Auto Insurance Reform Bill Goes Down in Michigan House
A bill to reduce auto insurance premiums was defeated late on Nov. 2 by the Michigan House, another blow for longstanding efforts to rein in medical costs contributing to the highest average rates in the country.
After hours of behind-the-scenes arm twisting and an extensive floor debate, the GOP-controlled House voted 45-63 against House Bill 5013 — 10 votes short. Forty-one of 45 Democrats and 22 of 63 Republicans joined to reject the measure.
“Everybody in the state of Michigan … knows car insurance is too high and something has to be done about. But there’s something about once you enter the boundaries of (Lansing), that year after year nothing gets done,” said Detroit Mayor Mike Duggan, who lobbied unsuccessfully for passage of the bill and whose city’s residents face the highest rates in the U.S. Another major proponent was Republican House Speaker Tom Leonard, who for the second time this year put a high-profile measure up for a vote knowing it would likely fail.
Michigan, the only state to require unlimited lifetime coverage for medical expenses resulting from auto crashes, allows health providers to bill car insurers much more for care than health insurers pay. A $170 annual per-vehicle fee also is assessed to reimburse car insurers for expenses surpassing $550,000 for the catastrophically injured.
The legislation sought a 40 percent cut, for five years, in personal injury protection fees for motorists choosing $250,000 rather than unlimited PIP coverage. That could equal an estimated 20 percent reduction in the overall cost of a comprehensive policy.
Drivers choosing $500,000 in benefits could have seen a 20 percent PIP reduction and those sticking with unlimited coverage would have paid 10 percent less for PIP. Motorists age 62 and older who have Medicare or other retiree health insurance could have opted out entirely of PIP.
The bill sponsor, House Insurance Committee Chairwoman Lana Theis, said the legislation is “not perfect” but is a “huge step in the right direction.”
It would “rein in out-of-control costs, crack down on fraud in the system, give drivers a choice and safe families hundreds, potentially thousands of dollars annually on their auto insurance while making it possible to sustain their unlimited option,” the Brighton Republican said.
Critics countered that the measure would gut quality benefits for the injured, shift costs to Medicaid and not stop insurers’ discriminatory practices by which urban drivers pay more due to factors that have nothing to do with their driving history. They also contended that the rate reductions would not be guaranteed.
“If your insurance company does some math that says they will lose money if they lower your PIP, they may not actually lower it at all. Michigan deserves better,” said Rep. Stephanie Chang, a Detroit Democrat.
Following the vote, Leonard said Republicans produced 41 votes and he had long suggested he would need 10 to 15 Democrats to vote yes. He accused “disingenuous” Democrats of “siding with the hospitals and trial attorneys over the people they represent.”
But House Minority Leader Sam Singh of East Lansing, who backs separate bipartisan auto insurance legislation, said the bill has “many flaws” and “forces people to go into bankruptcy to continue to get access to their health care services.”
Leonard responded that the alternative package “puts more costs into the system.”
Even if the measure had won approval in the House, it would have faced an uncertain future in the GOP-controlled Senate, whose leader opposes government-mandated premium reductions.
Before voting, the House amended the bill to soften a proposed fee schedule for medical services covered by auto insurers. Health providers could not have charged more than 160 percent of Medicare rates.
Duggan said opponents of the measure played the “Lansing game” and proposed changes they knew would fail, such as banning territorial rating — which he said will never pass because it would require legislators to offset rate cuts for some motorists with hikes on others.