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    Lansing — Democratic Gov. Gretchen Whitmer issued another veto threat after the Republican-led House approved early Thursday reforms allowing auto insurers to sell policies with reduced medical coverage but requiring them to cut consumer prices for the next five years.

    GOP leaders hailed the the broad no-fault reform bill as a “landmark” proposal that could save Michigan motorists between $120 and $1,200 a year on average, chopping auto insurance rates that routinely rank among the most expensive in the nation. But Democrats complained required rate rollbacks would be temporary and most opposed the legislation. 

    The 2:09 a.m. vote capped a marathon session that began one day after the Republican-led Senate approved its own sweeping auto insurance reform proposal. The surprise action sets up a potential showdown with Whitmer, who threatened to veto the Senate plan if it reached her desk and signaled Thursday morning she is not on board with the House version either.

    Michigan residents are “fed up” with sky-high auto insurance rates, said House Speaker Lee Chatfield, R-Levering, who called the reform legislation “an incredible step forward” for the state after more than 30 years of debate.

    “Our broken system forces many people in our districts to make a decision between driving illegally and without the peace of mind of insurance or putting food on the table for their families,” he said before the 61-49 vote. “That decision is not just cruel, it’s unfair.”

    House Republicans adopted amendments in an attempt to address some issues critics complained about in the Senate, but they did not negotiate directly with Whitmer or Democratic legislative leaders. 

    "The governor has made it very clear that she is only interested in signing a reform bill that is reasonable, fair and provides strong consumer protections and immediate financial relief," said spokeswoman Tiffany Brown.

    "In their current form, neither bill passed by the Legislature meets that standard. The governor has also been very clear that passing a budget that fixes the damn roads is her first priority."

    The House and Senate proposals would both lift the state’s unique mandate that auto insurers guarantee unlimited lifetime medical benefits for injured motorists, a requirement critics contend is a primary cost driver in Michigan but supporters say ensures quality care for victims of catastrophic crashes.

    The House proposal goes beyond the Senate version by spelling out additional policy options and mandating that insurers roll back personal injury protection rates for five years. Savings would depend on the level of medical coverage motorists choose to purchase.

    Insurers would still be required to offer policies with unlimited medical coverage, but they could also sell plans with $500,000, $250,000 or $50,000 in personal injury protection. Like the Senate version, consumers with private or public health insurance that covers auto crash injuries could opt out of the medical coverage all together.

    State Rep. Donna Lasinski, D-Scio Township, opposed the plan and questioned the potential savings, arguing voters want lawmakers to provide “real rate reduction, without sacrificing the quality of our coverage.”

    State Rep. Rachel Hood, D-Grand Rapids, said coverage benefits guaranteed under Michigan law protected her family from financial doom after her husband was struck by a car while bicycling to work, resulting in injuries that required multiple surgeries and rehabilitation, and led to periods of unemployment.

    “$250,000 was spent and gone by the time we started our first surgery,” Hood said, arguing the proposal could doom other injured motorists to poverty. “Without no-fault insurance, our dreams would have been stolen by debt.”

    Rep. Ben Frederick, R-Owosso, also praised the intent of Michigan’s no-fault auto insurance system but voted for the reform legislation.

    “What use is the best medical benefits in the country if our people can’t afford it? It crushes the very families it was designed to protect,” he said.

    Non-driving factors

    The House proposal would not directly prohibit insurers from using non-driving factors to set rates, but it would empower the Department of Insurance and Financial Services to create rules to do so if “there is no rational correlation between the factor and insurance losses.”

    Whitmer last week directed the department to review the use of factors like ZIP codes, which Democrats argue can amount to “redlining” and drive up costs in urban areas like Detroit, considered the most expensive city in the nation for auto insurance.

    Detroit Democratic Reps. Leslie Love and Karen Whitsett voted for the plan after sponsoring amendments to add the rate rollback and non-driving factor language. Rep. Sarah Cambensy, D-Marquette, also voted for the measure, but other Democrats demanded more explicit guarantees.

    “You want to stop redlining? Put pen to paper,” said Rep. Abdullah Hammoud, D-Dearborn. “Cap how much auto insurance companies are making in Michigan. You can do that. Cap what factors they can and cannot use, specifically, right now.”

    While rate reductions would be required only for five years, the House proposal would make Michigan a “file and approve” state for auto insurance rather than a “file and use” state, requiring regulator rate approval before insurers can sell new policies.

    Both plans would create a “fee schedule” for medical providers, capping reimbursement rates for auto accident insurance claims at levels currently charged under worker’s compensation.

    In-home attendant care by family members would be limited to 56 hours per week. Under the House legislation, post-acute brain and spinal injury specialists would need national accreditation to qualify for insurance reimbursement for care they provide to injured motorists.

    Back to the Senate

    Chatfield established a special committee that spent several months discussing potential insurance reforms, but leadership used a procedural maneuver to put the 82-page policy plan up for a vote Wednesday night without a public hearing.

    Whitmer briefly joined House Democrats in a closed-door caucus meeting around 10:30 p.m. as Republicans prepared for a vote. She did not immediately weigh in on the new plan publicly but said Tuesday she would only sign an auto insurance overhaul she thinks is “responsible, fair and protects consumers.”

    The governor had blasted the Senate plan Tuesday, saying it “preserves a corrupt system where insurance companies are allowed to unfairly discriminate in setting rates” and would not guarantee cuts to drivers’ coverage.

    The Senate plan did not include any rate rollbacks for insurers or limit consideration of non-driving factors.

    Sen. Tom Barrett, R-Potterville, watched the House vote from the floor. While he had not yet reviewed the final details of the new proposal, he touted what he called a “collaborative effort” between both chambers.

    “We’re not going to nibble around the edges. We’re going for major reform, and the House and the Senate are in agreement on that,” he said.

    Sponsoring Rep. Jason Sheppard, R-Temperance, said he thinks it would be “very difficult” for Whitmer to veto a plan that would provide the kind of savings residents are clamoring for.

    “She’s got seven-and-a-half million constituents that need that break,” added GOP spokesman Gideon D’Assandro.

    Yearly auto insurance premiums in Michigan average $2,693, the highest rate in the nation, according to 2019 rankings compiled by The Zebra, an insurance search engine and industry research firm. Detroit is the easily the most expensive city in the country for auto insurance, with rates more than double the state average.

    Auto insurance rates are "unaffordable" by federal standards in 97% of all Michigan ZIP codes, according to a recent analysis by researchers at the University of Michigan. In Detroit, average premiums cost between 12% and 36% of residents' pre-tax income in almost every ZIP code.

    Partisan divide

    The late-night vote marked a legislative breakthrough for the House, where a similar proposal went down in flames in 2017. Lawmakers have debated auto insurance reforms for years, but past efforts routinely stalled out amid intense battles between the powerful insurance, hospital and trial lawyer lobbies.

    “People in every corner of Michigan are talking about this broken system and the need for real reform,” said Rep. Jason Wentworth, R-Clare. “We are giving Michigan families choice and control over their insurance plan so they can have peace of mind about their monthly bills.”

    But Democrats blasted the process. Minority party lawmakers first saw a copy of the bill around 7 p.m. and were asked to vote on it the same night without a chance for meaningful bipartisan negotiation, they said.

    “When you’re proud of your work, you show it to the people,” said House Minority Leader Christine Greig, D-Farmington Hills. “You have public hearings. You have testimony on the legislation.”

    Michigan law requires motorists to purchase auto insurance, but Republicans argued many are already opting out by driving illegally or moving out of state for cheaper options.

    Reducing medical coverage guarantees for injured motorists would likely increase state Medicaid costs. While estimates are not yet available for the House plan, the non-partisan Senate Fiscal Agency projected state Medicaid costs would be $65.9 million higher in a decade than they are now.

    The House plan includes new requirements for the Michigan Catastrophic Claims Association but, unlike the Senate plan, it would not phase out the reinsurance program that helps insurers pay the most expensive claims.

    The MCCA assesses an annual fee that insurers pass along to motorists. It is set to climb to $220 in July. But under the House and Senate plans, motorists who purchase policies with reduced medical coverage would not be required to pay that full fee, only a portion to cover projected deficits.

    Both plans would also create a new automobile task force within the Michigan State Police and include members from the Department of Insurance and Financial Services and the attorney general’s office, the MCCA and the Michigan Automobile Insurance Placement Facility.

    The House plan includes Senate-approved language that would toughen rules against insurers setting rates based on gender and prohibit companies from refusing to insure or limiting available coverage based on where the motorist lives.

    joosting@detroitnews.com

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