Our Editorial: Shut off the auto insurance windfall
Michigan can’t afford to give automobile insurers an $80 million a year gift. But unless lawmakers correct a mistake they made in 2012, that’s how taxpayer money will continue to be spent.
The unexpected windfall came four years ago when the Legislature transferred administration of a program that pays for medical care for individuals who are injured in accidents caused by uninsured drivers.
Insurers lobbied the Legislature to transfer administration of the Michigan Assigned Benefits Claims Plan to the Michigan Automobile Insurance Placement Facility in hopes of containing skyrocketing costs.
Michigan’s no-fault insurance law guarantees unlimited lifetime benefits to those injured in an accident involving an uninsured motorist.
From 2008-13, medical costs arising from those claims spiraled out of control, rising 63 percent. Over a 15-year period from 1998 and 2013, costs to insurers rose five-fold to $226.7 million, industry data indicates.
Over the past two years, claims have continued to increase, though not as rapidly, up 7 percent.
Lawmakers did not intend to make the insurers who pay the claims eligible for a tax break on the claims submitted when they made the switch, but that’s what happened.
The tax credit covers a third of the cost of medical bills for those eligible to make a claim. It amounts to $60 million this year and will rise to $80 million next year.
Gov. Rick Snyder hasn’t included that money in next year’s budget because he expects lawmakers to eliminate the tax credit, and they should.
The insurance industry and its supporters are fighting elimination. Some backers claim that if the credit goes away, insurers will pass on the $40 per car hit to their customers.
But no one can be sure if the credits are making their way to policyholders now. If the Legislature wants to hand out an $80 million tax break to motorists, it should do so directly, and not count on insurers to distribute it for them.
The state budget is going to be under considerable stress over the next several years as the costs of remediating the damage done in Flint and wiping away the debt of Detroit Public Schools are paid.
Lawmakers should correct their mistake and retrieve the dollars they unintentionally gave auto insurers.