No-Fault Reform Plan Would Provide Major Insurance Rate Cuts for Drivers
City of Detroit, Michigan sent this bulletin at 09/26/2017 11:08 AM EDT
FOR RELEASE: Sept. 26, 2017
No-fault Reform Plan Would Provide Major Insurance Rate Cuts for Drivers
Savings would be
considerably greater for seniors in new legislation that would reduce nation’s highest
premiums, slash costs and root out fraud
Michigan House Speaker Tom
Leonard, state Rep. Lana Theis and Detroit Mayor Mike Duggan today announced a
plan to reduce Michigan drivers’ car insurance bills an average of 20% — and
even more for seniors — bringing significant relief to residents paying the
nation’s costliest insurance premiums.
The bipartisan legislation to
reform Michigan’s no-fault insurance laws is sponsored by Theis, R-Brighton,
and backed by Leonard, R-DeWitt, and Duggan, a Democrat. The plan would end
Michigan’s only-state-in-the-nation requirement that all drivers pay for
unlimited lifetime health insurance through their auto insurers, no matter
whether they already have health care coverage. Drivers who want to keep
unlimited health care specifically through an auto insurance company could
continue to do so.
This new plan would preserve the most
generous auto insurance coverage in the nation, while driving down health care
costs, rooting out fraud and abuse and reducing the rapidly growing number of
lawsuits statewide that Michigan’s 1973 no fault law was supposed to prevent.
The plan gives drivers options for lower rates and greater choice based on what
they can afford. More information on the Driver's Choice no fault-insurance reform plan is available at www.detroitmi.gov/driverschoice.
“Everywhere I go traveling
the state, people are demanding relief from their out-of-control auto insurance
rates,” said Leonard. “Michigan drivers are paying the highest rates in the
country because we are the only state that requires everyone to buy bonus
medical plans many don’t want and others don’t need.The families who are trying to make ends meet
with this extreme burden deserve better.They deserve a plan that makes bold, long-term reforms.They deserve a plan that puts people first,
not hospital lobbyists or insurance companies.They deserve a plan that will finally deliver real rate relief.”
Michigan drivers pay the nation’s
highest auto insurance premiums, averaging $2,400 a year, according to
insure.com, nearly twice the national average of $1,318. In the second highest
state, Louisiana, premiums average $1,921.
“It’s clear that no-fault is
collapsing and not doing what it was designed to do, and that’s costing
Michigan drivers dearly,” Mayor Duggan said. “People are paying too much,
forcing them to cut back on other necessities so they can afford to drive. It
leaves too many people driving uninsured or unable to drive at all because
their insurance costs more than their car payment.”
“Our plan provides
affordability, flexibility and freedom for Michigan motorists,” said Theis.“Michigan’s current no-fault system is No. 1
for all the wrong reasons. It’s time to let hard-working families and seniors
choose their own PIP coverage level, saving hundreds of dollars on their
premiums each year.”
Insurance rates are highest in
urban areas including metro Detroit, Grand Rapids, Lansing and Flint. Detroit’s
average annual premium tops $3,000, the highest of any city in America.
Drivers would be able to choose
options of $250,000 or $500,000 for personal injury protection (PIP), which
covers medical care in the event of serious injury during auto collisions.These options provide coverage on a
per person, per accident basis. The unlimited
health care option will remain for those who want to keep it. PIP often
accounts for as much as 50% of an insurance policy in Michigan.
New Jersey has the nation’s second
highest level of PIP coverage, at $250,000. Ten other states require $50,000 or
less, and 38 states require no PIP at all.
Under the no-fault reform
legislation:
Insurers would be
required by law to roll back rates for people who select the $250,000 coverage
level to guarantee that the savings are passed to drivers and not kept in
insurers’ pockets. Future rate increases would be regulated by the State of
Michigan for 5 years.
Auto insurers would
be subject to a fee schedule for health services, just like health insurers.
Under the current law, car insurers pays three or four times more for services
such as X-rays and MRIs than health insurance companies do, so the exact same
MRI that costs health insurers $770 costs auto insurers $3,200 or more.
Senior drivers
who have lifetime health care coverage would be able to opt out of PIP since
they’re already insured through employee retirement plans, Medicare and the
like.
Lawyers would be
prevented from filing liens against health care providers until an insurer has
denied a coverage claim, preventing thousands of lawsuits from being filed.
Lawsuits over auto crashes are skyrocketing across the state — accounting for
42% of all civil suits filed. Since 2010, the number of car-crash lawsuits has
increased more than 50% in Oakland, Macomb and Kent counties. And in too many
cases, lawyers are filing immediate suits for drivers against their own
insurance companies for medical bills — before coverage decisions are even made
— so the lawyers can pocket up to a third of those bills as attorney fees.
Anti-fraud
measures would crack down on those who abuse the system with unnecessary or
excessive medical services. That would include banning lawyers or their
families from abusing this system to profit from financial interests, direct or
indirect, in medical care facilities, a conflict of interest that often creates
a financial incentive for lawyers to drive up unneeded medical services.
Any excess
funding in the Michigan Catastrophic Claims Association that actuaries say
isn’t necessary to cover medical care would be returned to drivers who paid
into it.