Rarely is there a political coalition with such bipartisan support as there is for the latest reform to Michigan’s no-fault auto insurance. Detroit Mayor Mike Duggan and House Speaker Tom Leonard have joined forces to craft what would be a major improvement to state drivers’ ballooning costs.
Michigan’s rates are the highest in the country, with premiums roughly twice the national average, and Detroit’s are in a league of their own. That’s because Michigan is the only state which guarantees unlimited lifetime benefits for those injured in automobile accidents, under its no-fault insurance law.
The plan could reduce auto insurance rates anywhere from 20-50 percent, and would give drivers a choice in the level of personal injury coverage they receive. Those two changes alone would address some of the most egregious problems with Michigan’s system.
Reforming no-fault auto insurance is critical for the state, and particularly for Detroiters, who have faced an uphill battle with car insurance for a long time.
As Detroit sits on the cusp of thousands of new jobs, residents must be able to get around town and get to those jobs. No-fault insurance rates have discouraged them from being able to afford insurance, and led many to drive without insurance altogether.
The proposal would cut premium rates in three tiers, with the biggest cut being 50 percent for average drivers with no collision or theft coverage.
Drivers could also choose their level of personal injury coverage: $250,000, $500,000 or continue to receive unlimited lifetime benefits required of Michigan drivers now.
Giving drivers those options would be a drastic change, and would bring Michigan in line with the majority of other states. Other states which have dropped no-fault requirements in the past several decades have seen decreases in overall costs to the system, a primary objective of reform here.
One of the most anticipated elements of this proposal is the fee schedule it would install. Without it, medical fees have been able to skyrocket, driving up costs system-wide. Fees would be set at either 100 percent of 125 percent of the rates Medicare patients who are victims of car crashes are charged by health care providers following an accident.
That should lower costs across the board, but more importantly it should remove the incentive for health care providers to charge more to those covered by private insurance or auto insurance. Currently there’s only a fee schedule in place for workers compensation.
The Duggan-Leonard plan would also require insurers to roll back insurance policies from 20-50 percent. The state would regulate rate increases for the next five years.
That mandate makes the plan unappealing to Senate Majority Leader Arlan Meekhof, whose office has said he would rather see reforms to the law overall in the hopes those changes generate rollbacks on their own. He’s not wrong in principle. Government shouldn’t be in the business of price fixing. But reforming Michigan’s no-fault system is a big lift that requires bipartisan support, and compromises will have to be made.
Not surprisingly, the trial bar and medical providers are lobbying to maintain the unlimited lifetime benefits.
Yet groups across the spectrum support the plan, from the Michigan Chamber of Commerce to the NAACP. Gov. Rick Snyder’s office says he is encouraged by the renewed interest in this issue and that “hopefully this time around we can find a solution.” It would benefit all Michigan residents if they could.