Michigan auto insurance reform creates ‘unintentional’ price spike

Jonathan Oosting
The Detroit News
Gov. Gretchen Whitmer signs historic no-fault auto insurance reform legislation.

Lansing — The Michigan Legislature on Tuesday approved a “technical fix” that would prevent a one-year auto insurance price spike under a recent reform law intended to reduce rates that routinely rank among the highest in the nation.

The law, as signed last week by Gov. Gretchen Whitmer, requires auto insurers to reduce personal injury protection premiums by July 2020, when motorists will be given the choice to purchase plans with less medical coverage than unlimited lifetime benefits.

But the law also requires that insurers increase automobile liability coverage for bodily injury, and that provision was “unintentionally” written to take effect immediately, Senate Majority Leader Mike Shirkey, R-Clarklake, told reporters after the proposed amendment cleared the upper chamber in a 33-4 vote.

“It was just an unintentional thing,” Shirkey said. “And actually, if we’d had let it go, it would have actually increased your insurance costs today, which is not what we were trying to achieve, of course.”

The initial auto insurance reform legislation sailed through the Republican-led Legislature with a single one-hour public hearing, which occurred prior to major amendments and bipartisan negotiations that led to the final version Whitmer signed last week to great fanfare on Mackinac Island.

"This bill was rushed. This bill was drafted over night. It had no public vetting, and there was this artificial deadline of signing it by the Mackinac Policy Conference," said Sen. Jeremy Moss, D-Southfield, who opposed the law and voted against Tuesday's  proposed revision.

"Every speaker (at the Mackinac Island bill signing) said it was not perfect, and what do you know? Five days later we're ... fixing a law that literally the pen ink is not dry on."

Medical providers and personal injury attorneys have criticized aspects of the law, which includes a tiered treatment fee schedule and will end the state’s long-standing requirement that auto insurance policies provide unlimited lifetime medical benefits in the event of a catastrophic crash.

Shirkey said he was not surprised by the negative reaction from special interest groups.

“In fact, I thought it was proof positive we hit pretty close to dead one when just about everybody’s initial reaction was negative.”

The legislation approved by the Senate would require policies to include additional liability coverage for bodily injury by 2020, the same date by which insurers must reduce personal injury protection premiums.

The House also approved the revisions in an 89-20 vote after rejecting amendments from Democrats who objected to some of the more substantive elements of the legislation, such as the use of territories to set rates.

The more than 100-page bill was written “so quickly that it’s just plain sloppy” and raises questions about additional changes needed for the legislation, said Rep. Donna Lasinski, D-Scio Township.

Republicans estimate the average Michigan driver could save between $120 and $1,200 on their annual auto insurance bill when medical choice provisions kick in next year. Insurers must reduce personal injury protection rates for at least eight years but can seek a state exemption if they can prove the cut would cause them insolvency. 

Moss, one of four senators to vote against the larger reform plan, said he stands by that vote and predicts the Legislature is "going to be fixing this law for many years to come."

"This is not lasting relief and it is not real rate relief," he said. "The only relief it provides is to people who gut their health care in order to pay less."

Staff reporter Beth LeBlanc contributed.