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More would save under revised auto insurance plan

Jonathan Oosting
Detroit News Lansing Bureau

Lansing — Michigan auto insurers could offer reduced-coverage plans but would have to lower rates for all policy types under a modified reform proposal that a state House panel approved Thursday.

The Republican-led Insurance Committee advanced the proposal in a 9-5 vote, a small but significant step for legislation still facing steep hurdles at the state Capitol.

“The people want change, and this provides that,” said Rep. Lana Theis, R-Brighton, who sponsored the bill and chairs the committee. “The people want some real rate reduction and this provides that.”

The proposal, backed by Republican House Speaker Tom Leonard of Dewitt and Democratic Detroit Mayor Mike Duggan, would end Michigan’s longstanding mandate requiring no-fault auto insurance policies to include unlimited lifetime personal injury protection for catastrophically injured motorists.

Instead, insurers could offer plans with unlimited coverage, $500,000 in personal injury protection or a $250,000 plan that would cover $225,000 in emergency treatment and $25,000 in additional care.

Critics say the proposal goes too far in slashing coverage guarantees for catastrophically injured motorists who can quickly rack up expensive medical bills and note the proposal would increase state Medicaid costs by shifting more patients onto the government health care program.

The plan originally sought to require insurers to reduce the personal injury protection portion of motorist bills by an average of 40 percent for the $250,000 coverage option. An amendment adopted Thursday would also mandate 20 percent PIP savings for the $500,000 plans and 10 percent savings for unlimited coverage plans.

“People want savings across the board,” said Rep. Joe Bellino, R-Monroe, who sponsored the amendment. “Some people on both sides of the aisle who were hesitant to vote for the bill because of that expressed interest in this.”

Insurers would generally be required to keep the rate reductions in place for five years, “after which insurance companies can again raise their premiums willy nilly,” said Rep. Tim Greimel, D-Auburn Hills, minority vice chair of the insurance panel.

The Michigan House Fiscal Agency on Wednesday projected the reform plan would increase state Medicaid costs $80 million annually within 10 years as more injured motorists hit their auto coverage cap and are forced to rely on the government health care program. That’s less than the $150 million cost shift the agency originally projected.

“By allowing insurance companies to cap benefits for some plans, it will end up transferring and shifting that cost onto the taxpayers of this state,” Greimel said.

The GOP-led panel rejected an amendment by Rep. Sherry Gay-Dagnogo, D-Detroit, that sought to limit alleged “redlining” in urban communities by prohibiting insurers from using non-driving factors like zip codes to determine premium rates.

“It just goes to show that people lack real understanding of how to drive down costs and are afraid that their respective districts would somehow have to share the burden that Detroit is feeling,” Gay-Dagnogo said.

The insurance reform legislation faces an uncertain future in the full state House, where Leonard has said he will need votes from 10 to 15 Democrats and is counting on Duggan to deliver them.

No Democrats voted for the legislation in committee, although Rep. Abdullah Hammoud of Dearborn passed on the vote and Rep. Phil Phelps of Flint was absent.

“There’s still a lot of work that needs to be done on the bill,” said Rep. Michael Webber of Rochester Hills, the lone Republican to vote against the plan in committee.

Webber said he does not believe the bill has enough support to pass the House as is and is hoping supporters will make “serious concessions” on the floor.

Leonard said he might hold a vote on the measure even if he knows it will fail, a tactic he took on an income tax rate rollback bill in February. He didn’t rule out the possibility of floor action next week but did not commit to that time line either.

“I believe this is the biggest issue right now facing this state that this legislative body actually has control over,” the speaker said. “And I do believe at some point, all 108 members of this chamber need to let the constituents of their districts know where they stand.”

Beyond the House, Senate Majority Leader Arlan Meekhof, R-West Olive, opposes the legislation and has blasted mandated rate reductions as a form of government “price fixing.”

“I think if we’re really going to push for real reform and real savings, people expect it to go all the way through the process and not just be a vote in the House,” Webber said.

Theis said forcing insurers to lower rates for all coverage options is appropriate because they should be able to save money through a proposed “fee schedule” for medical providers, which the hospital lobby opposes.

The legislation would limit the amount medical providers can charge for treating injured motorists. Hospitals could charge 125 percent of Medicare rates for emergency services and 100 percent of Medicare rates for all other circumstances.

But the expanded rate reduction mandates approved in committee could force insurers to cut premiums to the point they’re “not profitable,” said Pete Kuhmench of the Insurance Institute of Michigan.

“Our preference is to not have any mandate whatsoever and let the market determine rates,” he said.

Bellino, who sponsored the rate reduction amendment and voted for the bill, predicted a figurative “bloodbath” as debate continues on the House floor.

“If everybody hates it, it’s got to be good for the people,” he said. “There’s not one special interest that’s happy about this.”

Staff reporter Michael Gerstein contributed