Premium Cut, Medical Cap Included in Michigan Car Insurance Proposal

February 24, 2014 by David Eggert

Michigan House Republicans have pitched a revised overhaul of the state’s auto insurance system that would cut premiums and curtail unlimited medical benefits for people catastrophically injured in crashes.

Speaker Jase Bolger said the wide-ranging plan ensures drivers still have the best injury coverage in the U.S. and can afford it. But criticism of the proposal mounted immediately and cast doubts that legislative efforts to significantly change auto insurance in the state can succeed.

The measure is both similar to and different from legislation that was backed 10 months ago by Gov. Rick Snyder and quickly stalled in the GOP-controlled House.

Michigan Governor Unveils Auto Insurance Plan

Michigan is the only state that offers unlimited medical benefits for catastrophic injuries and rehabilitation. The coverage costs motorists $186 per car per year, leading critics to say the system is too expensive in part because auto insurers are charged more than regular health insurers for the same medical services.

Under the new proposal, car insurance companies would be required to drop policy premiums by at least 10 percent for two years.

Most drivers would buy $10 million in lifetime personal injury protection instead of unlimited coverage, which Bolger, R-Marshall, said is 200 times more than in any other state and higher than a $1 million cap proposed last year. Low-income motorists could pick a cheaper option covering up to $50,000 in medical expenses.

“Nobody will feel this ($10 million) cap,” Bolger said, saying efficiencies included in the proposal would limit costs. “The existence of a cap drives people to be concerned about what they’re spending and asking do they need this service.”

Newly injured accident victims whose care surpasses the caps could be covered by their own health plan or government-subsidized insurance such as Medicaid. The 13,000-plus injured motorists with brain damage, paralysis and other incapacitating injuries currently covered by the Michigan Catastrophic Claims Association fund wouldn’t face the $10 million limit.

“We have addressed every single opposition we heard,” Bolger said. “I’m no fool. I know that people will find new excuses, they will find new reasons to oppose.”

He acknowledged two major players that haven’t compromised on auto insurance changes to date – hospitals and insurers – aren’t on board with the latest plan.

Democrats and a group of health providers, labor unions and others derided the revised plan, pointing out that it still proposes charging drivers $25 annually to help fund Medicaid because a 1 percent tax on health insurance claims isn’t generating as much as anticipated when it went into effect in 2012.

“In the long run, there are no real savings at all, and all the while Michigan drivers will be losing the best injury care in the country. That just doesn’t make sense,” said John Cornack, president of the Coalition Protecting Auto No-Fault.

The Michigan Insurance Coalition, representing insurers, credited Bolger for his leadership on a “very tough issue” yet said it opposes “government-mandated (premium) rollbacks in a free-market system.”

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