Another View: Changes to state’s no-fault insurance system would benefit consumers

By Pete Kuhnmuench

The insurance industry in Michigan supports House Bill 4936, which would make changes to the state’s auto no-fault law to ensure that the system is sustainable for consumers well into the future.

Michigan’s auto insurance no-fault law is unlike any other. It mandates that all drivers purchase unlimited, lifetime medical benefits. That means there is no cap on payouts for medical treatment of auto accident injuries.

The cost of providing these high medical benefits has been increasing at a staggering rate. The average Personal Injury Protection claim has gone up 166 percent from 2000 to 2010.  In 2010, the average medical claim was $36,245. That is out of line with other no-fault states. New Jersey’s average cost per auto no-fault claim in 2010 was $16,000. All other no-fault states have average claim costs under $10,000.

Those high costs result in Michigan consumers paying more for auto insurance than in surrounding states. The average premium in Michigan is $1,032, while the average premium in Ohio is $693; Indiana, $700; Illinois $798; and Wisconsin $641.

If the Legislature adopts House Bill 4936, consumers would get to choose the level of medical benefits that best fits their needs, just like they do for other decisions in their lives. The legislation still would mandate the highest medical benefits in the country. Consumers could choose $500,000, $1 million or $5 million. Currently, the next state with the highest mandate is New York, and it requires consumers to buy only $50,000 in medical coverage.

Another provision of the bill would implement a medical fee schedule similar to one already in existence in Michigan’s workers’ compensation insurance system. The workers’ compensation medical fee schedule has been touted for keeping workers’ compensation insurance rates low in Michigan. Medical providers are involved in the process that determines the fees provided for in the workers’ compensation reimbursement schedule.

For years, Michigan drivers have been paying more than their fair share for medical costs. Hospitals in Michigan charge no-fault carriers more to make up for lower payments made by government-funded programs.  For example, an X-ray is billed nearly three times the rate under no-fault than it is billed under the workers’ compensation system. This has significant impact on auto insurance premiums paid by Michigan consumers.

Those opposing the bill say any amount less than unlimited for medical benefits will bankrupt everyone and force them into the state’s Medicaid system. If this were true, then states with lower medical requirements (which are all other states) would have a lot more bankruptcy filings and  more of their population on Medicaid rolls. That is not the case.

Those opposing the legislation are not concerned about Michigan residents, but their own bottom line. The current Michigan auto insurance no-fault system has the highest benefits in the country. Under House Bill 4936, Michigan consumers would still have the highest benefits in the country.

Pete Kuhnmuench is the executive director of the Insurance Institute of Michigan in Lansing