Few issues reveal the political divide like auto insurance…

Oct 25, 2013

Insurance sure is a hot political topic these days with hearings in Washington on the glitches with the HealthCare.gov website, and the recent fight in the Legislature over the Medicaid expansion. So what better moment to re-kindle the controversy over Michigan’s auto insurance rates and the no-fault law?

Which is exactly what Governor Rick Snyder did this week when he re-started talks among the groups with an interest in an overhaul of the law. That includes doctors and hospitals, insurance companies, and trial lawyers – all major political players in Lansing.

And, certainly, people who’ve been injured in car and truck accidents have a big stake.

Auto insurance is intensely political. (So much so that some states even have elected insurance commissioners.) Pretty much everyone runs the risk of being hurt in a crash, and everyone who owns a vehicle - under Michigan’s no-fault insurance law - is supposed to carry liability coverage.

People are always upset by insurance rates, but none more so than people who live in cities with high premiums. Cities like Detroit and Flint.  Insurance rates actually affect elections. Some city dwellers use out-of-town addresses on their driver’s licenses and voter registration to get lower rates, which also means they don’t vote in local elections.

Also, if Governor Rick Snyder is ever going to take credit for a turnaround in Detroit, a city without a thriving public transit system, he’ll have to get a handle on insurance rates that basically shut out law-abiding middle-class families.

The governor called for a no-fault overhaul back in April , but that’s pretty much stalled in the Legislature. Despite big House and Senate majorities, GOP leaders have been unable to muster enough Republicans to support a plan.

This week, with the Medicaid fight (mostly) behind him, Governor Snyder decided now is the time to push the issue.

“I think everybody agrees the current system doesn’t work well,” he told reporters. “It’s not about someone winning or losing, but let’s get a good agreement where we call can benefit.”

Except, when it comes to auto insurance, someone is always winning or losing. But, with an election year coming up, this could also be the last, best moment to tackle a tough, emotionally charged issue like auto no-fault. And, to restart the conversation, the governor has suggested it may be possible to accomplish this without putting a cap on unlimited lifetime medical benefits.

Michigan is the only state that offers that generous benefit. And it’s popular because it means people who’ve been disabled in a car accident who need home assistants and expensive medical treatments don’t have to worry about whether they can afford it. But insurance companies say that’s a big factor in making auto coverage so expensive.

That singular controversy over a cap on benefits was enough to stop a no-fault overhaul in its tracks.

The path to consensus has been blocked largely by the very different approaches that Republicans and Democrats prefer when it comes to auto insurance reform.

Democrats typically focus on how insurance companies set their rates - so they push efforts to forbid using credit scores and where people live as a part of rate-setting. Of course, insurance companies don’t like that. And that’s a big reason why auto insurance companies are a big Republican constituency. Republicans focus on the cost side - the rates charged for medical treatments and assisted living and - the 900 pound gorilla - those unlimited lifetime medical benefits. 

And that’s a big reason why trial lawyers are part of the Democrats’ constituency. They sue insurance companies that deny claims, seeking big judgments. Hospitals play both sides of the aisle. They don’t want Lansing putting more rules on what they can charge for services, but they’d also like to see limits on court judgments that can drive up their costs.

One complication for Republicans is this issue has never really been a winner for them (and Democrats know it).

In 1992, Governor John Engler backed Proposal D after he couldn’t get a no-fault bill through the Legislature - sound familiar? Voters thrashed it. In 1993, Republicans gained a one-month-on, one-month-off House majority during the famous “shared power” term. One of the GOP’s first policy wins was muscling through a no-fault bill that included a cap on medical benefits. It was overturned the following year in a referendum. (And even though state House Republicans sealed their majority by one vote in that election cycle, they actually under-performed in 1994 compared to the rest of the GOP ticket.)

Since then, court decisions have been more instrumental than legislative action in making changes to the no-fault system. And, did you notice? Michigan has some of the most expensive state supreme court races in the country.

So, a lot of competing special interests. Wide public interest. Big stakes. And a brief window to act. History suggests this will not be easy.