Whitmer, GOP leaders announce deal to lower auto insurance premiums

Detroit Free Press (MI)

May 24-- May 24--LANSING -- Gov. Gretchen Whitmer and Republican lawmakers reached a deal Friday to lower Michigan's highest-in-the-nation auto insurance premiums, giving drivers rate reductions on a portion of their insurance ranging from 10% to 100%.

"After constructive conversations over the past week, I am pleased to announce that we have reached an agreement in concept on bipartisan auto no-fault reform legislation that will lower costs and protect coverage for Michigan drivers," Whitmer said in a news release Friday morning.

The deal provides five options for drivers on the level of personal injury protection coverage they want, in contrast with the current insurance system that provides unlimited lifetime benefits for people critically injured in car crashes. Under the deal, that unlimited coverage option would guarante a 10% rate reduction in PIP coverage, which covers about 50% of an insurance bill.

The rate rollbacks would last for eight years, after which there are no guarantees.

The other options include:

-- A 20% reduction in PIP rates for $500,000 in coverage

-- A 35% reduction for $250,000 in coverage

-- A 45% reduction for $50,000 in coverage

-- And a 100% reduction for senior citizens and drivers who have qualifying health insurance, such as Medicare or private insurance.

"The deal guarantees rate relief for every Michigan driver; provides a choice in coverage levels; establishes more uniform and structured compensation levels for medical providers, and removes the ability of insurance companies to discriminate based on non-driving factors," Whitmer said.

"I look forward to working with the legislature to pass and sign this important legislation into law."

But the agreement faced many critics, including lawmakers in Whitmer's Democratic Party. Among the concerns was whether insurance companies could hike other portions of the insurance bill to offset mandated rollbacks in the PIP rates.

Currently insurance companies have a "file and use" policy with DIFS, which means that the company files rate changes with DIFS and begin using those rates. DIFS, at some point, gets back with insurance companies to approve or reject those changes after the insurance company has already started to use the higher rates

The new bill would require insurance companies to have a "file and approve" system, which would mean that company would file a rate request with DIFS and have to wait until DIFS approvs it before they could start using that rate.

"The sad reality of the ... deal that the Republicans and Gov. Whitmer are touting is that it falls far short of what the politicians are promising," said Steve Gursten, president of Michigan Auto Law,a firm representing motorists injured in accidents.

"The rate reductions are not going to make an appreciable difference to lower premiums for people who currently cannot afford auto insurance. No stakeholder gets what they wanted, but the consumer failed to get what they needed most out of this -- meaningful rate relief."

Speaker of the House Lee Chatfield, R-Levering, and Senate Majority Leader Mike Shirkey, R-Claklake, released a joint statement.

"The people we serve are demanding action. For far too long, drivers from Macomb to Menominee and from Kalamazoo to the Keweenaw have been absolutely fed up with paying the nation's highest car insurance rates," they said.

"They have been waiting decades for state government leaders to step up and deliver results. Today, that wait is over."

Also included in the deal are bans on insurance companies using non-driving factors such as sex, marital status, zip code, credit score, home ownership, education level and occupation as factors in setting rates. Those provisions are the key to attracting Democratic votes to the bill.

Insurance companies, however, would be able set rates based on "territories" of the state, which haven't been defined yet.

Another element of the bill would set the rates medical providers can charge for services for car crash victims. Under current law, the rates charged for services when auto insurance is paying the bill are far higher than the fee schedule for Medicare or Medicaid patients or workers' compensation.

The new fee schedule, which will be phased in over two years, will allow hospitals to charge between 200% and 240% of the Medicare reimbursement rate.

The auto insurance issue emerged early as a top issue for legislative Republicans, with Whitmer saying she would veto legislation that did not guarantee real relief, protect consumers and restrict the use of non-driving factors in setting auto insurance premiums.

Pressure to reach a deal ramped up in the last week when Detroit billionaire businessman Dan Gilbert formed a ballot committee to send a reform plan to voters. That move, if successful, would have taken away the governor's veto power.

Chatfield and Shirkey said Friday's vote "will be a significant victory for the hard-working people of Michigan that will finally fix our broken car insurance system and deliver real, meaningful rate relief for families, seniors and household budgets all over the state."

Michigan is currently the only state in the nation with unlimited catastrophic health coverage as part of its no-fault auto insurance law.

Legislative staffers are still drafting the bill language, and the House of Representatives is expected to begin voting on the measure this afternoon with the Senate following suit later Friday.

In a statement released Friday morning, Detroit Mayor Mike Duggan called the bipartisan agreement "outstanding."

"It will cut rates for Michigan drivers significantly and we congratulate Gov. Whitmer and the Republican and Democratic leadership for coming up with an excellent bipartisan deal," he said.

Senate Minority Leader Jim Ananich, D-Flint, said the agreement "shows how, when we work together, we can find common ground."

The deal announced Friday is expected to go beyond auto insurance reform plans approved separately in the House and Senate.

Early on May 9, the state House approved massive changes to Michigan's auto insurance law that were introduced only late Wednesday. House Bill 4397 would replace Michigan's unlimited medical coverage for catastrophic injuries with a range of personal injury protection coverage options and mandate five years of reduced rates for that portion of a motorist's auto insurance bill. Three Democrats -- two from Detroit -- joined all Republicans to pass the measure 61-49.

The House action followed similar action on May 7 in the GOP-controlled Senate, where major auto insurance changes were introduced, rushed through committee and approved in a 24-14 vote, with two Detroit Democrats voting yes with the Republicans. Senate Bill 1 would not mandate specific reductions in portions of the auto insurance premium, as the House bill would. But it, too, would give a range of coverage options and would phase out the Michigan Catastrophic Claims Association. That piece of the package alone was expected to reduce the current catastrophic claims surcharge of $192 per vehicle to about $40.

Whitmer said she would veto either measure, leading to intense negotiations over the past two weeks between the Republican leadership and Whitmer. The prospect of a ballot initiative on the issue also lent a sense of urgency to the negotiations.

Early reaction to the deal was mostly positive. Detroit Regional Chamber President Sandy Baruah said the deal "demonstrates that bipartisan agreement and compromise is alive and well in Michigan ... While the details are not yet clear and certainly there will be elements that will cause concern, the Chamber applauds any progress."

But while the deal was expected to get wide bipartisan support in the House and Senate, some Democratic lawmakers still had concerns about the bill.

"I am deeply disappointed. This "deal" on no-fault will hurt people, not result in real rate reduction and still allows for discrimination. Why can't we get this right?" said Rep. Yousef Rabhi, D-Ann Arbor, on Twitter.

And Rep. Sherry Gay-Dagnogo, D-Detroit, noted on Twitter, "I will mark this as The Day I Became an Independent!"

Contact Paul Egan at 517-372-8660 or [email protected]. Follow him on Twitter @paulegan4. Read more on Michigan politics and sign up for our elections newsletter.

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