Michigan Governor Signs Auto Insurance Bill into Law

On an Mackinac Island where no cars are allowed, Gov. Gretchen Whitmer signed a bill into law Thursday that will make significant changes to Michigan’s no-fault auto insurance system.

Source: Detroit Free Press | Published on May 31, 2019

auto insurance premiums fanning inflation

Surrounded by Republican and Democratic lawmakers and Detroit Mayor Mike Duggan, Whitmer said the bill signing signaled a newfound partnership that will help forge new agreements to get the state’s $60 billion budget complete this summer and find a solution to fix Michigan’s miserable roads.

“It wasn't always easy. There were moments where we thought it was going to fall apart, but we stuck it through. We stayed true to our mutual goal of finding relief for people and not succumb to partisanship or special interests,” Whitmer said. “And today is a model for how we can and must continue to move forward. This shows that divided government does not have to look like Washington, D.C.”

Duggan, who was particularly interested in pushing auto insurance rate relief for Detroiters, who face the highest bills in the state, said the day was historic.

“No matter what else happens, it’s going to be a great day since Gov. Whitmer signed the no-fault bill,” Duggan said.

The auto insurance deal is expected to provide Michigan drivers with significant reductions in Michigan's highest-in-the-nation premiums, guaranteed for eight years, by giving drivers five choices for their insurance, ranging from keeping the current system of unlimited lifetime benefits to opting out entirely from the personal injury protection portion of insurance coverage. Guaranteed in the bill are savings in the PIP portion of insurance —which accounts for about 50% of the cost in an insurance policy — ranging from 10% to 100%.

There are no restrictions on what insurance companies can charge on the other portions of insurance bills, although the state Department of Insurance and Financial Services will have broader authority to approve or reject companies' rate hike requests.

Under the plan, the annual Michigan Catastrophic Claims Association fee, which covers unlimited lifetime medical benefits and is at $192 now and scheduled to go up to $220 per car in July, would go down to $43 a year for people who choose lower rates of personal injury coverage. For people who choose to continue unlimited lifetime medical benefits, the fee would presumably go up because there will be fewer people paying into the system.

The new law also puts new fee schedules in place for medical providers, who, under the current law, have been able to charge much higher prices for treatment of auto crash victims than patients whose health care bills are being paid for by Medicare or workers' compensation. And insurance companies would be prohibited from using non-driving factors, such as credit scores, ZIP codes, marital status and gender, when determining rates.

Those factors have some loopholes that critics said make the new law, which goes into effect in July 2020, problematic. While insurance companies can't use credit scores in setting rates, they can use credit reports, which would show whether a person has a history of making late payments. And while using ZIP codes is banned, insurers could base rates on "territories," which could be as small as a Census tract or as large as a region.

Those were compromises that had to be made in order to get through a Legislature that has tried for years to reform the no-fault system without success.

"We understood that in order to address the real reforms that were needed in our state, it was going to require an attempt to reach consensus," said Speaker of the House Lee Chatfield, R-Levering. "We told the people of the state of Michigan that we would do it in a bipartisan way, tackling the single largest issue that's been facing our state and that has eluded any real reform over the last 30 years."

Both Chatfield and Senate Majority Leader Mike Shirkey, R-Clarklake, singled out Whitmer for particular praise, saying that the deal couldn't have gotten done without her.

"I’m especially proud of my governor. She found an opportunity, discovered the possibilities and engaged at exactly the right time," Shirkey said. "We were dedicated to not destroying relationships, but building relationships. I think we have a formula to do other big complex issues, like ..."

"The roads," piped in Whitmer.

The issue, however, has not been without its critics.

People who have been catastrophically injured in accidents have been terrified of the prospect of higher costs for services that have provided them a lifeline after serious car crashes.

"This reform will lead to injured victims not receiving needed care, and families being bankrupted trying to pay for care needed, but no longer covered," said James Johnson of Norton Shores, whose daughter was seriously injured in a car crash 14 years ago and still needs constant care. "People will die needlessly. This purported reform is a cruel bait-and-switch, with no guarantees on rate reductions."

Some lawmakers also blasted the law, saying it was inferior coverage without guaranteed rate relief after eight years.

"The governor is asking Detroiters, who pay on average $5,000 per year, to sign up their families for Junk Insurance," said state Rep. Isaac Robinson, D-Detroit.

And state Sen. Jeremy Moss, D-Southfield, posted on Twitter that the law "will let you choose worse medical coverage under the guise of rate relief that may never come. Sadly, no one gets to choose if they get into a car accident, needing essential care. We should instead be working to keep our coverage and make it more affordable."