Alternatives to Michigan No-Fault Reform Proposed
Despite moving very quickly through the Michigan Senate, a bill proposing changes to Michigan’s no-fault insurance law hasn’t made any progress since it made its way to the Michigan House of Representatives in April 2014. The bill in question, SB 248, has been met with a great deal of outrage from hospitals, accident victims, and victim advocates, who believe the proposed bill is unfair for hospitals and other health care providers and would compromise the quality of care accident victims receive, while doing very little to help reduce the costs of auto insurance for Michigan drivers. But there are some alternative ideas being proposed.
Michigan has a reputation for having the most expensive auto insurance rates in the country. Michigan is also the only state to require drivers to buy no-fault auto insurance. Under Michigan’s no-fault law, all drivers are charged an annual fee of $186 per vehicle, which goes to the Michigan Catastrophic Claims Association (MCCA). If a driver suffers extreme, life-altering injuries in a car accident, their auto insurance covers the first $530,000 of their medical expenses and if expenses go above that, the MCCA starts reimbursing the auto insurance companies for those costs. The MCCA provides people with extreme car accident injuries with unlimited benefits for as long as they are needed.
Michigan’s unique no-fault auto insurance policy is often blamed for our high auto insurance rates. Auto insurance providers are claiming the reason they have to charge so much is because they have to pay hospitals more for services than other types of commercial insurance providers. Senator Marty Knollenberg of Troy is hoping to change this through SB 313.
SB 313 would change the way injuries from car accidents would be paid for by insurance companies. Instead of having auto insurance companies cover injuries caused by car accidents, auto insurance companies and health insurance companies would use coordinated care to make sure the accident victim gets all the care they need. For example, if an accident victim needs an at-home attendant for a certain number of hours per week, but the person’s health insurance policy only covers three-quarters of those hours, the victim’s auto insurance company would cover the rest of the hours and pay the same rate the health insurance company does. Knollenberg believes this will help bring down insurance rates without compromising patient care because health insurance companies can negotiate better rates than auto insurance companies.
However, SB 313 still has some major issues, one of which is the fact that certain types of health insurance, such as Medicare and Medicaid, cannot be mandated to use coordinated care under a system like this. There’s also concern that this plan will simply take some of the expense away from auto insurance premiums and shift it to health insurance premiums instead.
Meanwhile, Detroit Mayor Mike Duggan is working on a special auto insurance plan of his own that would be available to Detroit residents, who typically pay $2,000-$5,000 a year in auto insurance premiums every year. These high insurance rates make owning a car prohibitively expensive and Detroit police officers report that 60% of drivers they stop are found to be driving without insurance. Mayor Duggan is hoping to make it more affordable by creating an alternative insurance plan for Detroit residents. Under his proposed plan, drivers who opt into this plan would have coverage that limits hospital treatment for acute injuries to $250,000 per family and $25,000 for any necessary follow-up care. Drivers would not have access to unlimited protection from the MCCA and anything beyond that $275,000 would be covered by the person’s health insurance or would have to be paid out of pocket.
It’s estimated that Mayor Duggan’s proposed insurance plan would save Detroit motorists $1,000 per vehicle annually. His plan would also be available in other cities where more than half the motorists are driving without insurance. Critics of the plan say the limited coverage for car accident injuries makes the plan virtually worthless for people who have been injured in car accidents. This proposed auto insurance bill has not yet been drafted as a bill for lawmakers to consider.