LANSING, Mich. — Michigan Gov. Gretchen Whitmer will sign a bill to cut the country's highest auto premiums following a landmark deal that was reached with legislative leaders and approved by large margins in the House and Senate.
The changes will follow a years-long impasse in the state over generous but mandatory health benefits that are included in every car insurance policy under a law that was enacted more than 46 years ago.
A look at what the legislation means:
WHAT IS PIP?
Personal injury protection, or PIP, is a portion of your premium that covers unlimited medical treatment and rehabilitation expenses if you are injured in an accident. It also covers lost wages for three years and up to $20 daily for assistance with things like cooking, cleaning and other services you can no longer carry out due to your injuries.
WHAT DOES IT COST?
It varies by motorist. The state Department of Insurance and Financial Services says PIP on average accounted for 49% of total premiums in 2015.
IS PIP STILL REQUIRED?
No. Starting in July 2020, you will be able to forego personal protection benefits entirely if you have health insurance such as an employer plan or Medicare. Other options will include sticking with unlimited coverage or choosing either $250,000 or $500,000 worth. If you are on Medicaid, though, you will have to carry at least $50,000 in PIP.
WHAT ARE THE SAVINGS?
Insurers will be required, for eight years, to reduce — on average — the PIP portion of your policy by 10% (unlimited benefit), 20% ($50,000), 35% ($250,000), 45% ($500,000) or entirely. For calculation purposes, the PIP includes the yearly $220 per-vehicle fee you pay to reimburse insurers for expenses related to catastrophic injuries. That fee may drop substantially if you wave the unlimited coverage option.
DO INSURERS HAVE AN ESCAPE HATCH?
Insurers will be able to ask regulators for an exemption from the mandatory rate rollbacks by proving they would put their solvency at risk or are unconstitutional.
IS THE UNLIMITED BENEFIT VIABLE?
You will still be offered unlimited PIP. But it is unclear if it will be a realistically affordable option if many motorists opt out of the system.
WHAT ABOUT NON-DRIVING FACTORS?
Insurers already cannot base premiums on sex or marital status. The measure will also prohibit the use of home ownership, educational level, occupation, ZIP code or credit scores in setting rates. Some Democrats who opposed the bill expressed concern that insurers could still discriminate against you based on where you live or your financial information.
WILL HEALTH PROVIDERS BE AFFECTED?
Yes. Unlike several other no-fault states, hospitals, doctors and rehab facilities treating crash victims have effectively been able to charge auto insurers far more than they do for patients covered by private or government health plans. Starting in July 2021, they will be paid less for care covered by PIP — roughly 200 percent of the Medicare fee schedule. Payment for family-based attendant care will be capped at 56 hours a week.
WHAT ABOUT FRAUD?
A state anti-fraud unit created under a 2018 executive order will become permanent, working with the state police. Attorney General Dana Nessel said she is confident she will have tools to investigate and prosecute auto insurance fraud.
WHO SUPPORTS THE OVERHAUL?
Republicans and many Democrats, including Whitmer and Mayor Mike Duggan in Detroit — home to the most expensive premiums in a state with the highest average rates in the U.S. Supporters say drivers deserve options and, if they are severely injured in an accident, will have coverage from their health insurance like in 49 other states. High premiums driven by spiraling medical costs, fraud and lawsuits, they say, are forcing people to illegally drive without insurance. A University of Michigan study found that car insurance is "unaffordable" in 97% of Michigan's ZIP codes, exceeding 2% of the median household income. "We now have the chance to make the system more affordable while still helping those that need it," said Sen. Lana Theis, a Brighton Republican. "We can offer people a choice, like they have in every type of insurance they purchase."
WHO OPPOSES IT?
Some Democrats, along with hospitals, trial lawyers and brain injury facilities. Insurers also have reservations, questioning if the rate reductions will live up to what is being promised. Critics say the pending law will devastate the post-acute care industry in a state known as a leader in brain injury care and recovery. Others say the measure will not prevent insurers from raising rates on the non-PIP parts of a bill or adequately protect injured motorists, and shift costs to taxpayers. The way the bill was passed is also drawing criticism, as just one brief hearing was held since it was unveiled weeks ago and the latest version was made public hours before final voting. "We're standing at the end of the road for a system that has stood up for our neighbors and our residents and our friends and our family members for decades," said Rep. Yousef Rabhi, an Ann Arbor Democrat, saying it "stabs me to my very core."
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