Reforming Michigan’s no-fault auto insurance system remains a high priority in Lansing after a proposal during the 2018 lame-duck legislative failed to gain the support needed to pass.
State House leaders this month, soon after convening the new legislative session, formed a special committee to look at no-fault reform, and the first bill introduced in the Senate offers a basic outline for reforms.
Tricia Kinley, the new executive director for the Insurance Alliance for Michigan, expected the issue to come up early in the new legislative session as Senate Majority Leader Mike Shirkey and House Speaker Lee Chatfield each have placed no-fault reform high on their legislative agendas.
“All signs point to they want to get this discussion going sooner rather than later,” said Kinley, who joined the Insurance Alliance for Michigan on Jan. 7 as its executive director. “The system is becoming unsustainable.”
For years, lawmakers have tried unsuccessfully to change the state’s no-fault auto insurance law that’s been in effect since the 1970s.
A key stumbling block has been what to do with provisions in the existing law that allow for unlimited lifetime medical coverage for people injured in vehicle crashes — an aspect that’s unique nationwide and that insurers often blame for Michigan’s highest-in-the-nation auto insurance rates.
A lame-duck bill considered toward the end of 2018 would have created a tiered system and allowed insurers to offer consumers three options for medical coverage in their auto insurance. That proposal also failed to gain the support needed to pass, setting the stage for lawmakers to try again in the new year.
The Insurance Alliance is “open to a variety of options,” said Kinley, who previously spent 18 months working for former Gov. Rick Snyder’s administration and before that worked for the Michigan Chamber of Commerce.
Chatfield, R-Levering, began the process for another effort to reform the no-fault law with the formation of a special committee to craft a solution. Rep. Jason Wentworth, R-Clare, will chair the new committee.
“The ridiculously high cost of auto insurance is the single biggest issue holding back our state and getting in the way of further growth,” Chatfield said in a statement. “This special committee will allow us to focus on delivering a real solution this term and lowering rates for hard-working Michigan families. It’s time we cut through the politics on this issue and finally move our state forward with real reform. The people we represent are demanding car insurance reform, and we are taking real, measurable steps to get it done.”
A day later, Republican Sen. Aric Nesbitt introduced a bill that lacks specific changes but offers a potential framework for crafting a reform proposal.
Language in the proposed bill states that it intends to generate rate relief for consumers, reduce the number of uninsured drivers on the road, bring more auto insurers to the market, and “bring much-needed cost controls to the no-fault system.”
That would occur by allowing residents over 62 years old with lifetime health benefits to opt not to carry personal injury protection in their auto coverage. It would also give consumers the ability to choose the level of medical coverage they buy with their policy “that suits the individual’s needs, lifestyle and budget.” The legislation intends that consumers “will enjoy corresponding savings on his or her automobile insurance premiums that corresponds with the chosen benefit level,” according to the bill.
The legislation, now pending in the Senate Committee on Insurance Banking, also would set limits on payments for care providers treating crash victims. Care providers would not get paid by auto insurers “more than a statutorily determined amount that is a reasonable payment for the treatment or service rendered.”
Consumer advocates and the Coalition Protecting Auto No-Fault advocacy group have been the primary opposition to prior reform efforts.
The Michigan Health & Hospital Association also has strongly opposed past legislation but remains “very open” to reforms in the no-fault law to address fraud and abuse, thereby potentially lowering rates, CEO Brian Peters said.
However, the association will not back off opposing any legislation that it believes could weaken medical coverage for crash victims.
The MHA argues that unlimited medical benefits are “not the only aspect” contributing to high auto rates in Michigan, “and certainly the solution is not to create unreasonable caps or fee schedules to address that issue.”
“At the end of the day, our membership and board certainly are not going to support any legislation that either cuts off access to quality, affordable care to those who are injured in an auto accident, and they certainly won’t support legislation that fails to create meaningful cost savings for drivers,” Peters told MiBiz in December just before the lame-duck bills were proposed. “In other words, if you simply cut off access to care by a fee schedule or caps or some other mechanism, and yet there’s no guarantee of rate savings for drivers, we certainly are not going to support that sort of approach.”
After lawmakers gave up on the bills at the end of 2018, the MHA said that no-fault reforms “warrant thoughtful consideration, time and attention,” which were in “short supply during the final days of legislative sessions.” However, the ideas in the bill introduced in the Senate are “the same things we’ve been dealing with for eight years,” said Scott Mitchell, executive vice president for advocacy and public affairs MHA.
“We’re ready for a robust and wide-ranging discussion … not a repeat of what we’ve been dealing with in the last legislative session,” Mitchell said.
The Insurance Alliance for Michigan favors a three-pronged approach to no-fault reform that targets fraud, gives consumers choice in the level of medical coverage they want to buy with their auto policies, and controls medical costs.
Similar laws have worked in other states, Kinley said. Providing some ability for consumers to choose the medical benefit in their auto coverage “is the first thing that would rein in costs,” she said.
“Every other state has figured out how to make this work in a balanced way. There is a reason no other state has the system that we have,” she said. “Striking a balance makes sure we cover people, and at the same time makes sure we have a system drivers are able to afford.”
The alliance, which represents property and casualty carriers in Michigan, also argues that health care providers overcharge to treat people injured in crashes, even for the same type of injury.
“There is not a lot of rhyme or reason two very similar services have very different charges,” Kinley said. “Why are there two different charges? That doesn’t make sense.”
Payments to care providers by auto carriers are based on negotiated rates, Peters said.
Creating a state-imposed fee schedule “is a dangerous precedent,” he said.
“You’re talking about agreements between private entities — private auto insurance companies, and private providers,” Peters said. “When you talk about dictating the terms between private entities, that’s a pretty dangerous precedent, in our view.”
The MHA also objects to creating a no-fault fee schedule similar to what’s used for Medicare and Medicaid, which are government-run programs funded by taxpayers and “a dynamic that we understand.” Medicaid also does not cover the full cost of treating patients, Peters said.