LANSING — A proposed overhaul of Michigan’s no-fault insurance laws could give residents more choices and save them money on premiums, but could also shift costs for catastrophic injuries from insurers to state-funded Medicaid, opponents warn.
State Sen. John Proos, R-St. Joseph, said that the bill moved from a House committee Thursday is “a step in the right direction” toward lowering Michigan’s auto insurance premiums, the highest in the country.
Legislation passed by the Republican-led Insurance Committee on Thursday would end Michigan’s long-standing mandate requiring no-fault auto insurance policies to include unlimited lifetime personal injury protection for catastrophically injured motorists.
Instead, under the bill, insurers could offer plans with unlimited coverage; $500,000 in personal injury protection; or a $250,000 plan that would cover $225,000 in emergency treatment and $25,000 in additional care.
The original bill guaranteed a 40 percent reduction in insurance rates for people who choose a lower level of coverage at $250,000 in personal injury protection.
The amended bill includes a required 20 percent cut for drivers who choose $500,000 in personal injury protection coverage and a 10 percent reduction for the unlimited coverage that all drivers in Michigan now get.
It will also allow senior citizens to use Medicare coverage, rather than auto insurance, to cover medical bills, leading to savings of $800 to $1,000 a year.
Rep. Kim LaSata, R-Bainbridge Twp., said she was encouraged by the inclusion of the reductions at all rate levels.
While campaigning last year, and since taking office in January, LaSata said insurance reform has been the biggest issue for residents.
She said she has two family members being cared for after serious car accidents, and she understands the concerns of residents that those who are injured get the care they need.
LaSata also wants residents to have a choice in auto insurance, in the same way as homeowners insurance.
Michigan, which has had the no-fault mandate in place since 1973, is the only state that guarantees lifetime medical benefits for crash injuries, resulting in the higher premiums.
Proos said that counties that border Indiana and Illinois, where cheaper insurance rates are available, feel the effect more than some other parts of the state.
The House proposal is backed by Republican House Speaker Tom Leonard of Dewitt and Democratic Detroit Mayor Mike Duggan.
Critics say the proposal goes too far in slashing coverage guarantees for injured motorists who can quickly incur expensive medical bills. They also point out that the proposal would increase state Medicaid costs by shifting more patients onto the government health care program.
The House Fiscal Analysis reported that Michigan could see an additional $80 million in Medicaid costs per year after 10 years, and that the legislation could reduce state revenue by $5 million-$10 million a year.
The bill faces opposition on many fronts, including the Senate majority leader, as well as Democrats, hospitals and auto accident attorneys.
State Rep. Tim Greimel, D-Auburn Hills, charged that the bill will boost insurance company profits, and pointed out that the rate savings are only in effect for five years, after which the companies can raise premiums.
Senate Majority Leader Arlan Meekof, a Republican, sees the bill as “price fixing” and said that, as written, it is dead if it reaches his chamber.
The legislation would limit the amount medical providers can charge for treating injured motorists. Hospitals could charge 125 percent of Medicare rates for emergency services and 100 percent of Medicare rates for all other circumstances.
Insurance company officials are unsure about the impact of the rate reductions introduced Thursday, and they are concerned these rates will make coverage unprofitable.
Bills that would prevent insurance companies from considering where a customer lives, or their credit score, when calculating rates are being considered as a separate package. An amendment to accomplish this was defeated in the insurance committee.