Opinion | Michigan needs auto insurance reform. But don’t scrap No-Fault

May 24, 2019: Bipartisan Michigan auto insurance deal reached between Whitmer, GOP

This should be met with no surprise: A recent statewide poll showed a large majority of Michigan citizens reject any plan to limit or eliminate medical benefits for auto accident victims.

When a friend or loved one is injured in an auto accident, the system provides the care that is needed, without delay, and for as long as it is needed. At Hope Network, we see the benefits of this system every day as people who were catastrophically injured work back toward independence.

Michigan’s Auto No-Fault system is a fundamentally good system. But we would all appreciate lower insurance premiums. There are many ideas on how to bring down rates, but not all of the ideas protect the policyholders. Some let the insurance companies off the hook while not guaranteeing any premium reductions.

The most common solution like this is called “PIP Choice,” which refers to limited Personal Injury Protection coverage and really just means insurance companies do not cover the cost of care for catastrophic injuries. This plan does not come with any guarantee of premium reductions. In fact, according to the National Association of Insurance Commissioners, the states with the highest average premiums, when you exclude the Comprehensive and Collision coverage, all have a form of this PIP choice cost solution. They are Florida, New Jersey, and New York.  

Yet Michigan is fifth in the nation on this same list, so we need real solutions—like passing an anti-fraud bill. When State Farm testified before the House Insurance Committee on March 20, 2016, the statistic was that fraud was 16 percent to 18 percent of all claims. Reducing this number would benefit all of us and protect our system as a whole. State Farm representatives agreed in their testimony that creating a better Fraud Authority should bring down premiums in Michigan. In fact, there is no dispute on any side of this debate that we need better anti-fraud initiative, yet the legislature has not passed any reforms in this area despite being provided legislative language.

Another proposal put forward already in legislative language is the establishment of a reasonable fee schedule for healthcare providers who accept this funding. A fee schedule would have multiple advantages over our current system by ending disputes on what a provider should be paid, as well as stopping providers who may be overcharging. Defined reimbursement rates will also reduce the number of lawsuits currently being filed related to provider charges. All of these benefits will positively impact premiums for drivers.  

Proposals have also been crafted to reduce premiums for senior citizens. The language provides an option to buy a wrap-around policy for those who have Medicare. This change would eliminate the cost of the duplicate coverage in their auto policy, while protecting the insured with the benefits not covered under Medicare.  

Finally, we need to address the non-driving rating factors that are used to price people out of the market. All drivers should be offered fair premiums adjusted on actual driving risk factors. In Michigan, many good drivers are being priced out of our system based on their home ownership status, job type, gender, and even status as a widow. Additionally, by having “good” credit instead of “excellent” credit, your annual premium in Michigan can increase by over $400 according to Consumer Reports. If pricing was exclusively based on driving risk, rates would go down for us all.  

There is a clear path forward to reduce the auto insurance premiums in Michigan without sacrificing the care that is needed for those injured and left with the potential for lifetime disabilities. If we work together and think smart, there can be a win-win.