Plan to cut Mich. insurance rates faces Senate hurdles

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — Detroit Mayor Mike Duggan and House Speaker Tom Leonard on Tuesday unveiled a sweeping auto insurance reform plan that drew bipartisan support but was still opposed by many traditional foes.

The plan would drive down premiums 20 percent to 50 percent for Michigan motorists who opt to buy lower-coverage plans, Duggan and Leonard said. But a no-fault insurance coalition and Oakland County Executive L. Brooks Patterson countered that the proposal would benefit insurers and hurt crash victims with substandard coverage.

The bipartisan legislation would allow drivers to choose between three levels of personal injury protection benefits, tie medical provider fees to Medicare rates, guarantee rate reductions and limit insurer premium increases for five years.

Duggan, Leonard and House Insurance Chairwoman Lana Theis, R-Brighton, introduced the legislation alongside a broad group of business and community leaders, including Detroit NAACP President Wendell Anthony, trial attorney Mark Bernstein, Michigan Republican Party Chairman Ron Weiser and Michigan Chamber of Commerce CEO Rich Studley.

“Very seldom do you see something come up in this town that has a coalition this big,” Leonard said.

The proposal from the Democratic mayor and Republican state House leader would dramatically revise no-fault auto insurance in Michigan, the only state that guarantees lifetime medical benefits for motorists catastrophically injured in crashes. Instead, drivers could choose unlimited coverage or plans that cap lifetime injury coverage at $250,000 or $500,000.

“We are going to give drivers actual choice in the amount of insurance they buy,” Duggan said, noting the minimum $250,000 cap would still match New Jersey as the most generous in the country.

Thirty-eight states do not require any health coverage in auto insurance, the mayor said, instead relying on private or government-sponsored health insurance to pay medical bills.

“The only place in America where people don’t have choice on health care is car insurance” in Michigan, he said.

The legislation faces several obstacles, including early opposition from hospitals and Senate Majority Leader Arlan Meekhof. The West Olive Republican has blasted mandated rate rollbacks as a form of “price fixing” and criticized medical provider fee schedules on similar grounds.

Patterson, a Republican who has fought attempts to scale back lifetime benefits, called the plan “the greatest robbery since the Great Train Robbery in 1855.”

“$500,000 on a catastrophic accident would probably last you two to three weeks, that’s how expensive it is in emergency care,” said Patterson, who was injured in a 2012 crash. “After that, who pays for your care? It goes over to Medicaid, a publicly funded insurance program you and I and every citizen in Michigan pays for.”

The proposal is the latest in a long string of attempts to reform Michigan’s 1973 auto no-fault law and drive down premium rates that routinely rank among the highest in the country.

The three-tier legislation would force auto insurers to reduce rates. Under the $250,000 cap plan, they would have to cut 40 percent from the personal injury protection portion of motorist bills and slash an annual fee for the state’s catastrophic injury fund, currently $170 per vehicle.

The average driver who picks comprehensive auto coverage but reduced medical benefits would save about 20 percent a year, Duggan said. A driver with basic coverage could save closer to 50 percent.

Seniors with Medicare or other retiree health coverage could save an average of 35 percent, or between $800 and $1,000 a year, because they would no longer be required to purchase redundant auto insurance coverage, Duggan said.

Michigan drivers are legally required to purchase auto insurance and pay an annual state Catastrophic Claims Association fee — $170 per vehicle this year — to reimburse insurers for medical claims that exceed $555,000. The fee, which would be cut under reduced medical benefit plans, is intended to spread the cost of the unlimited medical benefits across all insurers.

Nearly two dozen House Republicans, five House Democrats and one Senate Democrat participated in Tuesday’s announcement, including Rep. Sylvia Santana, D-Detroit.

“I don’t believe there will be enough votes in either caucus, Republican or Democrat, to get this done alone,” Leonard said. “This has to be done in a bipartisan fashion.”

The Coalition Protecting Auto No-Fault quickly criticized the plan because it would weaken the state’s traditional guarantee of unlimited lifetime medical benefits. President John Cornack argued it would “cut costs on the backs of some of Michigan’s most vulnerable people,” including crash victims who are paralyzed or have brain injuries.

State Sen. Coleman Young II, a fellow Detroit Democrat who is running for mayor against Duggan, questioned the timing of the plan and criticized it for failing to address alleged “redlining” or limiting insurers from raising rates again after five years.

“I don’t know why he’s doing this all now,” Young said. “He could have done this three years ago. I think it’s an election ploy.”

The new legislation would create a “fee schedule” limiting the amount medical providers can charge auto insurers for treating crash victims. It would generally link provider reimbursements to Medicare rates, but hospitals would be allowed to charge 125 percent of Medicare rates.

Duggan, who ran the Detroit Medical Center for nine years before becoming mayor, said an MRI at a hospital can cost $484 if you’re on Medicare, $770 if you have private insurance or $3,259 if you’re covered by auto insurance.

“That is what is driving up your car insurance rates,” he said.

Medical providers have disputed similar figures and opposed mandated fee schedules.

The new legislation “isn’t a new beginning — it’s a non-starter,” Michigan Health and Hospital Association CEO Brian Peters said in a statement. He said nothing in the bill guarantees rate reduction for anyone who still chooses unlimited medical benefits.

A separate bipartisan plan would maintain unlimited lifetime injury benefits but attempt to combat fraud, establish fees for some medical providers and prohibit insurers from using “non-driving factors” like ZIP codes or gender to set rates.

Meekhof continues to push a plan the Senate approved late last year that would create a fraud authority, limit paid “attendant care” hours for family members of auto accident victims and cap benefits in assigned claims cases involving uninsured motorists or pedestrians.

The new proposal incorporates some of those elements, Duggan said. In addition, it would create new rules prohibiting attorneys from owning medical facilities or service centers where they send their clients.

Meekhof said earlier this month the Duggan and Leonard plan would be “dead” on arrival, but he had not yet seen any details of the actual plan.

“Sen. Meekhof has made clear his personal position,” spokeswoman Amber McCann said Tuesday. “That doesn’t mean he won’t listen to his caucus members if they want to discuss parts of the House plan that might come over to the Senate.”

Theis expects to start public hearings on the legislation next week and will entertain possible changes. “It’s all hands on deck,” she said. “If you’re coming with an idea that’s actually going to create savings for folks, we’re going to take a look at it.”