Medicaid costs could increase under Michigan House auto insurance plan

The Michigan House-passed plan to give drivers the option of opting out of unlimited personal injury protection coverage would likely lead to a gradual increase in Medicaid costs for the state, a Senate Fiscal Agency analysis of the bill found.

As passed, the House legislation, House Bill 4397, would allow drivers to pick from five levels of personal injury protection, or PIP, coverage options: unlimited, $500,000, $250,000, $50,000 and a complete opt-out option for people with health insurance that covers vehicle accidents.

In a financial analysis of the bill, the nonpartisan Senate Fiscal Agency concluded some of the costs faced by accident victims without unlimited coverage would shift to their current primary insurers, whether they were covered by commercial insurance, Medicare or Medicaid.

What the long-term cost shifts could be vary, depending on how many people choose to continue purchasing unlimited PIP coverage. Based on existing Michigan Catastrophic Claims Association data, the Senate Fiscal Agency projected the state’s share of Medicaid costs could increase by $65.9 million over a ten-year period, and that the rate of growth would eventually slow down after that.

Auto no-fault bill with mandated rate reductions passes Michigan House

Shortly after 2 a.m. Thursday, the House voted 61-49 on House Bill 4397.

Other potential costs to the state include losing $15 to $20 million a year in revenue from the state’s 1.25 percent insurance premium tax due to lower insurance rates, and additional administrative costs for the Department of Insurance and Financial Services and the Michigan State Police, the agency found.

Under the bill, an Automobile Insurance Fraud Task Force would be created within the Michigan State Police to collect and investigate claims of insurance fraud and provide annual reports to the legislature.

The House bill would require insurers to reduce PIP rates from between 10 percent for unlimited coverage to 100 percent for complete opt-outs for five years, after which point rates would be subject to prior approval by state regulators instead of the current system that allows rate increases to take effect before review.

House Republicans estimated drivers could save between $120 and $1,200 in savings for a driver paying $2,400 a year under the plan, and lauded the plan as much-needed relief for Michigan residents.

Why Michigan auto insurance costs so much, and how to lower it

Michigan has the highest auto-insurance premiums in the country. Here are the reasons why, and the various proposals to lower costs.

A potential overhaul of Michigan’s existing no-fault auto insurance policy surged to the forefront last week when both the House and Senate passed versions of auto insurance reform plans over the span of two days.

There are some variations between the House and Senate versions, but House Speaker Lee Chatfield, R-Levering, and Senate Majority Leader Mike Shirkey, R-Clark Lake, said last week they planned to work on addressing those differences.

Whitmer told reporters she would not sign either the House or Senate bill as is, noting she would veto legislation that didn’t guarantee strong consumer protections and financial relief.

Whitmer threatens to veto any auto insurance reform bill that ‘preserves a corrupt system’

Gov. Gretchen Whitmer opposes legislation passed by both chambers of the Republican-majority legislature.

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Whitmer, GOP leaders talking amid auto insurance impasse, veto threat

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Royal Oak and Troy police investigate a multi-car crash on Crooks Road at Meijer Drive.  (Photo: Brandy Baker , The Detroit News )

Lansing — A standoff between Democratic Gov. Gretchen Whitmer and Republican leaders could come to a head Tuesday as they discuss proposals seeking to cut Michigan auto insurance rates that routinely rank among the highest in the nation.

Whitmer met Monday with Senate Majority Leader Mike Shirkey and is expected to meet again Tuesday with House Speaker Lee Chatfield following last week's vow to veto separate plans approved by each chamber. 

If they are unable to agree to terms or a path forward, the GOP-led Legislature could force the issue by finalizing a plan on its own and sending it to Whitmer's desk, perhaps as early as Tuesday afternoon.

A House proposal approved last week in a late-night session and now awaiting Senate action would end Michigan’s unique promise of lifetime medical benefits for injured motorists, allowing insurers to sell reduced coverage policies but reduce personal injury protection premium rates for five years.

Republicans touted it as a “landmark” plan to save motorists money, but Whitmer said she does not consider the legislation a “reasonable, fair” way to provide immediate rate relief and strong consumer protections.

Hospitals, brain injury specialists, rehabilitation facilities and other health care providers are urging Whitmer to hold fast on her veto pledge, citing likely coverage reductions and a proposed fee schedule that would cap their reimbursement rate at worker’s compensation levels.

In their Monday meeting, the governor and Shirkey, R-Clarklake, discussed "working together towards solutions addressing both the state's infrastructure crisis and auto insurance reform over the weeks ahead," said Whitmer spokeswoman Tiffany Brown. 

"The governor has always made clear she is willing to work with anyone who is willing to work with her," Brown said. "The administration looks forward to ongoing discussions to find real solutions that improve our roads and benefit Michigan residents." 

Lawmakers have spent decades debating reforms to the 1973 auto insurance law, and with the House and Senate both advancing their own plans, “I think this is closer than state government has been in over 20 years,” said Rich Studley, president and CEO of the Michigan Chamber of Commerce.

The chamber, which is supporting the reform effort, had been pushing Whitmer, Shirkey and Chatfield to meet and attempt to resolve differences.

“There are three people who can solve this problem now, and they’re all very knowledgeable and very capable,” Studley said.

Whitmer has not spelled out specific changes she’d like to see but wants to explicitly prohibit insurers from using non-driving factors such as ZIP codes or credit scores. The bill would empower the Department of Insurance and Financial Services to create rules to do so if “there is no rational correlation between the factor and insurance losses.”

Chatfield is “willing to meet with the governor any time,” said Gideon D’Assandro, a spokesman for the Levering Republican. “He is committed to making sure this gets done and gets done soon. We can’t let politics get in the way of real reform. We’re too close.”

Jim Haveman, who served as health director under Republican Gov. Rick Snyder, called the proposal a “gift” to the insurance industry and is encouraging Whitmer to reject the plan if it reaches her desk in hopes of spurring more robust negotiations in the future.

He predicted the House proposal would "gut" medical providers and accused GOP leaders of  “ramming and jamming” the proposal through the Legislature to avoid outcry from crash victims who could lose benefits or access to care.

"They didn’t want that testimony," Haveman said. "They didn’t want to see people come in in wheelchairs or stretchers."

Health officials sound alarms

Michigan is the only state in the nation that requires auto insurance to include unlimited lifetime medical benefits for catastrophically injured patients.

The House plan, which the Senate is considering, would allow insurers to sell plans with $500,000, $250,000 or $50,000 in personal injury protection. Consumers with private or public health insurance that covers auto crash injuries could opt out of the medical coverage altogether.

The plan would also mandate a fee schedule for medical providers, which House Republicans argue will prevent "widespread abuse and patients being forced to pay three or four times what a medical service actually costs." 

Health care officials deny price gouging claims and expect most motorists would choose the cheapest auto insurance plan that could purchase, especially low-income drivers who already qualify for Medicaid and could instead rely on that coverage.

For hospital trauma centers, that means nearly half of the auto crash victims they treat could be covered by either Medicaid or Medicare, which already mandate reimbursement rates that are “less than the cost of delivering services,” said Laura Appel of the Michigan Health & Hospital Association.

The proposed workers’ compensation fee schedule for crash victims with auto insurance would “barely over the cost of delivering care and we would argue does not keep up with the increasing cost of pharmaceuticals and technology,” she said.

The hospital association estimates the government-mandated fee schedule could cost Level 1 and Level 2 trauma centers a combined $325 million a year. There are 41 such facilities in Michigan, including pediatric specialty centers.

Phillip Weaver, CEO of Hope Network in Grand Rapids, said the Christian nonprofit rehabilitation center would likely lay off 525 employees in the first six months if the “one-sided” House plan were to become law. 

“That’s pretty dramatic,” he said. “Nobody thinks about the consequences when they’re taking votes.”

Hope Network Neuro Rehabilitation has treated people with traumatic brain and spinal cord injuries for four decades, but “basically we wouldn’t be allowed to take in any new patients because the reimbursement rates would be much lower than what the cost of the actual services are,” Weaver said.

Tom Constand, president of the Michigan Brain Injury Provider Council, said some sort of reimbursement cap may be appropriate for the treatment of auto crash victims, but he suggested that fee schedule should be based on the type of care that is provided.

Unlike a broken arm that will heal, “things like a brain injury or a spinal cord injury require a lifetime of care,” he said. “And that’s where we’re concerned about charging a rate such as workers compensation for the intensive care, the intensive work that needs to be done on an ongoing basis for these people.”

Ian Vedder, co-owner of Soteria Home Health attendant care company in Grand Blanc, said he currently has one patient on workers compensation that pays around $19 an hour but could not afford others.

“It’s almost impossible for me to provide care” at that rate, he said. “I don’t have the revenue to be able to provide high-quality staff. It’s just not something that’s feasible.”

Cost savings

Michigan is one of 12 states that have a no-fault auto insurance law intended to limit lawsuits by ensuring damages are paid. A handful have medical provider fee schedules linked to workers’ compensation or Medicare, including New York, which requires $25,000 in personal injury protection.

In most states, “you use your health insurance or Medicaid or whatever else it is in case of an accident, or you sue and get the other guy to pay for it,” said Eric Lupher, president of the non-partisan Citizens Research Council of Michigan

“The path before (lawmakers), as it relates to the health care aspects of the law, are to find a way to rein in the costs, and what they’re proposing will achieve that,” Lupher said of the House and Senate plans. “There are alternatives, but it’s a valid way to do it.”

House Republicans project their plan could save a motorist between $120 and $1,200 on average, depending on the level of personal injury protection they choose to purchase.

The proposed reforms could shift some health care costs from auto insurers to private or government-run health insurers.

The Senate Fiscal Agency projects the House plan — like the Senate version — would increase state Medicaid costs each year as more drivers without unlimited auto insurance coverage rely on commercial or government-run health insurance.

“In many severe injury cases (in which the accident victim became dependent on long-term care), costs would shift to Medicaid as most people do not have long-term care coverage beyond the limited coverage provided to Medicare recipients,” the agency said.

That shift could cost the state about $65.9 million in additional yearly Medicaid costs by 2029, according to projections  If drivers are “less interested in unlimited” personal injury protection, “then the increase in Medicaid costs would be greater,” the agency said. 

But the current system is “about to collapse” and residents are “mad as hell" about their premiums, said Studley, who is hopeful Whitmer and GOP leaders will negotiate a plan all sides can live with.

“You can’t have a so-called no-fault system that is riddled with lawsuits,” he said. “You can’t have a system where you have tens of thousands of people who are breaking the law every year because they can’t afford — literally cannot afford — to purchase the insurance that is required by state law.”

joosting@detroitnews.com

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Car insurance is cheaper with 9 points than zero no claims

Motorists who are one step away from a driving ban could be paying less for their car insurance than drivers with zero no-claims discount, new research has revealed.

Insurances quotes were on average nearly 10 per cent cheaper for a typical UK driver with nine points on their license for speeding or other offences compared to those who have a no-claims discount, according to data from Vantage Leasing.

It also found that drivers with six penalty points were cheaper to insure than motorists who had one, two or three years' no-claims bonus.

The leasing specialist analysed which motorists are paying the least on their insurance through a number of factors including occupation, make of car and age.  

New: The study found parking on the road was the cheapest due to rise in keyless car attacks

It conducted the research in April 2019 through multiple insurers, using a typical UK male and female driver profile with different variables analysed.

The firm created a typical UK driver profile then researched quotes for every parameter (points on licence, no-claims, occupation, where car is parked) through car insurance comparison websites. 

The typical UK driver was found to be a male, 50 year old sales manager who is married and holds a full UK licence. 

They rack up on average 15,000 miles per year and the base default was that the typical driver had three points on their licence and five years of no-claims. 

Insurance costs for cars are broken down into car insurance groups, ranging from group one to group fifty with group one the cheapest to insure. 

When reviewing their results, it also found that a Skoda Fabia was Britain's cheapest group one car to insure with owners paying an average annual quote of £413.67 a year. 

This was followed closely by the Nissan Micra at £417.25 a year and the Seat Mii, which cost on average £459.03 for annual cover.    

CHEAPEST CARS TO INSURE  Car Average quote 1 SKODA Fabia Petrol 1.0 manual 5dr SE MPI 75 £413.67 2 Nissan Micra 2019 1.0L Manual 5dr VISIA Hatchback £417.25 3 SEAT Mii S 1.0 Manual 3dr S (60) Hatchback £459.03 4 Skoda Citigo Petrol 1.0L Manual 3dr S (60) Hatchback £464.94 5 VW UP Petrol 1.0L Manual 3dr TAKE UP! 60 Hatchback £473.37 6 Chevrolet Spark 1.0L annual 5dr LS Hatchback £489.41 7 Kia Rio 1.2L Manual 5dr 2 Hatchback £491.19 8 Smart FORFOUR PURE Petrol 1.0L £512.14 9 Ford Ka+ 1.2L Manual 5dr STUDIO TI-VCT 70 Hatchback £523.01 10 Hyundai I10 1.0 manual 5dr S Hatchback £567.65 Source: Vantage Leasing  

A Skoda Fabia has been found as the cheapest car to insure by Vantage Leasing's study

Vantage Leasing also looked into common misconceptions about methods to reduce insurance costs, including that parking in a locked garage will give you cheaper premiums than leaving your car on the road or driveway.

It found that parking on the road was actually the cheapest option on average, costing nearly 10 per cent less for insurance when compared to leaving a vehicle in a locked garage.

Parking on the road was also found to be marginally cheaper than parking on the driveway.

Car thefts rose by nine per cent last year, a recent Office for National Statistics report revealed, with much of the rise blamed on the recent spike in keyless car theft tactics. 

The sharp increase of these thefts, which often use 'transmitter relay' attacks that target cars who have keyless entry systems, could be to blame for lower insurance quotes for cars parked on surrounding roads. 

A motorists occupation can also have some impact on insurance quotes with the riskiest jobs meaning quotes come in around 20 per cent more expensive than those that are considered safer. 

Computer programmers are among the cheapest to insure, with their insurance costing on average £553.37 a year. This was closely followed by sales executives at £572.44 a year and bookkeepers also at £572.44. 

CHEAPEST CAR INSURANCE BY OCCUPATION Occupation Average quote 1 Computer programmer (information technology) £553.37 2 Sales Executive (retailing) £572.44 3 Book-keeper (finance) £572.44 4 Admin officer (retail) £577.22 5 Teacher (education) £592.57 6 Sales assistant (Retail) £613.89 7 Cleaner (cleaning services) £614.46 8 Nurse (health authority) £635.99 9 Care worker (professional NHS) £658.17 10 Catering staff (food store) £659.27 Source: Vantage Leasing  

However, catering staff are deemed to be among the riskiest, paying over £100 more a year than programmers at £659.27.  

With regards to age, a typical young driver is impacted harder by driving convictions compared to an older driver with their occupation seeing quotes vary as much as 30 per cent. 

The average cost of yearly insurance for a typical young driver, which Vantage worked out would be a 21 year old, with nine points is a massive £2,037 whilst for a typical driver, it is £801 - well over a thousand pounds cheaper. 

Vantage Leasing Managing Director, Rob Walker, said: 'The research is eye-opening, dispelling common myths including that penalty points could spell disaster when it comes to insurance costs. 

'We also see how the latest trends in car crime such as keyless theft can impact how insurers view risk – hence why parking on the road at night is often cheaper.

'While the research shows what a typical male or female driver can expect, it doesn't cover every eventuality, and some may find their circumstances produce different results. 

'It does, however, provide some intriguing insights into the ever-evolving nature of vehicle insurance.'

Medical professionals are most at fault... 

Another study by Go Compare found that medical professionals have the most at-fault claims. 

The comparison site analysed over seven million car insurance quotes from its database across the previous 12 months for people with over 1400 professions. 

It found that paediatricians have the highest rate of at-fault claims with 17 per cent having made one or more claim.

Psychiatrists were the second highest with 14 per cent having one or more claim whilst 12.2 per cent of both hospital consultants and surgeons also had one or more claims. 

Other occupations in the top ten list included museum consultants, transcribers and vicars.  

Go Compare also looked at the top ten occupations of people who have been found using a device when speeding. Psychoanalysts were the worst culprits with 4.3 per cent getting caught. 

Dog breeders and pest control were the second and third most guilty parties with 2 per cent of people from both professions being caught in the act. 

Lee Griffin, founding member of Go Compare, said: 'Your occupation is one of the key considerations used to calculate the cost of your premium. Ultimately, different professions are deemed riskier than others, so the chances are, if you're a footballer or a GP, you're likely to face higher premiums than a priest.'