“Reforming” no-fault insurance in Michigan: the GOP’s gift to insurance companies

NOTE: updated to correct info about Sen. Joe Hune, Rep. Pete Lund and the House & Senate versions of the bill.

Michigan’s no-fault auto insurance is the GOP’s current target for reform. In what can only be described as a gift to auto insurance companies, they are looking to remove the requirement for unlimited lifetime coverage for victims of auto accidents. The claim is that this will save Michigan insurance purchasers (i.e., auto owners) so much money that our pockets will be filled and the world will be set right once again.

Problem is, it’s a bunch of lies. The fact is that, outside of Metro Detroit, the average cost to Michiganders for auto insurance is similar to the national average of $1,000 per year or less for a single vehicle. However, if a person is involved in a catastrophic car accident requiring lifetime care, the proposed lifetime cap will shift the costs to our social welfare system, ensuring that all of us pay more in the end. In fact, according to a recent study, Michigan Medicaid costs could rise by $30 million in the first year if this cap goes through.

A new study concludes that Michigan’s Medicaid program could spend an additional $30 million during the first year if the state Legislature approves bills to change the state’s 39-year-old no-fault automobile insurance law.

One of the provisions of the four-bill legislative package would allow drivers to choose different coverage levels for personal injury protection, or PIP, including one as low as $50,000.

Michigan drivers now pay $145 annually and receive lifetime unlimited injury and rehabilitation benefits.

“Our major conclusion based on the findings of our report is there is no compelling reason to reduce the coverage at this time,” said Jane Powers, vice president of Public Sector Consultants, the Lansing firm that conducted the study.

Interestingly, the sponsor of the Senate version of the bill delivering this gift to insurance companies, Sen. Joe Hune, has frequently talked in interviews about benefit choices starting at $250,000. However, when legislation was introduced, the lowest coverage level was $50,000. The Senate bill is SB 649.

The House bill, HB 4936 sponsored by Rep. Peter Lund, also has a little suprise tucked into it in the form of a $50,000 appropriation for a “study” on the effect of the new law. Why did he put this in there? Because appropriations bills are not eligible for citizens’ referendums where they are put on the ballot for Michigan citizens to vote on. Citizens’ referendums on our no-fault insurance rules happened in 1992 and 1994 when voters smacked the “reforms” down. Lund, Hune and their Republican friends in the Legislature don’t want any chance of that happening again.

This “reform” has been highly contentious. Legislators are reporting that they have never been lobbied so hard on any other issue this year. Yesterday, after a couple of weeks of hearing testimony, the bill was passed out of the House Insurance Committee on a mostly party line vote and now goes to the full House for consideration.

If you’d like to learn more about this new legislation, I commend your attention to the website of the Coalition to Protect Auto No-Fault (CPAN). There you can keep up to date on the bill, learn the facts about this GOP gift to insurance companies and find out how you can take action. There are links there for contacting your state legislator. PLEASE TAKE A MOMENT TO CALL YOUR LEGISLATOR AND TELL THEM TO VOTE NO! ON THIS BILL.

Hat tip to JC who provided me with copious amounts of information on this topic.

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  • aielman

    Why is it a requirement for lifetime coverage? Can’t that just be an option that you pay for?

    • cryingliberty

      It’s what’s required by the legislation as a minimum, just as other states regulate the minimum level of coverage for auto insurance. There are a number of reasons why – among them, it cuts down on litigation over medical damages, and it provides a guaranteed safety net for those in auto accidents that they will receive the medical care they need without having to worry about other kinds of insurance, but there is a strong part of me that feels it’s just a gimme to insurance companies.

      I’m honestly ambivalent on it – I see why it’s valuable, but I also don’t like how hard it hits my pocketbook. The unlimited personal injury coverage is nearly 50% of my insurance premium every 6 months; I barely make enough money to pay my insurance as it is.

      I would absolutely drop the unlimited personal injury coverage if given the opportunity – I can only barely afford it. 

      So while I see the point in having it be a requirement, I just wish it didn’t hit me so hard.

      • aielman

        I’m wondering the same thing. Why does it have to be required? I can see making a requirement that it’s offered if you want to pay for it. But why require it? If you want the coverage, pay for it. If you don’t, and you get a lifetime debilitation, that’s on you. Personal responsibility can be a bitch.

      • http://www.facebook.com/profile.php?id=1241887016 Robert C. Evans

        The only “gimmie” to the insurance companies is this newly proposed bill: HB 4936. As it stands right now if you are injured in an automobile accident your insurance company and the state of Michigan are responsible for your medical bills. The changes the bill proposes would force caps to that coverage and require that once those caps are reached that you seek treatment in the Medicade system. A recent study done by Crain’s Detroit reported that during the first year that this bill goes into effect the costs associated with treating accident victims through Medicade would dramatically rise by approximately $ 30 million dollars forcing higher taxes on Michigan citizens and more profits for the insurance companies. Paying the same or higher rates for your auto insurance for LESS coverage while increasing taxes in the state is bad for Michigan and bad for our economy. The only people who win if this bill is passed is the insurance companies. If you can barely afford to pay your insurance now just wait and see what happens if this bill is enacted. 

  • Jameskcormier

    Unfortunately a representative from AAA disclosed at the house insurance committee hearings last week stated that no one in the state of Michigan will save any money from auto no fault reform.    Actually, auto insurance rates will increase for all Michigan residences due to having to increasing the liability part of your auto insurance to protect yourself from being sued.    Also, your taxes will go up due to auto no fault switching from a private entity to a public one through Medicaid/Medicare.  And 1000s of Michigan families will go bankrupt attempting to provide services/care for their loved one.   So auto no fault reform is bad for everyone.

  • Barrmichigan

    well this is surely a obvious walk around the voters ,with lawmakers being bought off by insurers, maybe they will put a referendum on our voting laws so we cant get them out of office.how much will you have to pay for a policy if you dont have health coverage? $ 400.00 a month ? will the insurers require you to have their health insurance before you can purchase an auto policy? The auto insurers surely want to be last in line when it comes to paying out for claims. you pay first and when your bankrupt they may pay or maybe not! They do it on a daily basis now how bad will you think it will be if this bill passes
    The insurance commission is bought and paid for by the insurers,no no denying it..One large insurer made 1.8 billion off michigan taxpayers last year. ENOUGH IS ENOUGH !

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