LANSING, Mich. – The Republican-led Michigan House early Thursday approved a plan to reduce the state’s high auto insurance premiums, moving to no longer require that drivers buy unlimited medical benefits through their car insurer to cover crash injuries.
The move set the stage for a potential showdown with Democratic Gov. Gretchen Whitmer, who threatened to veto separate auto insurance legislation that cleared the GOP-controlled Senate earlier in the week. The top House Republican said he hoped to soon reach a compromise with senators and the governor.
“The goal here is to get a signature by the governor and deliver rate relief for the people of our state. We’re going to have the conversations that are necessary to make that happen,” said Speaker Lee Chatfield of Levering.
The House bill — which passed 61-49 on a largely party-line vote after 2 a.m. — would let motorists forego mandatory unlimited personal injury protection, a requirement only in Michigan. Insurers would have to cut PIP rates, for five years, by between 10% and 100%, depending on the coverage chosen. That could equal an estimated $120 and $1,200 in savings for someone paying $2,400 annually per car, assuming the PIP fee accounts for half their bill, according to Republicans’ projections.
A recent study showed that Michigan’s estimated annual premium of $2,610 is highest in the country and almost double the national average.
“It affects the people who live in every one of our communities. We have been overpaying for decades, and people are demanding a change,” said Rep. Jason Wentworth, a Clare Republican.
While the House vote was a big step forward in efforts to cut premiums after years of legislative stalemates, the bill’s prospects were uncertain. Majority Republicans have made car insurance changes their top priority, but Whitmer has been more focused early in her term on trying to fix the roads with a proposed fuel tax increase as part of her first budget.
Many of her Democratic allies in the House blasted the insurance legislation, and criticized how it was unveiled and approved within a matter of hours with no public review or committee testimony.
“If our constituents are angry now about their insurance rates, imagine how angry they’ll be when they realize that with the bill before us at it stands, their rights and benefits have been taken away — given away — and our rates haven’t really been lowered,” said Rep. Donna Lasinski of Washtenaw County’s Scio Township.
Under the measure, people opting out of unlimited medical coverage and instead choosing between $0 and $500,000 in benefits would not have to pay much of what will soon be a $220 annual per-vehicle fee that reimburses auto insurers for expenses surpassing $580,000 for the severely injured.
The bill would stop car insurers from having to pay much more than private and public health insurers do for the same medical services, a factor driving claim costs. They would follow a fee schedule similar to what exists for workers’ compensation injuries.
The legislation also would direct state insurance regulators to write rules banning the use of non-driving factors if there is no “rational correlation” with insurance losses.
Democrats said the measure is flawed. They contended that a prohibition on the inclusion of credit scores or other non-driving elements in the rate-setting process should be explicitly written into the law, and they said insurers could still hike rates in the long term.
“The insurance companies got a gift today,” said House Minority Leader Christine Greig of Farmington Hills.
After the five-year period of mandated lower premiums, Michigan would scrap a file-and-use system that lets rate increases take effect before regulatory review. Rates instead would be subject to prior approval.
The bill would also create a task force to target fraud, limit reimbursement for family attendant care and no longer let insurers use sex as a rating factor when pricing policies issued on a group basis.
Three of 52 Democrats joined all 58 Republicans to vote yes.
Reaction from key players in the auto no-fault system was mixed.
The Insurance Alliance of Michigan, an industry group, said the legislation addresses major culprits of a “broken” system such as overcharging by medical providers and a lack of consumer choice. But it expressed “serious concerns” that the House, unlike the Senate, added “arbitrary rate and regulatory mandates.”
The Michigan Health & Hospital Association said the bill “stinks,” and it urged the Legislature to start over.
Chatfield said the fact that the insurance and health industries are “uncomfortable” with parts of the legislation indicates “we have struck an excellent balance.”