Michigan Repub­licans are leading a push to reform Michi­gan’s auto insurance. The state’s auto insurance rates have been the highest in the nation for the last five years. Pexels

Slashing Michigan’s auto insurance costs is the first pri­ority for state Repub­lican leg­is­lators this session.

When Repub­licans intro­duced Senate Bill 1 on Jan. 15, they promised “long-overdue reforms,” including crack­downs on medical fraud, changes to per­sonal injury pro­tection, and potential mod­i­fi­ca­tions to Michigan’s no-fault system, said Sen. Aric Nesbitt (R‑Lawton), the bill’s primary sponsor and a 2001 Hillsdale grad.

“Michigan drivers are sick and tired of paying the highest auto insurance rates in the country,” Nesbitt said. “It’s time we mod­ernized the system, reduced fraud and costs, and pro­vided better options for consumers.”

For the last five years, Michigan has had the highest prices for car insurance in the nation. In 2018, Michigan drivers dolled out an average $2,239 for auto insurance — 64 percent higher than the national average premium, according to a study.

“It affects our seniors, it affects kids getting into the work­force, and it affects the poor in ways that are uncon­scionable to me,” said Sen. Lana Theis, (R‑Brighton), chair of the Senate Insurance and Banking Com­mittee. “I had a senior call me, telling me that I made him choose between his food and med­icine, or driving… He wanted me to fix it. I have been unable to do so, and it’s a huge burden.”

Michigan’s no-fault system dates back to 1973, when leg­is­lators hoped to lower the costs and delays of law­suits resulting from car acci­dents. Today, only 11 other states have no-fault auto insurance, and Michigan alone offers unlimited per­sonal injury pro­tection. Its closest rival, New York, caps per­sonal injury pro­tection at $50,000 per person.

Reforming auto insurance has been debated for decades: Leg­is­lators have intro­duced more than 450 bills about auto insurance since 2001, according to

Sen. Bill 1 aims to break the stalemate. Nesbitt said he was open to “any and all ideas” to drive down costs, including “major reforms” to the no-fault system. He intends to give motorists the option to choose a cheaper, limited per­sonal injury protection.

“You drive down the costs by doing com­pre­hensive reforms. Every­thing needs to be on the table,” Nesbitt said. “We need to give drivers the ability to choose the best per­sonal injury cov­erage that best meets their needs and their budget.”

Nearly half of Detroit’s budget for auto insurance feeds per­sonal injury pro­tection, according to a 2015 Pin­nacle Actu­arial Resources analysis. Michigan’s per­sonal injury pro­tection covers a sweeping range of care for injured accident victims, from hos­pital expenses to lost wages to funeral services.

Some econ­o­mists blame Michigan’s unlimited per­sonal injury pro­tection for rampant medical inflation, while Repub­lican leg­is­lators call it a “blank check” for hos­pitals to exploit.

“Everyone knows that when there is a blank check, at the other end, costs are going to go up dra­mat­i­cally,” Theis said. “We need to pull that blank check out of the system.”

Medical providers some­times charge auto insurers two or three times more than health insurers. Auto insurers coughed up $5,300 for a MRI in Detroit, while the iden­tical pro­cedure cost $1,000 at other hos­pitals or just $500 under Medicare, according to an 2017 inves­ti­gation by the Detroit Free Press.

“There is no pricing, so there is no trans­parency,” said Hillsdale College Pro­fessor of Eco­nomics and Public Policy Gary Wolfram. “And that’s the basic problem: People respond to incen­tives. If you tell the hos­pital, ‘We’ll pay you $4,000 for the MRI,’ they are going to charge $4,000 for the MRI.”

Nesbitt and Theis hope to slash these costs by intro­ducing a no-fault fee schedule, which would set fixed prices for medical providers, and by allowing drivers to opt out of unlimited, lifetime per­sonal injury pro­tection and into a reduced-price, reduced-cov­erage plan.

But the defenders of the no-fault system denounce trimming unlimited per­sonal injury pro­tection. Any over­hauls of per­sonal injury pro­tection or the no-fault system will face the pow­erful Coalition Pro­tecting Auto No-Fault, the lob­bying arm of medical providers, plaintiff attorneys, and patients.

“In the past, these pro­posals failed because even­tually people realized what these pro­posals are all about — depriving people of care,” said CPAN spokesperson Steve Sinas. “The idea that no-fault is this fun­da­men­tally flawed thing, that it is bur­dening our state, that it must be fun­da­men­tally changed, is not true.”

Sinas said he would welcome reforms that would introduce a fee-schedule, attack fraud, and reduce lit­i­gation. Two out of every five law­suits in Michigan courts are filed over auto acci­dents, according to Crain’s.

In Hillsdale County, where res­i­dents ranked trans­portation as a top concern, the cost of auto insurance hurts those who struggle with gen­er­a­tional poverty the most. The sky-high pre­miums likely push them into driving without insurance, said Com­munity Action Agency Hillsdale County Manager Clint Brugger.

“There are a lot of people for whom it is a burden to find money in their budget to pay their insurance,” said Rep. Eric Leutheuser, (R‑Hillsdale), a 1982 Hillsdale grad. “I’ve had people tell me that if insurance rates go up any higher, they don’t know what they’re going to do.”

As of 2015, one in five drivers didn’t have car insurance in Michigan, slotting the Wolverine state in fourth place for unin­sured drivers, according to an Insurance Research Council study.

“Chances are, if you need to get to work and you don’t have the means to be able to make your car insurance payment, you’re going to drive without,” Brugger said. “You don’t want to lose your job, that would just put you further behind.”

Repub­lican leg­is­lators hope that by pushing reforms through Con­gress, they can lower the cost of living for Michiganders.

“I know people who grew up in Hillsdale County, whose friends are here, but who are living over the border because auto insurance is cheaper. It’s unac­ceptable — I want those people to stay here,” Leutheuser said. “And if we can lower the costs of living, we can help them stay in Michigan.”