The insurance industry in Michigan released a study on Tuesday, July 17th that predicts motorists could save up to 16 percent on their auto premium if they were allowed to select capped health benefits for accident injuries.
Michigan is the only state to require unlimited personal injury protection benefits, which policyholders pay for through a $123 annual fee per vehicle.
If drivers instead could buy a limited amount of medical coverage, $50,000 worth, and the state set maximum fees for health providers who care for patients in auto accidents, policyholders could save 21 percent on their premiums, according to a study done for the Insurance Institute of Michigan.
“Michigan is an anomaly,” said David Field, regional counsel with Allstate Insurance. “What’s wrong with offering consumers choice?”
Insurers support House Bills 4702 and 4792, sponsored by House Insurance Chairman Virgil Smith, D-Detroit, and Rep. Joe Hune, R-Hamburg, that would set fees that medical providers could charge auto insurers, similar to the workers’ compensation system, and let motorists choose different levels of medical coverage. The unlimited coverage would still be available.
The legislation is opposed by a group of health providers, trial lawyers, labor unions and consumer advocates known as the Coalition Protecting Auto No-Fault.
“People don’t have to give away their medical and rehab benefits for lower rates,” said Kevin A. McKinney, the group’s legislative coordinator.
He said insurance companies are making record profits and argued lawmakers instead should pass legislation helping insurance regulators roll back rates. The industry responds that rising medical costs and Michigan’s required “Cadillac” coverage are a big reason rates have increased.
It is unclear how far the bills could get in the Legislature because efforts to change no-fault traditionally have run into opposition. Statewide ballot proposals in 1992 and 1994 that would have reduced mandatory coverage were defeated by wide margins.
But Smith said something must be done to make auto insurance more affordable in Detroit and Flint. Fifty percent of drivers in the Detroit area do not have insurance even though it is mandatory, according to State Farm Insurance.
Smith said he would have tried to end the practice of determining insurance rates by ZIP code _ dubbed redlining by critics _ but there is too much opposition because rates could rise for motorists living in other parts of Michigan.
“If you can bring down the cost of the product, you will ultimately bring down the price,” said Smith, who plans to hold hearings on the bills but acknowledges there is opposition. Dates have not been set.
Backers of the legislation say many motorists might end up still sticking with unlimited benefits to cover catastrophic injuries. But they say some motorists, including seniors, do not need unlimited auto coverage because they could be covered by Medicare, work policies or long-term care insurance.
Critics, however, respond that letting consumers opt out of unlimited benefits ultimately would just leave the government with the bill for more uncompensated health care when people are seriously hurt in accidents.
Three studies altogether were released by insurers Tuesday.
One found that keeping unlimited health benefits in place but setting maximum fees that insurers would pay health providers caring for injured motorists would shave about 12 percent off premiums.
According to the Insurance Institute report, 94 percent of Michigan personal injury protection claims cost under $50,000.
House Bills 4702 and 4792.