Michigan takes aim at ‘crazy expensive’ auto insurance

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — “All options” are on the table as Michigan legislators return to session next week seeking to reform the state’s no-fault auto insurance system and reduce motorist rates that are among the highest in the nation.

House Republicans are leading efforts to change the state’s nationally unique law that guarantees lifetime medical benefits for catastrophic injuries, a task that has proven elusive during GOP Gov. Rick Snyder’s tenure.

They aren’t ruling out a controversial plan to give motorists the option to buy reduced-coverage policies that cap injury benefits. They’re not dismissing set fees for medical care opposed by hospitals, or mandated rate rollbacks opposed by insurers.

“At the end of the day, we have to have rate relief for the citizens of this state, and that means we’ve got to leave all options on the table,” House Speaker Tom Leonard, R-DeWitt, told The Detroit News.

Leonard and Senate Majority Leader Arlan Meekhof of West Olive are both calling auto insurance reform a top priority for 2017 because election-year politics would make a resolution more difficult in 2018.

Snyder has consistently advocated auto insurance reform. GOP officials are also anticipating a bipartisan push from Detroit Mayor Mike Duggan, a Democrat who has decried high rates in his city and is working on a solution behind the scenes.

“I’ve seen few people that are better at building coalitions than he is,” Leonard said of Duggan. “And when I say coalitions, I don’t just mean legislators; I mean outside individuals who understand the need to solve problems facing our state. We’ve got a unique opportunity right now.”

Michigan motorists consistently pay among the highest rates in the nation for mandatory insurance coverage, and rates in Detroit and other urban areas are often higher.

Statewide premiums averaged $1,351 in 2014, the third highest rate in the country, according to the National Association of Insurance Commissioners’ latest report released in January. recently pegged Michigan’s full-coverage average premiums as the nation’s highest.

Hospitals and patient advocates say there are ways to control costs but argue Michigan’s unique state law means motorists here get the best form of auto insurance in the country.

“If you’re involved in an accident, everything you would need for yourself or your family is covered. Nowhere else in the country is there a product that does that,” said Chris Mitchell of the Michigan Health and Hospital Association.

“We’ve had people in other states involved in auto accidents who end up bankrupt trying to pay their medical bills, or they end up being put in a nursing home because they don’t have the adequate care they need at home.”

While summer negotiations have not yet produced any actual legislation, reform advocates are optimistic concrete plans will take shape this fall and set the stage for passage.

“I think this is the best chance we’ve had in 30 years for very real change,” said House Insurance Committee Chairwoman Lana Theis, R-Brighton. “People who moved out of Michigan because they needed jobs are moving back because we have jobs for them, and they recognize what the difference is with their cost in insurance.

“It’s crazy expensive. Everybody knows that.”

D-Insurance goes statewide?

Duggan’s earlier push to allow insurers to sell a lower-cost, capped-coverage “D-Insurance” plan in Detroit died quietly in the last session. But the mayor has been making noise about creating a new statewide solution.

Duggan declined an interview with The Detroit News, with a spokesman explaining the mayor is not yet ready to discuss negotiations. But he has been talking with legislators and scheduled meetings with others in coming weeks.

“You are going to see an interesting coalition between right-wing Republicans and the city of Detroit to drive down car insurance costs for the entire state of Michigan,” said Duggan earlier this month, noting he’s been meeting with insurance industry and hospital officials.

Duggan’s challenger for mayor, fellow Democrat and state Sen. Coleman Young II, is not involved in the House negotiations on auto reform but sits on the Senate Insurance Committee. Young has highlighted the issue, promising if he becomes mayor to sue insurance companies for a mandatory rate rollback in Detroit because they allegedly single out and raise prices for African-Americans. The industry has consistently rejected claims of discriminatory “red-lining.”

Multiple legislators told The News they believe Duggan could back a plan that, like D-Insurance, would give motorists across the state the option to buy a policy with a cap on personal injury protection benefits. It may be paired with required rate reductions.

“I’m hearing some ideas about a package that would still cap catastrophic claims at $250,000 with an anticipated (rate) rollback of 30 percent, but we don’t know how long that would be over,” said Rep. Sherry Gay-Dagnogo, a Democrat on the House Insurance Committee and Detroit Caucus chair.

Gay-Dagnogo said Democrats are also concerned about high auto insurance rates, but they’ve traditionally fought coverage caps. She argued that any reform plan must prohibit insurers from using factors like ZIP code, education level and credit scores to determine individual rates.

“If you don’t remove education attainment, if you don’t remove credit scores, then even if you see a statewide 30 percent rollback, what you’ll see is insurance companies will still have the ability to raise rates based on those other factors,” she said.

Previous attempts to cap no-fault’s lifetime personal injury protection benefits have drawn emotional rebukes from auto accident victims — including Republican Oakland County Executive L. Brooks Patterson — who say the law guarantees high-quality care and keeps them off government insurance programs.

Critics say allowing the choice of capped catastrophic coverage would drive low-income motorists into the reduced-coverage plan.

It would be “devastating for injured people and very bad for state taxpayers, because eventually those who are catastrophically injured are going to hit that cap, they’re going to go onto Medicaid,” said Josh Hovey of the Coalition to Protect Auto No-Fault.

The coalition, which includes medical and consumer groups, is working with legislators to introduce a separate plan that Hovey said would “make insurance fair, affordable and protect accident victims.”

The group supports anti-fraud initiatives, a rate on hourly caps for family-provided medical care and set fees for treating auto accident victims.

A tough sell

Most lawmakers and interest groups seem to support the creation of a new authority to crack down on insurance fraud. But the challenge for Republican leaders is finding a mix of proposals that can win enough votes to pass the Senate and House, where some level of Democratic support will likely be necessary.

Snyder backed a 2013 plan that would have put a $1 million cap on personal injury protection benefits, but he said last month he does not want to go down that path again, “and it’s actually not the highest cost piece.”

The insurance industry disagrees.

“We have unlimited lifetime medical benefits, and no other state has that,” said Lori Conarton of the Insurance Institute of Michigan. “When people want to know why they pay more here, that’s the reason.”

Snyder has signaled interested in set medical fees. But hospitals, who are major employers in some legislators’ districts, oppose the concept. So do some free-market conservatives.

“I think it’s difficult for Republicans to get in-between a transaction between two private entities,” Meekhof told The News. “That’s basically price fixing, so that wouldn’t be at the top of my list.”

The Senate approved a plan late last year that would have created a fraud authority, limited paid “attendant care” hours for family members of auto accident victims and capped benefits in assigned claims cases involving uninsured motorists or pedestrians.

“That was a good compromise between the hospitals and the insurance companies,” Meekhof said. “We thought that was a good place to start, and we still believe that.”

The plan narrowly passed the Senate without any Democratic support, and the House did not take it up. Democrats say they’re willing to work with Republicans but are still awaiting an invitation.

“It’s time to put the partisanship away and find an answer that helps consumers,” said Senate Minority Leader Jim Ananich, D-Flint.