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Mackinac Island — Gov. Gretchen Whitmer signed historic no-fault auto insurance reform legislation Thursday on the porch of the Grand Hotel during this week's Mackinac Policy Conference. 

After decades of debate over the 1973 auto insurance law, the GOP-led Senate and House last Friday approved the bill to lower Michigan's highest-in-the-nation auto insurance rates.

The law ends the state's unique requirement that motorists purchase auto insurance policies that guarantee uncapped lifetime medical benefits in the event of catastrophic crash injuries. Instead, insurers will be able to sell reduced coverage policies but will be required to reduce medical premiums for eight years. 

Drivers won't see rate relief for at least another 13 months because changes in the 120-page bill are phased in.

Noting the irony of signing a car insurance law “in the one place you can’t drive a car,” Whitmer celebrated the new legislation and urged continued cooperation on road funding.

“People of this state don’t care if you’re Republican or Democrat,” Whitmer told reporters. “They just want us to fix the problems.”

The plan creates a tiered fee schedule for medical providers that caps rates they can charge auto insurers for motorist care.

While insurers could not base rates on ZIP codes, they could still use “territory” as a factor to set rates based on geographic designations like census tracts, which are generally small areas that typically average about 4,000 residents. 

Detroit Mayor Mike Duggan thanked Whitmer, Senate Majority Leader MikeShirkey and House Speaker Lee Chatfield for honoring their campaign promises by creating legislation that should create rate relief for Detroit, where the average costs range above $5,000.

“I can’t tell you how much it means to the city,” Duggan said.

The plan would prohibit insurers from considering other non-driving factors like sex, marital status and credit score, which would be defined as a numerical ranking assigned by a consumer rating agency to measure credit risk.

Whitmer helped negotiate the bipartisan deal but conceded to GOP leaders on at least one major point. The first-term governor had said she would “draw the line” and veto any plan that includes a full medical opt-out for drivers with qualifying health insurance, but the new law allows that option. 

It was clear from the beginning of the year, negotiation would be necessary to reach a consensus, said Chatfield, R-Levering.

“This is a true testament to what can happen in divided government when you work together,” he said. “This has built an excellent platform” from which state leaders can tackle other high-profile issues.

Despite pressures to push an early version of the bill to the governor for a veto, House and Senate leadership came to the table to reach a consensus so as “not to destroy relationships, but build relationships,” said Shirkey, R-Clarklake.

“Almost always the attempts at reform started with a solution, not a full definition and understanding of the problem,” he said. “This time the interest groups were not the ones driving the reform. It was the Legislature driving the reforms.”

Motorists with Medicare or private health insurance that covers auto crash injuries will be able to purchase policies without personal injury protection. lower-income motorists with Medicaid health insurance could purchase auto plans with as little as $50,000 in medical coverage, while other drivers could select plans with $250,000, $500,000 or unlimited protection.

Insurers will be required to adjust rates by July 2020, and motorists would see savings they next time they renewed their policy under that date. For eight years, insurers would have to cut average personal injury protection premiums by between 10% and 100%,depending on which level of medical coverage a driver selects. 

Critics say the law will strip important treatment guarantees for catastrophically injured motorists and shift costs to other forms of insurance, including taxpayer-funded programs like Medicaid. 

Quicken Loans founder and Detroit billionaire booster Dan Gilbert was part of the push for the legislation, in part because he said auto insurance rates were impeding potential employees from moving to the area. 

When lawmakers and the governor appeared to be at a stalemate earlier this month, Gilbert began the process for a ballot initiative to implement the reform. Whitmer has said the petition had no bearing on the deal that was eventually reached, but Quicken Loans Vice President of Government Affairs Jared Fleisher disagreed. 

Fleisher said the threat of a ballot initiative “put pressure on all sides to come to the negotiating table.”

Last week's reform was "enormously significant legislation" that addressed the main cost drivers of auto insurance in Michigan, he said. Fleisher said he did not believe the reform would drive up other insurance costs.

"We’ve researched this extensively," he said. "Serious auto accidents are actually so rare compared to the every day conditions that drive health care costs that it barely moves the needle in terms of employer-provided health care costs.”

The non-partisan Senate Fiscal Agency disagreed, projecting annual state Medicaid costs will rise $70 million in the next ten years as a result of the law. “If there were less interest in unlimited PIP coverage, then the increase in Medicaid costs would be greater,” the agency said Tuesday in a new analysis.

Older motorists with Medicare coverage who opt out of personal injury protection would be fully covered for hospital, pharmaceutical and physician services, the agency said. But they would have limited coverage for long-term care, so those costs would likely be shifted to Medicaid after an injured motorists spends down their savings to qualify. 

Likewise, Medicaid recipients who purchase policies with $50,000 in medical coverage and require extensive care after a car crash “would see their medical costs shifted from automobile insurance and the (Michigan Catastrophic Claims Association) to Medicaid,” the agency said. Over time, the largest component of this cost shift would be nursing home and attendant care.”

Personal injury attorney Steve Sinas, legal counsel for the Coalition for Protecting Auto No-Fault, said the reform plan is “nothing to celebrate” and called it a “sad day for Michigan.”

“The people of Michigan might possibly get some marginal savings on their auto insurance, but they’re giving up so much more than they are getting. Medical coverage for auto accidents will be much more limited going forward, and the insurance industry will have greater control over people’s medical care,” he said. “The future auto accident victims of Michigan will experience the deeply flawed nature of these reforms.” 

The new law will create an increasingly complex system for Michigan motorists to navigate, Sinas said, and consumers will “inevitably” be confused by the risks and benefits of various types of coverage they will be able to buy. 

“In the end, these reforms enrich the insurance industry, take critically important rights and benefits away from people, and will shift significant financial burdens onto Medicaid for auto accident medical care, which will ultimately be paid by Michigan taxpayers,” he said.

eleblanc@detroitnews.com

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