SIDNEY — It’s no hidden secret that Michiganians take pride in leading the nation as a beacon in the auto-production industry. However, ask almost any car-owner in the state what they are paying in insurance to keep their own vehicles on the road and instead of a specific figure you will hear simply “too much.”
Ranking as the second-highest state in the nation in average auto insurance (insure.com), Gov. Rick Snyder announced Thursday a new proposal to Michigan’s no-fault auto insurance system in an effort to lower costs.
That announcement was followed up with legislation introduced by Rep. Pete Lund, R-Shelby Township, who introduced House Bill 4612 Tuesday in Lansing to cap Michigan’s unlimited personal injury protection coverage at $1 million. The bill would also limit what medical providers charge insurers for auto-related injuries and create an authority to combat insurance fraud.
“Michiganders have seen their auto insurance rates rise faster than any other state in the country,” Gov. Snyder said Thursday in Lansing. “It has been 40 years since the no-fault system has been implemented and it’s long overdue for review. These changes will create a policy that continues to cover accident victims far better than any other state and will create cost controls that stem the tide of rising insurance premiums while also providing immediate relief for families.”
The plan calls for an end to the requirement that consumers purchase unlimited lifetime medical coverage.
Michigan is the only state that mandates an unlimited coverage policy.
Under the proposal, Michigan’s mandatory coverage for catastrophic accident victims would continue to be the highest in the nation, providing $1 million in coverage.
That is 20 times the next highest state, New York, which caps coverage at $50,000.
According to Snyder’s proposal, insurance premiums would be lowered by $250 per year for the average Michigan family.
On Monday, a day before official legislation was introduced, Rep. Rick Outman, R-Six Lakes, discussed the matter at the monthly Legislative Update meeting at Montcalm Community College in Sidney.
Outman said as Snyder’s plan was laid out Thursday, he was not in support of it because of a lack of details. Knowing that official legislation was pending this week, however, Outman said he would need more time to appropriately weigh the pros and cons of the new legislation before making an official decision on the matter.
Outman added that he has two main priorities that must be addressed before he can support any new legislation.
The first, addressing fraud and abuse of the current system. Second, addressing the cost of health care by making sure current costs are lowered and not simply shifted to another entity paid for by tax payers.
“I agree there needs to be reform, but there are things we need to look at first,” he said. “I find myself asking, does this lower the cost of health care or does it shift the cost of health care? It seems to me that it is shifting the cost of health care.”
Under the new bill, it would be required that auto insurance premiums be lowered by at least $150 per vehicle in the first year, with hopes for larger savings later. After consumers pay a new $25 per-premium assessment to fund a Medicaid shortfall that the bill creates, actual savings would amount to $125.
Critics of the legislation, such as American Bikers Aiming Toward Education (ABATE) legislative officer Chuck Cross, who represents Montcalm, Mecosta, Osceola, Isabella and Claire counties, said the savings of $125 per year is not enough to make up for losing unlimited benefits.
“I don’t think these people realize the proposed savings that all of these insurance companies are proposing to you is only going to be about $10 a month,” he said. “This is all about profits for the insurance company, period.”
Cross added that he believes once the cap of $1 million is reached, residents of Michigan will end up fitting the bill regardless of remaining medical costs through medicare or medicaid.
“You’re going to get $1 million in the first year of a serious accident. After that, it comes out of your pocket,” he said. “It will go to medicare, medicaid or private health care if you’re lucky, which comes out of your pocket.”
Another key component of the bill would be the removal of the Michigan Catastrophic Claims Association (MCCA), which is directed by insurance company representatives, and the introduction of the Michigan Catastrophic Claims Corporation (MCCC), which would be open to the public and cover insurers’ costs for personal injury protection benefits.
Currently, policy holders in Michigan pay an extra $175 per insured vehicle each year to the MCCA to reimburse auto insurers for personal injury protection benefits after they exceed $500,000 per claim.
That assessment of $175 is scheduled to rise to $186 in July to cover increasing costs.
The MCCA is not currently required to open its records and meetings to the public, including details on how the association sets rates.
This has led to a driving force in Lansing asking for more transparency, hence the introduction of the MCCC in the new legislation.
Sen. Judy Emmons, R-Sheridan, said Monday the issue of auto insurance has been around for as long as she can remember. She recalled two occasions, in 1992 and 1994, when the measure was on the ballot and was voted down both times my Michigan voters.
“The driving point here is that folks believe Michigan auto insurance is expensive, and it is,” she said. “Are you going to see the savings that you would like to see if you change the no-fault policy? I’ve got to see what they put in writing. I know they are in the process, and we’ve discussed this in year’s past, but there is a multitude of issues.”
Outman closed his remarks by asking for a show of hands of how many people in the audience of about 40 individuals would approve of the reformed legislation.
“As we look at this, are you willing to give up unlimited coverage for $125 per vehicle?” he asked.
About 25 percent of people in the room raised their hands.
Outman said he plans to arrange at least one town hall-style meeting to gather more public input on the new legislation before he makes any sort of decision on the legislation.