer — is in the best interests of Michigander consumers and will likely spark even more savings.

With all these successes, there are still some who want to turn back the clock to the days of rampant overcharging, fewer choices and high costs. The medical fee schedule, which is still in its first year of implementation, is a critical part of reform because it reined in egregious overcharging by medical providers and brought fairness and common sense to the costs associated with care. Before the medical fee schedule took effect, there were numerous examples of overcharging uncovered by the Detroit Free Press, such as a medical provider charging $5,000 for an MRI when billed to auto insurance. The same MRI by the same doctor at the same facility cost $500 when billed to Medicare. Consider thousands upon thousands of examples of this overcharging and it's no wonder Michigan had the highest auto insurance in the nation.

Beyond overcharging, the broken system also incentivized medical providers to push needless medical procedures, which undermined the quality of health care for patients. A Citizens Research Council report prior to reforms noted, "Prices paid by auto insurers are higher than those paid by other payers for the same services and Michigan's auto insurance statute ensures that auto insurers are more likely than other parties to pay for auto-related injuries." Reforms also created utilization review, which allows independent experts, such as board-certified chiropractors and therapists, to review cases and charge disputes brought to DIFS and plays a significant role in controlling costs for unnecessary medical procedures. Prior to the bipartisan auto no-fault reforms, there was little other recourse for dispute resolution outside of heading to court.

Because bipartisan auto no-fault reforms made several changes to a system that had not been updated for nearly 70 years, the new law put in guardrails and protections for people. Let's be clear — people are still receiving the medically necessary care they need under the law. Michigan still allows people to choose unlimited personal injury protection — and even if they select a lower threshold such as $250,000, that is still five times more coverage than any other state in the country.

Additionally, the Legislature has appropriated $25 million to the long-term care industry as a stopgap for any businesses that were struggling to transition. To date, several applications are pending before DIFS to access these funds. We understand the process takes time and we encourage any business in the long-term care industry to apply. The small number of DIFS attendant care complaints — 118 in total with only 14 remaining to be solved — is a testament to how successful reforms have been given these changes affected millions of consumers.

Despite efforts by some to turn back the clock on reforms, the facts and data compel us to recognize bipartisan reforms are creating savings for 7.2 million Michigan drivers, cracking down on fraud, stopping overcharges and giving Michigan consumers a choice.

Thank you for your leadership and continued commitment to these important bipartisan reforms.

American Property Casualty Insurance Association

Insurance Alliance of Michigan

Mackinac Center for Public Policy

Michigan Chamber of Commerce

National Association of Mutual Insurance Companies

NFIB Michigan

National Insurance Crime Bureau