The proposal to overhaul Michigan's no-fault auto insurance system got its first hearing Tuesday, and cracks in the initial bipartisan support for the bill began to show during the first three hours of testimony.
The sponsor of the bill, state Rep. Lana Theis, R-Brighton, had to acknowledge that the people who want to continue with high levels of coverage — either $500,000 or unlimited lifetime personal injury benefits — would not initially see rate relief.
And that the lower level of coverage, which would provide $250,000 of personal injury coverage, only covers health care services in the hospital. Continuing coverage after a person injured in a car crash is released from the hospital would be capped at $25,000.
But that's still better than driving illegally without insurance because you can't afford high premiums, she said.
"Your residents are being required, like I was when I had no money, to purchase insurance or break the law," Theis told state Rep. Sherry Gay Dagnogo, D-Detroit. "I’m giving them an option that they don’t currently have."
Detroit Mayor Mike Duggan, a big supporter of the legislation, said he'd love to see things such as credit scores and zip codes removed from consideration when insurance companies set rates.
"But we know that’s not politically possible," he said. "Let’s take a 20% rate cut and see where it goes."
Democrats on the House Insurance Committee expressed skepticism that the insurance industry would actually keep reduced rates after the initial five years and that when health coverage runs out for drivers in lower-coverage policies that the burden will fall on the state, which will have to pick up the Medicaid bills. Those could run to $150 million over the next 10 years, according to an analysis by the House Fiscal Agency.
They also feel that drivers in urban zip codes still would suffer with high rates.
"In my zip code in Dearborn, a 6-month premium now is around $4,200. With a 40% reduction (with the lowest level of coverage), it would bring that down to $2,500," said state Rep. Abdullah Hammoud, D-Dearborn. "But in Ann Arbor, it’s $1,100 for unlimited medical coverage. That’s the biggest struggle I have. I’m paying 100% more and getting 100% less for better coverage in Ann Arbor."
The auto insurance reform would:
Cut premium rates 20% to 50% in three tiers: a 20% cut for average drivers with comprehensive coverage and $250,000 in personal injury coverage; a 35% cut for a retiree with full lifetime health care; and a 50% cut for drivers with no collision or theft coverage.
Allow drivers to choose the level of personal injury coverage: $250,000, $500,000 or the unlimited lifetime benefits that all Michigan drivers now have to have. There is no guaranteed rate reduction for the people choosing $500,000 or unlimited benefits.
Have the state regulate any rate increases for the next five years.
Set medical fees at either 100% or 125% of the rates charged for Medicare patients for medical services provided by health care providers to victims of car crashes. Right now, such schedules aren't in place for car crash victims, leading to inflated prices for services to people hurt in car accidents.
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.
Beneficiaries of Michigan's no-fault system pleaded with the committee to maintain the insurance.
Will Kerkstra, a 33-year-old Grand Rapids resident, said the no-fault system saved his wife Lauren's life and is giving them hope for their future. Lauren Kerkstra, 29, was critically injured in a car crash last year, suffering a traumatic brain injury, three broken vertebrae and a lacerated kidney. She spent three weeks in the hospital and requires constant care at home. The family has wracked up nearly $2 million in medical bills.
"She’s recovered from most of the physical injuries, but we’re just trying to get her on the right track for the brain injury," he said as he held his 3-month-old son, Emerson. "I had no idea about no-fault until the accident. We like to talk about our high premiums like we talk about the weather. But when it happens to you, your medical bills are covered. We’ve worked so hard to save money, and now we don’t have to go medically bankrupt."
But Wendy Block of the Michigan Chamber of Commerce said the bill would not only make Michigan more attractive for insurance companies that want to locate to the state, it would help break down the barriers for people looking for work.
"One of the main points employers bring up to us is that people simply can’t get to the jobs and transportation, and the high cost of insurance is often cited as a factor," she said. "We do think this bill will break down the barriers for employment."
Despite Michigan's unenviable position as the state with the highest insurance rates in the nation, getting the necessary votes in both the House and Senate will be a struggle. Democrats remain wary of substandard coverage for lower-income people and the loss of the ability to sue insurance companies in some cases. And Senate Majority Leader Arlan Meekhof, R-West Olive, said any proposal that includes mandates on what insurance companies can charge is a nonstarter in the Senate.
But after his testimony, Duggan said he remains optimistic about the prospects for the no-fault auto insurance overhaul.
"We're working really hard, we'll see," Duggan said.
The hearings on HB 5013 will continue next week before the committee takes a vote on the bill.
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