Mich. Republicans propose auto insurance overhaul

The Michigan State Capitol in Lansing, Mich.
The Michigan State Capitol in Lansing, Mich.

LANSING, Mich. (WOOD/AP) — There’s no doubt Michigan drivers get fed up paying high insurance premiums, but auto insurance reform has been a controversial topic and one that various proposals have had a tough time getting support in the legislature.

Thursday, Michigan House Speaker Jase Bolger (R-Marshall) and the House Republicans unveiled a new proposal for auto insurance reform.

Michigan is the only state that offers unlimited medical benefits for catastrophic injuries and rehabilitation, the Associated Press reports. The coverage costs motorists $186 per car per year, leading critics to say the system is too expensive in part because auto insurers are charged more than regular health insurers for the same medical services.

In their proposal, House Republicans say that in the past 10 years, the medical portion of auto insurance has increased 51% and there is no end to that increase in sight. They blame high premiums on inefficiencies in the system and disputes between providers and insurers that they say cost Michigan drivers millions of dollars.

The House Republicans say Michigan consumers pay up to four times the amount for the same medical services when using their auto insurance compared to private insurance and other insurers.

The proposal also points out The Michigan Catastrophic Claims Association (MCCA) is not transparent enough, and can lead to confusion and suspicion.

The new proposal would create a fraud authority to investigate and prosecute fraud or abuse, ensuring rate payers savings. It also establishes a $10 million cap for benefits per individual through the MCCA. The new cap is 200 times higher than the next highest state, which is New York’s $50,000 cap.

“Nobody will feel this ($10 million) cap,” Bolger told the AP, saying efficiencies included in the proposal would limit costs. “The existence of a cap drives people to be concerned about what they’re spending and asking do they need this service.”

The proposal also creates a low‐cost auto insurance policy for individuals at or below 133% of the federal poverty level.

Democrats and a group of health providers, labor unions and others derided the revised plan, the AP reports, pointing out that it still proposes charging drivers $25 annually to help fund Medicaid because a 1 percent tax on health insurance claims isn’t generating as much as anticipated when it went into effect in 2012.

“In the long run, there are no real savings at all, and all the while Michigan drivers will be losing the best injury care in the country. That just doesn’t make sense,” said John Cornack, president of the Coalition Protecting Auto No-Fault.

The Michigan Insurance Coalition, representing insurers, credited Bolger for his leadership on a “very tough issue” yet said it opposes “government-mandated (premium) rollbacks in a free-market system.”

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Inside woodtv.com:

A infographic breakdown of Michigan’s no-fault insurance policy and the reform proposal from House Republicans (pdf)

The House Republicans’ auto insurance reform proposal (pdf)

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