Our editorial: Legislature should move on D-Insurance

The Detroit News

Mayor Mike Duggan’s proposal to create an auto insurance program with cheaper premiums for Detroit residents hasn’t gone far in the Legislature. Meanwhile, Detroiter’s rates are as high as ever.

What does high mean? Detroiters routinely pay $6,000 or more for an annual policy. That’s led many to drive without coverage, further driving up costs for everyone else, or to use addresses in the suburbs as their official residence.

The mayor’s proposal, called D-Insurance, would at least allow insurers to offer competitive rates to drivers while ending legal scams that accompany many cases today. The Legislature should move on this issue.

The proposal would allow drivers in Detroit to opt out of the state’s mandatory unlimited personal injury medical policies, which auto insurers pay under Michigan’s no-fault auto insurance system. The city would partner with private insurers to offer the lower rates.

That means those who purchase D-Insurance wouldn’t pay into the Michigan Catastrophic Claims Fund, but they also wouldn’t be eligible for unlimited medical coverage. The mayor calculates policies would drop an average 30 percent for those who opt out.

D-Insurance plans would cap health care benefits at $275,000, and additional costs would be picked up by Medicaid, Medicare, other employer-provided insurance plans or plans bought through Obamacare.

Additionally, Duggan said there are “concerning” relationships between medical providers and lawyers, who take cuts of the already ballooned costs for medical care. In some cases, lawyers take a third of the medical payments, and medical providers don’t mind because they’re already being reimbursed at 300 percent the going rate for care.

There’s an incentive to maximize care because the system as it stands today will pay it out. That’s why standardized rates are critical, and why competition in the insurance system is a must.

A study commissioned by the city found Detroiters file medical claims at twice the rate of suburban drivers, but get in just as many crashes. The medical claims filed by Detroiters also cost twice as much as those filed by suburban drivers.

D-Insurance would provide these drivers an affordable rate for insurance by removing the profit incentive for lawyers to recruit victims for medical liability suits.

The bill has passed out of the Senate Insurance Committee, and as written could apply to other Michigan cities. There’s some angst in the Legislature that allowing these changes in Detroit will force changes statewide. And perhaps it should.

Michigan’s no-fault auto insurance policies make car insurance an enormous burden for state residents, and especially Detroiters.

Change has to start somewhere, and D-Insurance provides a realistic, workable solution that can be a catalyst for much-needed auto insurance reform in Michigan.