House, Senate pass bills that would dramatically change auto insurance | Michigan Radio
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House, Senate pass bills that would dramatically change auto insurance

Updated: Thursday, May 9 at 6:30 a.m.

The Republican-led state House early Thursday approved an overhaul that would let people opt out of mandatory unlimited medical coverage for car crashes. The Senate passed a plan earlier this week.

The House bill would let motorists forego mandatory unlimited personal injury protection, a requirement only in Michigan. Insurers would have to cut PIP rates, for five years, by between 10% and 100%. That could equal an estimated $120 and $1,200 in savings for someone paying $2,400 annually, according to Republicans' projections.

Democrats oppose the bill, saying it favors the insurance industry and would not guarantee long-term rate relief or ensure the elimination of non-driving factors in setting rates. Republicans say people should not be forced to buy unlimited coverage.

Updated: Wednesday, May 8 at 7:16 a.m.

The state Senate has approved a bill to dramatically change how auto insurance is bought and sold in Michigan. Two Democrats joined the Republican majority to adopt the bill.

It would roll back requirements for drivers to buy unlimited medical coverage.

Republicans say giving consumers more choice in levels of coverage would bring down rates. 

“Michigan drivers are going to be able to choose the level of coverage that fits their budget, their needs; instead of having the state dictate to them what level of coverage that they are required to have,” said Senator Aric Nesbitt (R-Lawson).

Democrats say that would subject drivers and passengers to the risk of onerous medical bills if they are seriously injured. They also say there's no guarantee insurance companies would drop their rates. 

So just what does that unlimited medical benefit provide? Michigan Radio's Lester Graham reported in 2011 about just what exactly is covered under Michigan's no-fault Personal Injury Protection:

The Michigan Office of Financial and Insurance Regulation explains if you are hurt in an auto accident, the Personal Injury Protection part of the no-fault policy will pay all of your medical costs. It will also pay up to 85 percent of the income you would have earned if you had not been hurt for up to three years-- with some limits. And if you need physical therapy or other kinds of therapy such as help with your speech or re-learning tasks or how to hold a job, you’ll get help as long as necessary. It’s lifetime, unlimited coverage.

Some Democrats argued that giving drivers the option to choose reduced coverage would leave people who would be hurt the most by high medical bills with the least protection.

“The people who are most likely to take the reduced benefit option are going to be those from lower-income households, and putting some of my residents and your residents, too, into a position where they could be bankrupt and on Medicaid is not a solution,” said state Senator Stephanie Chang (D-Detroit). 

Earlier this year, a University of Michigan report found that despite the protection of Michigan's mandates, car insurance is unaffordable for a vast majority in Michigan. According to reporting from Michigan Radio's Sarah Cwiek, lower-income communities have higher rates than most, and Detroit is hit with the highest rates. Detroiters can expect to spend 12-36% of their median income on auto insurance. Cwiek wrote, "The average car insurance premium in Detroit is $5,414, compared to $2,610 for the state as a whole (which is twice the national average)." 

The bill now goes to the state House, which is also controlled by Republicans.

Governor Gretchen Whitmer is threatening to veto the auto insurance legislation if it gets to her desk in its current form. Whitmer said Tuesday it “creates more problems than it solves.”