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Newest attempt at Michigan auto insurance reform debated

LANSING, Mich. -- Legislation introduced last week claims it would cut the medical portion of Michigan car insurance rates by an average of 40 percent.

Garnering bipartisan support, House Bill 5013 was debated at the House Insurance Committee Tuesday morning.

"We’re going to make employment more accessible to lower-income folks," said Democratic Detroit Mayor and former hospital CEO Mike Duggan before the committee.

"So I won’t tell you this is perfect, but I’ll tell you it’s the best chance I’ve seen to get some reliefs for some people who need it."

Rep. Lana Theis, R - Brighton, sponsored the proposed legislation, introducing it as a cost-cutting measure to Michigan's notoriously expensive no-fault auto insurance. Tuesday she advocated for the bill and its medical providers fee schedule that would work to keep any hospitals or clinics from charging different rates to car or health insurance providers for the same procedure.

"It’s no secret that Michigan’s auto no-fault system has been a cash cow for many healthcare providers for decades," said Theis.

"Multiple studies have proven that auto insurers pay two to three times more for medical procedures than health insurers pay."

In part the proposal would allow drivers to choose their level of personal injury protection (PIP) coverage between $250,000, $500,000 or unlimited. Any expenses exceeding these caps would shift onto private or government-issue health insurance. Michigan currently is one of about 30 percent of states that require drivers to purchase no-fault insurance.

"Under this bill, for drivers who select the $250,000 coverage level, insurance companies would be mandated to file rates that reduce the medical portion of their premiums by an average of 40 percent," said Theis. "The mandatory rate reduction under this bill would last for five years."

With proposed premium price cuts mandated for only five years, critics, including many hospitals and trial attorneys, are against it.

"This bill does not guarantee any rate reduction, as a matter of fact all it does is it intends to reduce rates by 40 percent for those people who buy the cheapest policies that have only $25,000 in general coverage," said Tom Sinas, practicing attorney.

Sinas says this bill does not address underlying state insurance issues, including the way insurers set rates.

"There are things that we don’t do in this state, for example we don’t make it illegal for insurance companies to charge people different amounts of money based on their zip code," said Sinas.

"If we want to tackle rates, we’ve got to be honest about the problems that are driving up rates before we decide to get rid of all these protections we’ve had for over 40 years."

According to the House Fiscal Agency, if passed HB 5013 could increase costs for Medicaid by an estimated $150 million per year after 10 years. To read the agency's nonpartisan analysis in full, click here.

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