Michigan automobile owners are eagerly anticipating next summer’s promised relief from the nation’s highest car-insurance rates. Unless several lawsuits against the no-fault reform prove successful, that is.
A lawsuit filed in Ingham County late last week seeks to declare the new laws’ price controls and limitations on medical care unconstitutional.
According to the lawsuit, capping reimbursements distributed to medical providers by insurance companies is unconstitutional. Likewise, the lawsuit argues, limiting reimbursements for family members caring for victims of catastrophic accidents in their home is also unconstitutional.
Advocates for the bill, however, declare such mechanisms are necessary to stem the escalating costs of car insurance in the state. In fact, a 2019 University of Michigan study concluded car insurance is “unaffordable” in 97 percent of Michigan zip codes.
“It was no longer a city vs. rural, or a Democrat vs. Republican issue – the high cost of car insurance in Michigan has been hurting everyone from Marquette to Metro Detroit,” wrote Rep. Eric Leutheuser, R-Hillsdale, in an opinion essay published Sept. 3 in the Hillsdale Daily News.
Michael Van Beek, research director at the Mackinac Center for Public Policy, concurs with Leutheuser.
"The extremely expensive medical benefits these trial attorneys and medical providers seek to protect through these lawsuits are precisely the reason why Michigan's auto premiums are ridiculously expensive, the highest in the nation,” he told The Center Square. “It's why so many hard-working families can't afford insurance and why far too many of them drive illegally, without insurance."
Legislation that will slash rates considerably passed 94-15 in the House and 34-4 in the Senate. The bill was signed last May by Gov. Gretchen Whitmer and is scheduled to go into effect in July 2020.
The most recognizable savings would result from five-tiered personal injury protection (PIP) coverage rather than the current one-size-fits-all PIP.
New policies will allow customers to buy PIPs covering $500,000, $250,000, $50,000, unlimited coverage or, conversely, opting out of PIP completely if a driver’s health insurance covers auto accidents. Respective savings will average 10 percent for unlimited coverage; 20 percent for $500,000 coverage; 35 percent for $250,000 coverage; and 45 percent for $50,000 coverage.
Eric W. Lupher, president of Citizens Research Council of Michigan, told The Center Square the new law rectifies what he calls the flaw within the current no-fault automotive insurance system.
“The Patient Protection and Affordable Care Act has three levels that customers can purchase, namely, the bronze, silver and gold packages,” he said. “But our current no-fault insurance comes only in the unlimited gold package."
Lupher continued: “Car insurance has become so expensive because there was no way to scale back the gold plan.”
Another aspect of the new law lauded by Lupher are new rules that prohibit insurance companies from considering non-driving factors such as gender, marital status, home ownership, educational level, occupation, credit score or zip code when calculating rates.
“One of the more under-appreciated benefits to getting auto insurance reform right in Michigan is the potential it has for creating jobs and growing our economy,” John C. Mozena, president of The Center for Economic Accountability, a Michigan-based nonprofit and non-partisan organization that promotes free-market-based economic development policies across the country, told The Center Square.
“Businesses consistently say that their biggest concern in site selection is finding the skilled workforce they need to succeed,” Mozena continued. “When policies like sky-high auto insurance rates drive people out of our cities and away from our state, we’re not just losing those workers – we’re also losing the companies that would want to come here to hire them. When we make it unnecessarily expensive for people to live in Michigan, we also make it unnecessarily expensive to employ them here.”