The state Legislature is preparing to begin debate on possible changes to Michigan’s unique auto insurance coverage for people injured in accidents.
Michigan now is the only state in the nation that mandates unlimited medical benefit coverage for people seriously injured in auto accidents. That would change under proposals that could offer motorists less expensive insurance in exchange for limited personal injury protection coverage.
Supporters of the changes, including the auto insurance industry, say it would allow motorists to opt out of more expensive coverage they can’t afford or don’t want. Insurers also are looking for relief in a system they say is growing increasingly expensive and threatening their finances.
“If you take a look at the cost of the system, the skyrocketing medical costs, it’s simply unsustainable,” said Sen. Joe Hune, a Republican from Livingston County’s Hamburg Township and chairman of the Senate Insurance Committee. “There’s going to be a tipping point sometime. The system just can’t sustain itself.”
Opponents of the proposed legislation say it could threaten the financial stability of the state’s no-fault auto insurance system. They say motorists opting for less coverage could wind up underinsured and in deep financial trouble if they’re seriously injured in an accident.
John Cornack, CEO of Ann Arbor-based Eisenhower Rehabilitation Center and president of the Coalition Protecting Auto No-Fault, said the proposed legislation “does not come close to meeting the needs of severely injured accident victims.”
The coalition opposed to the proposed changes includes hospital and health groups, trial lawyers and other organizations. They’re engaged in a lobbying battle with auto insurance companies and business groups such as the Michigan Chamber of Commerce that want to alter the system.
The legislation would make significant changes to how people involved in catastrophic injury accidents are covered under state law.
Currently, all Michigan auto policyholders must buy unlimited medical benefits as part of their coverage. Regular auto insurance policies handle coverage up to $500,000, after which all insured motorists are assessed a fee to cover more severe cases, which are reimbursed through the Michigan Catastrophic Claims Association. The association, created in the late 1970s, now covers medical bills for roughly 12,800 accident victims across the state.
Unlimited coverage would continue for those currently in the MCCA system, according to supporters of the developing legislative plan. But there would be no such guaranteed coverage for those severely injured in future accidents.
Instead, motorists would have options for personal injury coverage likely ranging from $250,000 to $5 million. The developing legislation, which could be introduced this month, is likely to replace an original proposal that would let motorists buy as little as $50,000 in coverage up to unlimited coverage.
The new plan also likely will contain fee schedules and other measures aimed at controlling health insurance claims costs. It also likely will include elements of a plan backed by Sen. Virgil Smith, D-Detroit, that could provide some personal injury protection insurance relief in Detroit and possibly to residents in other areas of the state.
The $250,000 threshold would cover about 99 percent of accident victims, Hune said. But the Coalition Protecting Auto No-Fault says the average acute care stay cost for a person with a severe brain injury is more than $250,000, with some surpassing $1 million. CPAN says hundreds of people a year could have injury-related costs beyond even $500,000 in insurance coverage and would need to turn to other income, charities or taxpayers to pay for their care.
“Right now, accident victims in our state can get the care they need without turning to welfare,” Cornack said.
But the possibility of cheaper rates might be tempting for some motorists, who now pay an average premium of more than $1,000 a year in Michigan. Supporters of allowing flexibility on medical coverage say Michigan motorists could save roughly 15 percent on comprehensive policies and up to 40 percent on basic policies that don’t include coverage for collision or theft.
“Michigan consumers should not be forced into a `one size fits all’ auto insurance system,” said Pete Kuhnmuench, executive director of the Insurance Institute of Michigan.