Lansing — The Michigan House on Thursday night rejected a plan to overhaul the state’s no-fault auto insurance system despite a strong push by Speaker Tom Leonard and Detroit Mayor Mike Duggan.
Duggan and Leonard argued their bipartisan plan would drive down auto insurance rates that routinely rank among the nation’s highest by allowing drivers to choose plans that cap currently unlimited lifetime medical benefits for injured motorists.
But critics defended guaranteed benefits in current law and questioned provisions they said could allow insurers to skirt cost-cutting requirements.
The plan failed in a 45-63 vote, with support from 41 Republicans and four Detroit Democrats.
Leonard, a DeWitt Republican who is running for state attorney general in 2018, put the bill up for a vote even though he suspected it would fail, a move intended to put members on record. While 22 House Republicans voted against the measure, he blamed the failure on the 41 Democrats who opposed it.
“They represent areas where citizens need the most help, and tonight they failed them,” Leonard said after the vote. “A supermajority of House Republicans stood up to reduce auto insurance rates… and they walked away.”
House Minority Leader Sam Singh, D-East Lansing, dismissed Leonard’s suggestion that Democrats were unwilling to negotiate in good faith, pointing to a separate bipartisan reform package that GOP leadership has criticized.
“To me, there was so many flaws in this bill,” Singh said. “That’s why you saw such bipartisan opposition to this.”
The failed vote is the latest setback in a decades-long effort to reform Michigan’s no-fault auto insurance system, which critics say has not lived up to its promise to control costs by limiting expensive legal battles.
“Our broken, outdated no-fault system has caused rates to skyrocket to the highest in the nation,” said sponsoring Rep. Lana Theis, R-Brighton. The cost has “caused families to decide whether they want to put food on the table or follow the law.”
Lawmakers on both sides of the aisle say the status quo is not working, but they have failed to agree on a solution amidst intense fights involving powerful insurance and hospital lobbies.
The legislation would allow motorists to choose between three levels of personal injury protection, ending a longstanding requirement that all auto policies include unlimited lifetime medical coverage for costly catastrophic injuries.
Motorists could still choose unlimited coverage or plans capping medical expense coverage at $500,000 or $250,000, which would include $225,000 for emergency treatment and $25,000 for extended care.
Duggan, a Democrat who is seeking re-election next week against state Sen. Coleman Young II, was at the Capitol for the second straight day to lobby members of his own party. Leonard had repeatedly said he would need 10 to 15 votes from Democrats.
Duggan vowed to continue fighting for reform despite the failed vote and told reporters he was proud of the four Detroit Democrats who supported the plan, saying they “stood up to enormous pressure from special interests.”
“Everybody in the state of Michigan outside the 36-square miles of Lansing knows car insurance is too high and something needs to be done about it,” Duggan said.
State Rep. Leslie Love was among the Detroit Democrats who voted for the bill, which she said was not perfect but would be a good start. She said she pays $5,300 a year for auto insurance.
“Preserving a system that is not attainable for nearly half the motorists in the city of Detroit does no justice for poor and middle-class folks,” Love said, arguing high rates encourage motorists to illegally drive without insurance.
She denied accusations she is beholden to the insurance industry and accused special interests on all sides of creating an unsustainable system.
“It’s like there’s a bottomless airbag of cash at the scene of every auto accident,” Love said. “It’s a gravy train, and everyone is profiting except the drivers. The people.”
But several Detroit Democrats opposed the plan, including state Rep. Sherry Gay-Dagnogo, who implored the House to address alleged “red lining” by prohibiting insurers from basing rates on non-driving factors, such as zip code.
The Republican majority rejected her proposed amendment she said would limit a practice that has allowed “racial discrepancies” in auto insurance rates and driven up premiums for drivers of color.
“The rates we pay are exorbitant, predatory, and have stymied our economic ecosystem,” Gay-Dagnogo said. Territorial pricing has “locked my citizens into cyclical poverty, and that’s inhumane.”
The legislation sought forced premium reductions for at least five years by requiring insurers to file rates that “reflect savings expected” from the legislation.
Insurers would generally have to cut the personal injury protection portion of motorists bills by an average of 40 percent for $250,000 policies, 20 percent for $500,000 policies or 10 percent for polices with unlimited medical coverage.
But the proposal included a hardship waiver that would allow insurers to sell plans with lesser savings if the Department of Insurance and Financial Services deemed it justified.
“There is a gaping hole in this legislation,” Singh said, questioning the promised savings. “Whenever you talk about an insurance company, you always have to read the fine print.”
Leonard and House Republicans made several changes to the legislation Thursday ahead of a possible late-night vote, including a five-year sunset that would require the Legislature to revisit the law in 2023.
Republicans also modified a proposed fee schedule for hospitals by increasing a proposed cap on reimbursement rates that hospitals that treat injured motorist could seek from auto insurers. The change moved at least one reluctant Republican to support the plan.
“I’ve been a ‘no’ all along because I think we need to protect Michigan citizens, but I also think Michigan citizens have the right to be able to afford insurance,” said Rep. Ed Canfield, R-Sebewaing. “And at this point we know that 22 percent of people don’t have insurance, or don’t buy insurance.”
“Hospitals are making money with this product the way it is,” he continued. “We’re also all good Republican people who believe that you should be able to charge what you wanna charge. I also believe that we have to be fair. And I believe that this schedule we brought out is fair and that’s why I’m saying I’m supporting.”
The legislation sparked intense lobbying from opponents and supporters, including competing television ads from special interests who have battled over the issue for years.
The Michigan Health and Hospital Association, which opposes fee schedules, ran ads suggesting the proposal would benefit “greedy insurers” and called it “another Lansing rip off.”
The Insurance Alliance of Michigan, an industry group that had initially voiced concerns with the legislation, ran supportive ads this week urging legislators to “stand up to big hospitals” and vote for the plan.
A group called “Reform Auto No-Fault Now,” which is not listed in state incorporation or campaign finance records, was also running Facebook ads urging passage of the bill and accusing at least one legislator of “fighting for special interest groups.”
Critics noted the non-partisan House Fiscal Agency project the bill would inrease taxpayer costs for Medicaid as coverage caps force more injured residents onto the government-run health care plan. State spending would jump $500,000 in the first year and $80 million annually within a decade, according to the agency.
To qualify for Medicaid, you “basically have to be bankrupt,” said Rep. Brian Elder, D-Bay City, who called the bill a “bait-and-switch con game.”
“It threatens to wipe out the hard-earned assets of working people simply because they were unfortunate enough to be in a car accident,” he said.
The latest version of the bill would have established a cap on reimbursement rates for hospitals and other medical providers that treat injured motorists. They could not charge auto insurers more than 160 percent of Medicare rates, up from 125 percent in the initial legislation.
Separately, the state House on Thursday approved a bipartisan plan to forgive outstanding “driver responsibility fees” by October of 2018. As of August, Michigan motorists had accumulated $637.1 million in outstanding fees, but officials did not expect to recoup the full amount.
Critics argue the fees, which are imposed on top of traditional traffic tickets, are a punitive double-tax on motorists and have cost many delinquent drivers their licenses, limiting their ability to travel to jobs and contribute to the state economy.
The House approved the main bill in the amnesty package in a 103-5 vote, setting up continued negotiations with Gov. Rick Snyder and the state Senate, which last month scaled back a similar forgiveness plan.