Fight brews in Michigan over fast-moving no-fault auto insurance reform bill
Lansing — The state Senate narrowly approved Thursday major changes to Michigan's auto insurance law, setting the stage for a battle between insurers and medical providers and the families of car accident victims over the future of the state's robust medical care.
The Republican-controlled Senate voted 21-17 to advance legislation to the House that would rein in medical expenses for auto insurance companies and relieve them from financial exposure to unfunded liabilities.
"Unlimited benefits don't work, the system is broken," said Sen. Rick Jones, R-Grand Ledge.
Democrats said the bill is a "giveaway" to profitable insurance companies by capping medical expenses they have to pay for while not guaranteeing any insurance premium relief for drivers. The GOP majority defeated a series of amendments sponsored by Sen. Coleman Young seeking mandatory rate reductions of 30 percent, 20 percent, 10 percent or 5 percent.
"If we're going to put price controls on the hospitals, I don't see why we can't put price controls on the insurance companies," said Young, D-Detroit.
Reforming Michigan's 43-year-old auto no-fault law has been a priority of Gov. Rick Snyder, who said Thursday he's working with Detroit Mayor Mike Duggan on separate legislation to bring rate relief to Detroiters who pay the highest auto insurance premiums in the country.
The Senate bill that passed Thursday caps in-home attendant care for family members who take care of an injured loved one at $15 per hour for a maximum of 56 hours per week.
Sen. Joe Hune, the bill sponsor, said the only way to contain the cost of escalating auto insurance rates is to "take costs out of the system" for insurers.
"I think this is the best plan that we could put together," said Hune, R-Hamburg Township.
But Democratic critics said the bill does nothing to address Detroit's auto insurance rates.
"You still have not done anything to fundamentally roll back rates in the city," Young said.
Democratic Sen. Bert Johnson railed against the legislation, saying he pays $6,624 a year for auto insurance and $6,048 for home insurance annually "to live in a poor city like Highland Park." He said black people in urban cities like Detroit, Pontiac, Flint and Benton Harbor have similar insurance costs.
"The reason that we're paying these high insurance rates is because this Legislature is looking the other way to what is amounting to or tantamount to economic racism," said Johnson, who also represents parts of Detroit.
Sen. Virgil Smith, D-Detroit, broke ranks with fellow Democrats and joined 20 Republican senators in passing the bill.
"We have to lessen the cost if we're going to reduce the price when it comes to auto insurance," Smith said. "We are pricing people out of our urban centers such as Detroit, Flint and Saginaw."
Ten Democrats voting against the bill were joined by seven Republican senators, including Majority Floor Leader Mike Kowall of White Lake and Sens. Marty Knollenberg of Troy and Tory Rocca of Sterling Heights.
Jones said he hoped lawmakers could pass a pilot program at a later date that would set lower insurance rates and coverage for Detroiters.
"It's much more important to have people with lower insurance (coverage) than to have them out there uninsured," Jones said.
Advocates for Michigan's no-fault auto insurance charged the fast-moving Senate bill would destroy the state's unique system of unlimited coverage for victims of the most profound crash injuries.
"The intent is to give relief to some of the most profitable corporations in the world," said Coalition Protecting No-Fault Insurance President John Cornack, referring to auto insurance companies.
Cornack heads the Eisenhower Center in Ann Arbor, which provides residential rehabilitation services to people with traumatic brain injuries.
Hune introduced the bill March 26 and got the committee he chairs to pass it after a single hearing Wednesday and teed up for a vote Thursday.
It would replace the current Michigan Catastrophic Claims Association, which pays for injury treatment costing more than $530,000, with a new entity headed by a governor-appointed seven-member board. That care is funded by an annual assessment tacked on to each insured vehicle owner's auto insurance premiums.
Hune's bill also calls for a fee schedule under which payments to health care providers for crash injury treatments would be based on rates for workers compensation injuries.
Insurers for years have blamed unlimited coverage for costly crash injuries for Michigan's relatively high auto insurance premiums.
Michigan is the only state that requires drivers to purchase unlimited personal injury coverage. The state with the next highest mandatory benefit, New York, requires at least $50,000 of personal injury coverage.
Under the bill, insurers would be on the hook for the first $545,000 in medical benefits and the new catastrophic claims fund would be liable for lifetime benefits exceeding that amount.
"Going forward you'll be mandated to buy two insurance policies — one for the first half million or so dollars of coverage and another for catastrophic claims," said Peter Kuhnmuench, executive director of the Insurance Institute of Michigan.
Michael Dabbs, president of the Brain Injury Association of Michigan, said the legislation's fee limits and co-payment requirements would hit hardest the families of crash victims needing long-term, high-level care.
One day before Hune's bill was introduced in the Senate, the association announced the annual assessment will drop July 1 to $150 per vehicle, down $36 from the current levy of $186 per vehicle.
MCCA Executive Director Gloria Feeland said motorists are getting the reduction because the fund's stock market investments have been more profitable than expected and because more than $29 of the current assessment has helped reduce a predicted deficit.