GAYLORD — Nearly one year ago, Michigan launched an overhaul designed to rein in some of the nation’s most expensive car insurance rates.
Back in 2019 Gov. Gretchen Whitmer signed into law a series of changes as part of bipartisan effort to address problem areas in the state’s no-fault auto insurance system.
Agents, industry and regulatory officials say many drivers in the state are paying less for vehicle insurance helping to achieve a major goal of the legislation.
However, some critics contend the law hasn’t delivered on all of its promises, saying urban areas — particularly Detroit — have not realized all of the rate reductions that were talked about when the reform package was approved. They also believe potential problems may occur when another change takes effect next month requiring rehabilitation clinics and other medical-care providers who treat those injured in accidents to cut some of their prices by 45{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}.
The first part took of the reform package became effective last July and gave motorists a first-ever choice in the amount of no-fault medical coverage they could buy with auto insurance.
Drivers could choose from up to four levels of personal injury protection (PIP) which pays medical coverage for those injured in an accident. Drivers were able to select unlimited, $500,000 or $250,000 coverage levels while eligible Medicaid enrollees could also opt for a $50,000 limit. Others were allowed to waive PIP coverage if they had Medicare Parts A & B and met other eligibility requirements.
Previously, Michigan drivers were required to buy unlimited, lifetime no-fault coverage with benefits that even some of the best health insurance policies don’t offer, such as long-term specialized rehab, home and vehicle modifications and 24/7 in-home attendant care.
The agents’ viewpoint
“By far the majority of our clients have seen rates decrease over the last year,” said Ashley Brower-Whitney, president of Harbor/Brenn Insurance Agencies in Petoskey.
Jason Goodale, a State Farm agent in Gaylord, added, “I would say most of our policyholders did save money and most of them stayed with the unlimited (medical) coverage.”
Goodale wasn’t surprised that most kept the unlimited coverage.
“My clients were concerned about what they could potentially be giving up” if they chose one of the other medical options,” he added.
As Brower-Whitney noted, “Medicare is great but it doesn’t cover everything that the medical on the auto policy does..
She cited in-home health care as one example.
“Even keeping their unlimited coverage many were still saving several hundred dollars a year,” Brower-Whitney said.
Since the choice in medical coverage selection was new, Brower-Whitney believes that more may consider the other coverage levels when they renew this year.
“A lot of people said ‘I will keep it for this year but take a look at it next year.'” she said.
While lower rates are good for consumers, it did affect the bottom line slightly.
“Our commissions are based on policy premiums and since premiums are down so are the commissions a little bit, but it’s nothing that is challenging to the agency,” said Brower-Whitney.
Having a choice in medical care meant a lot more paperwork for the agents. If clients select anything other than unlimited coverage, they must sign a form at every renewal.
“(The new law) does have some hiccups, especially with the state requiring paperwork at every renewal,” said Goodale.
“Last year was the busiest summer we ever had and it is still continuing,” added Brower-Whitney, who said she had a lot more phone calls and conversations with clients. “That is actually a good thing,” she said.
Goodale said his policyholders did have some information on the changes.
“They would hears bits and pieces from family, friends and the media but they weren’t overwhelmed,” he said. “They needed someone to sit down and explain the choices.”
Goodale said he would give the reform an overall grade of B minus. Brower-Whitney said her grade would come in at either C plus or a B minus.
The view from the regulatory side
Anita Fox is the director of the state department of insurance and financial services, responsible for regulating Michigan’s financial sector including banks, credit unions, insurance and mortgage companies.
Fox’s agency doesn’t have direct control over the rates your insurer charges for auto insurance as much of that is determined by personal factors like driving history. But the department does review the rate structures of auto insurers.
She believes that the reforms have produced substantial savings for most drivers.
“We are no longer the state with the most expensive auto insurance in the country according to multiple sources,” she said. “Insurers have exceeded the rate reductions that were mandated in the statute.”
Fox wasn’t surprised that most consumers kept unlimited medical coverage. “We have always had generous benefits and it doesn’t surprise me that many Michiganders want to keep the security of unlimited lifetime benefits.”
She, too, believes that more consumers will consider lesser coverages in the second year.
Fox also disputes contentions that the savings promised to drivers in urban areas like Detroit have not met expectations.
“We think there have been decreases statewide and in Detroit. Because of high rates, Detroit had a lot of uninsured drivers which drove up rates for everyone,” she said. “We have seen industry reports that 50,000 people are now insured because they have more affordable options and we have heard from Detroiters who have saved a significant amount of money.”
Overall Fox believes that the reforms have been successful.
“There may be some things we need to look at as we go forward,” she said. “But I would give this high marks for achieving many of the things Michiganders have been asking for.”
Michigan shares a border with Ohio and is similar to the Buckeye state in many regards. Ohio has urban and rural areas like Michigan, yet the insurance rates there are lower.
Fox believes at least part of the difference can be explained by history.
“Michigan has always prided itself on having significant benefits for auto accident victims and even at the new levels of coverage, we equal or exceed the best benefits in the country,” she said.
Fox also notes that Michigan has no-fault system where other states use a tort system meaning you have to determine who is responsible for an accident.
“It’s hard to compare from state to state because coverages vary just like it’s hard to compare consumers because of things like driving records,” added Fox.
The critic
Wayne Miller is a plaintiff attorney in the Detroit area who also teaches a class in no-fault auto insurance at the Wayne State University Law School. His firm specializes in cases involving catastrophic injury, including the rights of the injured, their families, and their professional service providers.
Huge over promise and under delivery is how Miller describes the insurance reform package.
“The main purpose of the reform was to lower rates. I suspect for some their premiums have gone down. I think for others not only have their premiums not gone down, they have increased,” Miller said.
Miller said he has heard that some agents are telling policyholders to avoid the $500,000 and $250,000 coverages “because the savings were too small.”
He also believes that rates in Detroit and other urban areas have not fallen as dramatically as promised by promoters of the reform package.
“Big urban areas of the state like Detroit are not experiencing any relief at all,” he said. Miller believes it is at least partly due to the high cost of comprehensive and collision coverage in those areas. “Those are generally the most expensive parts of auto insurance,” he added.
Now Miller sees another huge challenge coming next month when changes to state law will require rehabilitation clinics and home health care providers who treat accident victims paying with no-fault insurance to cut some of their prices by 45{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb}. The baseline for the cuts is the prices the providers’ charged back in January 2019 before the revamped no-fault law.
The Michigan Brain Injury Provider Council said a survey found eight out of 10 rehabilitation and home health providers expect to close their doors if the cuts go into effect. It said 6,000 accident victims as a result are expected to lose care and 5,000 health care providers could lose jobs.
“What would you think if you got a pay cut of 45{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb},” asked Miller. “Very few people can afford a 45{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} haircut.”
Legislation has been introduced in Lansing to prevent the 45{de3fc13d4eb210e6ea91a63b91641ad51ecf4a1f1306988bf846a537e7024eeb} reduction.
Meanwhile, a trade group for the state’s insurance companies, the Insurance Alliance of Michigan (IAM), claims Michigan drivers have saved over $1 billion since reforms were enacted last July and the savings stem in part from a reduction in the Michigan Catastrophic Claims Association (MCCA) per-vehicle fee over the last two years. The fee covers medical claims that exceed $580,000.
“The reforms passed by the legislature to fix Michigan’s broken, outdated auto no-fault system are working. The reforms are lowering rates for drivers across the state, bringing more competition into Michigan and encouraging tens of thousands of people to get car insurance again because they can finally afford it — all while ensuring drivers with unlimited, lifetime medical benefits can still receive care. Sadly, special interests are resorting to scare tactics and using misinformation in an attempt to protect their golden goose and preserve their ability to overcharge and price gouge Michigan consumers. We urge the legislature to stay the course and let these reforms keep working,” said IAM executive director Erin McDonough.
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