Insurance overhaul will help consumers
Many drivers are cheering action in Lansing that — beginning in about a year — will allow Michigan residents to reduce their automobile insurance costs.
The legislation is a solid step toward reducing Michigan’s highest-in-the-nation auto insurance premiums. Critics of the measure mourn the loss of required unlimited lifetime benefits for personal injuries sustained in traffic crashes. But the change will leave more cash in the pockets of Michigan consumers for things like rent and food.
The measure ends the 1973 state mandate that auto insurance policies cover all medical costs, forever, for car crashes. That mandate is blamed for Michigan’s high insurance premiums, the highest in the nation each of the last five years.
Beginning in July 2020, insurance companies will be allowed to sell policies that pay less-than-unlimited benefits.
The average Michigan annual premium is $2,693, according to insurance comparison website The Zebra. That’s 83 percent more than the national average of $1,470. The average premium for a Traverse City (49684 ZIP code) resident is $2,292. Detroit’s premium on average is $5,464 a year, far more any other U.S. city.
Last week’s legislation will, beginning next July, allow drivers to choose from several tiers of coverage. The lowest tier — no PIP coverage — requires that the registrant have a health insurance policy that covers collision injuries.
In other states, people badly injured in car crashes typically end up receiving some benefits from health insurance they buy through their employer or the Affordable Care Act. In Michigan, they rely on auto insurance, even if they have other coverage.
Michigan auto insurance premiums have risen as medical costs continue to spiral upward. Insurance companies complain the problem is enhanced by the tendency for many care providers to charge more for services when billing auto insurance than they do when billing the same service for patients covered by regular health insurance.
We suspect the new law will result in more drivers actually having coverage when they need it.
The Detroit Free Press reported in 2014 that a common dodge for cash-strapped Detroit residents was to buy a one-week insurance policy so they could show proof of insurance when buying license plates. Then they’d drive without insurance the other 51 weeks of the year. The new law may bring premiums down to an affordable level and make such tactics less common.
Backers of the new legislation said Michigan’s current law is unsustainable because it mandates unlimited services. Every other state in the U.S. has figured out how to care for victims of catastrophic car crash injuries at lower cost to consumers. The new law may help Michigan achieve a reasonable balance between cost and coverage.
Michigan’s 46-year-old system appears to have created an environment that drove up costs in several ways. The new law addresses the practice of health care providers charging — depending on which type of insurance is being billed — outrageously different rates for identical services. It prohibits insurance companies from using non-driving factors such as educational level, occupation, credit score, home ownership or ZIP code when setting rates.
Detroit Mayor Mike Duggan expects that most Michigan residents will save $500 a year and Detroit residents will save at least $1,000 a year.
Those savings will provide a bit of financial relief for cash-strapped consumers across the state.