Could changes to auto Personal Injury Protection cost more than they save?
Some members of the legislature are once again proposing changes to no-fault auto insurance in Michigan. They say it will save auto owners money. Opponents say the plan is good for insurance companies, but not for accident victims.
Everybody seems to agree auto insurance in Michigan costs too much.
“In this legislation it would specify that premium costs would come down by $125 per vehicle in the first year and then hopefully because of competition and other things could even see that increase in later years,” Governor Snyder said.
That one-year guarantee of savings would come because of a reduction in the Personal Injury Protection part of auto insurance.
Right now, if you’re seriously hurt in an accident, say a spinal cord injury or a traumatic brain injury, once you go through the $500 thousand dollars in coverage on your policy, any reasonable medical and rehabilitation costs beyond that are paid for life. It’s through the Michigan Catastrophic Claims Association.
It’s the best coverage in the nation.
But the insurance industry says that fund is not sustainable. Some groups want to review the numbers and assumptions to see if that’s true. So far, the insurance industry has resisted that.
Governor Snyder says providing care for life for accidents victims is too generous and makes insurance rates too high. The total coverage should be capped at $1 million.
He says there are other ways for people to pay for care.
“If someone has their own health insurance, if someone has Medicaid or Medicare, that’s possible. And then the tort system is still available if they’re not at fault in that accident. So, there’s a number of other mechanisms available if they're not at fault in that accident,” Snyder explained.
But, many health plans don’t cover the physical therapy or other costs that some people need for years or for life.
If people had to depend on Medicaid, they’d have to spend all their assets, basically go broke to qualify, and then taxpayers pick up the bill.
The tort system means more lawsuits. Avoiding all those lawsuits is part of the reason Michigan went with a no-fault auto insurance plan to begin with.
The Governor and other backers say they can stretch that million dollar coverage by putting more limits on what hospitals and doctors can charge for services. The Centers for Medicare and Medicaid Services report hospital costs in Michigan are already the ninth lowest in the nation.
“What if in a blink of an eye you lost everything? Your home, your savings, your ability to work.”
The Michigan Health and Hospital Association is circulating and online video which features a guy who recently survived a bad car accident, Oakland County Executive L. Brooks Patterson…
“Predictions that this fund will collapse within 25 years is bunk. It’s a scare tactic. It’s just the opposite. It is being refunded; it is healthy. Legislation should keep its hands off.”
“This is great for the insurance companies, but under these proposals, the taxpayers lose,” Gursten said.
Gursten says this is going to do nothing to reduce the cost of auto insurance in the long run.
“For, really, a promise of one-time savings for one year of basically between $125 and $150, we’re going to essentially dismantle the crown jewel of insurance systems in the United States with absolutely no guarantee that rates will be lower starting a year from now,” Gursten said.
The puzzle here is why the governor and the legislators are targeting the Personal Injury Protection portion of auto insurance. According to the Insurance Information Institute, it’s about 5% higher than the national average, yet it is by far the best coverage in the nation. Other portions of Michigan auto insurance premiums are much higher than the national average. Comprehensive coverage is 13% higher. Collision is 30% higher because of things such as high crime, uninsured drivers, and fraud –all much more difficult problems to solve.