1. Limit the “unlimited” medical benefit
The most hotly contested part of no-fault insurance in Michigan is the unlimited, lifetime medical requirement.
Supporters of limiting the benefit, including Detroit Mayor Mike Duggan (D) and House Speaker Tom Leonard (R), say the benefit costs too much to be a state requirement, and that it duplicates coverage already provided by health insurance. A bipartisan plan proposed (and rejected) by state lawmakers 2017 would have reduced mandatory coverage requirements to $250,000 — on par with New Jersey, the state with the second-highest PIP requirement — in exchange for a 20% reduction in rates for the average driver.
Opponents, including lawyers, medical providers, and disability advocates with The Coalition Protecting Auto No-Fault, fiercely defend the unlimited medical benefit as a critical safetynet for people who have been catastrophically injured. They worry that if PIP is capped, medical bills could quickly overrun coverage, leaving families financially devastated and forcing injured people to rely on far more limited services through Medicare or Medicaid. Michigan’s nonpartisan House Fiscal Agency told lawmakers that the 2017 proposal would have added $150 million per year to Medicaid within a decade of the change.
2. Create a medical fee schedule
Michigan law requires insurers to pay whatever is “reasonably necessary” to treat crash victims. Disputes over what’s covered and how much it’ll cost often land in court.
Perhaps that’s why there’s broad support among lawmakers, medical providers, insurers, and groups like The Coalition Protecting Auto No-Fault for a fee schedule that would standardize medical reimbursements. For example, New Jersey limits the cost of a standard brain MRI to $823 to $876 depending on what part of the state you’re in. The cost in the Detroit area, depending on which facility you visit, can range from $500 to $5,000.
While these groups agree that a fee schedule could help control costs and meaningfully impact insurance premiums, disagreements have emerged over what that fee schedule should look like. Disability advocates and medical providers want to make sure it doesn’t limit patients’ access to specialized care.
3. Prohibit insurers from using certain information when setting rates
A number of Michigan lawmakers and reform advocates have raised concerns about what information insurers use to set car insurance rates.
Some factors — including gender, marital status, occupation, education, and credit score — are controversial, and not just in Michigan. In late 2017, New York joined California and a number of other states in prohibiting education and occupation as rating factors after state regulators found them to be unfair. Regulators in many other states still allow such non-driving factors, because they help insurers mathematically predict the likelihood of drivers filing a claim.
The fairness of these rating factors is debated because they can impact premiums as much or more than how someone drives. For example, Michigan is second in the country for credit score impact, with a 24% difference in average premiums between credit score tiers.
However, prohibiting any single factor does not necessarily reduce rates overall. In fact, Detroit Mayor Mike Duggan told Michigan legislators in 2017 that banning credit as rating factor would reduce premium costs by only 3%. That’s because eliminating rating factors doesn’t reduce the cost of medical claims and legal fights. Insurers would likely charge about the same overall amount; they’d just distribute it differently.
Michigan car insurance rates also vary widely based on zip code (due to the likelihood certain claims will be filed in that zip code). If zip code were prohibited as a rating factor, rates would likely become more uniform, with some drivers in expensive areas paying less and drivers in more affordable areas paying more.