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Thu October 13, 2011
No-fault insurance changes passed by House committee
Update 3:35 p.m.
A state House committee has approved major changes to Michigan’s no-fault auto insurance.
The legislation would cap medical fees and restrict the kind of care people who are badly hurt in car accidents could get.
As it is now, if someone is catastrophically injured in a car accident, no-fault Personal Injury Protection pays for all necessary medical and rehabilitation expenses.
It’s unlimited, lifetime benefits if necessary.
This new bill would limit medical fees, and it would give motorists the choice to purchase $500,000, $1 million, or $5 million worth of coverage.
After that, you’re on your own.
The people who want these changes to no-fault insurance say this is about lowering auto insurance rates. They note more people are driving without insurance because they can’t afford it.
A Michigan Watch analysis found there would be little or no insurance rate savings and no guarantee any savings would be passed on to consumers.
The Michigan Insurance Commissioner, Kevin Clinton, testified before the committee.
Clinton is a former insurance industry executive who was appointed Commissioner by Governor Snyder in April.
He said predictions that consumers won’t see any savings are wrong.
“I want to assure everyone that this won’t be the case. The competitive marketplace should result in lower rates and if it doesn’t, OFIR stands ready, willing, and able to step in to make sure it does happen,” said Clinton.
OFIR is the Office of Financial and Insurance Regulation. That office is legally restricted in how and when it can step in to address insurance rates.
Commissioner Clinton also echoes the concerns of insurance companies that the proposed changes must be put in place to keep a catastrophic claims fund solvent.
The insurance industry determines rates for the fund behind closed.
Representative Marcia Hovey-Wright (D-Muskegon) asked Commissioner Clinton how we know whether the MCCA fund is unsustainable.
Here’s their exchange:
Clinton: “It is extremely difficult to predict these costs.”
Hovey-Wright: “Then how can we impose a cap?”
Clinton: “Well, I think the current system is unsustainable. I just don’t think it can work.”
So, it’s extremely difficult to predict what the fund needs, but the insurance industry is certain it’s unsustainable.
Opponents of the changes are worried people who are severely hurt in the future won’t get the coverage or care that they need if these changes are approved by the legislature and the governor.
Insurance Commissioner Kevin Clinton said people will have other options.
“You can go to your health insurance. You can go to Medicaid, Medicare, Social Security. You can sue people. That’s the way it operates in 49 other states,” said Clinton.
Clinton says even with the restrictions and caps, this coverage will still be better than in those other states.
Opponents say hurt people will end up paying the most.
Representative Kate Segal (D-Battle Creek) noted they’d heard hours of testimony from families who found the current no-fault Personal Injury Protection saved their families from financial ruin, and, made sure people who were badly hurt got the care and rehabilitation they needed.
“I mean with the testimonies of families with a car hitting a child on the side of the road on a bicycle, that’s why we require auto insurance… It was not their fault, but now we’re saying you got to go sue for all that payment. I don’t understand why we would want to switch that system. If we could open up MCCA and see where the problem is, but why would we want to go after that little kid on the bike?” asked Segal.
Democratic members of the Insurance Committee asked for more time to study the last minute changes to the bill.
Represenative Pete Lund (R-Shelby Township), who sponsored the bill, moved ahead with the vote.
“This is not the end of the issue, but merely moving the process forward. I’d like to ask the clerk to call the roll,” said Lund.
The bill now goes to the full House for a vote.
A Michigan House of Representatives committee has approved major changes to the state’s no-fault auto insurance. Despite last-minute changes and calls for more testimony, the chairman of the committee, Representative Pete Lund (R-Shelby Twp.), moved ahead with the vote.
The current no-fault Personal Injury Protection pays for all necessary expenses above and beyond basic auto insurance coverage if some one is catastrophically injured in an auto accident.
It would give auto owners the choices to purchase either $500,000, $1 million, or $5 million worth of coverage. Coverage beyond that amount would fall under a schedule of limited medical fees and coverage.
Proponents of the legislation say the current system is unsustainable and auto insurance rates are too high.
Opponents say there’s no way to determine if the current system is sustainable because insurance companies make the determination of the rates behind closed doors. They also say, in the future, people who are severely hurt won’t get the coverage or care that they need. The critics say many people and their families will be forced onto Medicaid or to file more lawsuits to get medical care.
The bill now goes to the full House for a vote.
*CORRECTION: In a previous version of the story we reported the vote was "along party lines," which has been corrected above.