MICHIGAN AUTO INSURANCE REFORM
Michigan’s no-fault auto insurance system is in desperate need of reform. While it was once
the envy of the nation, its high level of mandated medical benefits has become too costly,
unsustainable and duplicates other health care coverage. Staggering increases in the costs of
providing mandated unlimited, lifetime medical coverage as part of an auto insurance policy
has pushed the price of auto insurance 20% to 25% higher than neighboring states. Providing
consumers the opportunity to choose the medical coverage level that best fits their needs
and implementing a medical fee scheduled will allow them the ability to reduce their auto
Michigan Drivers Pay the Price
It is not news that medical costs have been increasing significantly, driving up the price of auto
insurance for Michigan policyholders. During the last 10 years, the average auto insurance
Personal Injury Protection (PIP) medical claim rose more than 166%, from $13,617 in 2000
to $36,245 in 2010.
In addition, under the current system auto accident injury costs appear to be higher in
Michigan than other states. According to a 2010 study by the Rand Institute for Civil Justice,
injury payments in Michigan are 57% higher than other states, resulting in 17% higher
premiums. Also, Michigan motorists are 19% more likely to claim reimbursement for a
hospital visit and 25% more likely to claim reimbursement for emergency-room use.
In other states, drivers have choices in the amount of medical coverage they purchase in their
auto insurance policies. Michigan drivers deserve the same opportunity.
The average auto insurance premium in Michigan is $1,042 according to the most recent data
available by the National Association of Insurance Commissioners. Meanwhile, neighboring
state residents pay a lot less due to lower mandated benefits. The average auto insurance
premiums in states bordering Michigan follow: Ohio ($695); Indiana ($710); Illinois ($807)
and Wisconsin ($653). The cost of auto insurance could play a part in a person’s decision
whether or not to relocate to Michigan.
If policyholders had a $500,000 coverage option, they would continue to have the best benefits
in the country — 10 times more than New York, the state with the next highest mandated
benefits. The medical limits for the other no-fault states follow: Florida, $10,000; Hawaii,
$10,000; Kansas, $4,500; Kentucky, $10,000; Massachusetts, $8,000; Minnesota, $40,000;
New Jersey, $15,000; North Dakota, $30,000; Pennsylvania, $5,000; and Utah, $3,000.
Most accidents result in injuries below $500,000. In a study by EPIC Consulting, LLC., 99.5
percent of all auto accident injuries are below $500,000.
High Cost of Reimbursements
One of the reasons the current no-fault auto insurance system is unsustainable is the higher
costs charged for medical services.
On average, reimbursement costs for no-fault claims are roughly three times the
reimbursement costs for workers’ compensation and four times the reimbursement costs for
Medicare for the same procedure. Even one of the most basic (and frequently used) of today’s
diagnostic tools, an X-Ray, is billed nearly three times the rate under no-fault than it is billed
under the workers’ compensation fee schedule. This has a significant impact on auto insurance
premiums paid by Michigan drivers and businesses.
The workers’ compensation system has a medical fee schedule that works. No matter
what hospital you are in, or which doctor is treating patients, the workers’ compensation
reimbursement is an established, set rate.
A medical fee schedule is one of the most common cost containment tools used in the workers’
compensation insurance system. Forty-two states use some sort of medical fee schedule. In
fact, the Workers’ Compensation Research Institute (WCRI) found in a 2010 study that costs
per workers’ compensation claims in Michigan were lower than typical, compared to 15 other
large states. One of the factors that contributed to the lower claims cost, according to WCRI,
was Michigan’s ability to control medical payments.
By establishing a similar fee schedule for auto insurance medical coverage, Michigan can
ensure that the costs will remain low.
Consumers Benefit with No-Fault Auto Insurance Reform
Consumers in Michigan would still have the highest auto insurance medical benefits in the
country under the no-fault auto Insurance reform plan while lowering what they pay for auto insurance. According to a 2007 study by EPIC Actuaries, a motorist could save 15 to 33
percent on their auto insurance, by adopting a fee schedule and providing coverage options,
depending on the coverages they select. In addition, the plan would ensure the stability of the
no-fault auto insurance system for the future.
Proposed no-Fault law changes provide for long-term stability of system
Michigan residents can no longer afford the unlimited, lifetime medical benefits mandated
by the state’s 39-year-old no-fault auto insurance law. A recent story, “No-fault law change
draws harsh criticism” omitted the fact that high benefits and no medical cost controls are
threatening the stability of the no-fault system.
Michigan is the only state in the country that requires every motorist to purchase unlimited,
lifetime medical benefits as part of their auto insurance policy. The next highest state is New
York, which requires motorists to purchase $50,000 in medical benefits. Staggering increases
in the costs of providing this mandated unlimited, lifetime medical coverage has pushed the
price of auto insurance 20 to 25 percent higher than neighboring states.
The amount you pay for medical coverage in your no-fault policy is rising. In 2000, this
coverage was 26 percent of your premium. In 2010, that medical coverage represented
41 percent of what you paid for auto insurance. In addition, you pay $145 a year to fund
catastrophic injuries over $500,000, an amount that has increased 2,500 percent over the last
The proposed changes are not unreasonable as opponents would have you believe. House Bill
4936 would allow consumers to choose the level of medical benefits that best fits their own
needs. Consumers could choose $500,000, $1 million or $5 million. The bottom line is 49
states, plus the District of Columbia, permit consumers to choose the level of medical coverage
they wish to purchase, usually at dramatically lower levels than being proposed in Michigan
without any negative impact on care and government programs.
Claims that the sky will fall if policyholders had to purchase something less than unlimited
coverage are also fabricated. A study by Miller Actuarial shows that 99.5 percent of all auto
insurance claims are under $500,000.
Another provision in the legislation would implement a medical fee schedule for no-fault
injuries. A fact not mentioned in the article is that hospitals unfairly charge no-fault patients more for procedures and treatments than the amount they charge under workers’
compensation and systems with a fee schedule. A MRI of the neck is $2,045 if your no-fault
carrier is paying. That same MRI costs $418 if you were injured on the job and workers’
compensation is covering the treatment. Who do you think pays for the shift from other insurance payers to no-fault? It is the auto insurance consumer.
Change is difficult. A system that provides unlimited, lifetime benefits is obviously a good
one, but it comes at a price. In Michigan that price will be more people on the roadways
without insurance because they can no longer afford it.
Even with the changes proposed in House Bill 4936, Michigan would continue to have the
highest auto insurance benefits in the country. House Bill 4936 would make the no-fault
system affordable and viable for Michigan families in the future.