House Passes Insurance Reform With Mandated Rate Rollbacks
May 14, 2019
House Republicans stuck together and, with the support of three Democrats, pushed through sweeping reforms to the state’s auto insurance system for the first time since the Michigan’s no-fault law was created more than 40 years ago.
Michigan’s auto insurance customers would see guaranteed rate rollbacks, choice in personal injury coverage and a fee schedule for medical providers under a plan that moved 61-49 at 2 a.m. Thursday morning, 18 hours after the Senate passed similar changes.
Unlike the Senate version, HB 4397 will give the Department of Insurance and Financial Services (DIFS) the power to prevent non-driving factors from being used to set rates. It also mandates savings of between 10 and 100 percent of previous personal injury protection (PIP) costs, meaning some ratepayers can opt out of the Michigan Catastrophic Claims Association’s (MCCA) unlimited, lifetime coverage.
Despite the concessions made on the two issues that Democrats and Gov. Gretchen Whitmer cited as reasons for their opposition on Tuesday, most Dems were a no vote. Instead, Democrats pivoted to talking about the people who will choose to take lesser coverage and “be left in the cold” if they get in a catastrophic car accident.
The Governor joined Democrats in the caucus room for about 10 minutes Wednesday night, but left the chamber without commenting to the media to give a reaction to the plan.
Democrats who voted in support of the bill were Reps. Sara Cambensy (D-Marquette), Leslie Love (D-Detroit) and Karen Whitsett (D-Detroit).
Rep. Jason Wentworth (R-Farwell) pointed out that the House has been trying to reform auto no-fault for more than 30 years. He contended residents across the state are talking about the broken insurance system.
“The legislation lowers rates for Michigan drivers, in some cases by thousands of dollars, and increases consumer protections,” he said.
House Minority Leader Christine Greig (D-Farmington Hills) slammed Republican leadership for not working with her caucus and, instead, putting forth a proposal that watered-down consumer protections. Specifically, she questioned moving the fraud authority from the Attorney General to the Michigan State Police.
She closed her speech by accusing House Speaker Lee Chatfield (R-Levering) of lying to her face, which got her gaveled down and her microphone shut off.
House Republicans drafted its version of reform Wednesday, using Rep. Jason Sheppard’s (R-Lambertville) HB 4397 as the vehicle bill. The caucus used concepts that were discussed in Wentworth’s Select Committee On Reducing Car Insurance Rates, according to House Republican spokesperson Gideon D’Assandro. They voted to discharge the bill from committee Wednesday evening before taking it up on the floor. It would go into effect six months after passage.
MIRS learned that Chatfield knew he had 56 “yes” votes for no-fault reform and was going to wait until Thursday’s session or next week to run the bill. However, he was told directly that Democratic leadership approached a Republican caucus member to support an opposing bill package.
Chatfield, concerned that waiting would allow opponents to pick off “yes” votes, decided to run the package Wednesday. Most of the day was spent figuring out which Democrats would sponsor the rating factor and guaranteed rate relief amendments, among the others that were adopted.
In his speech on the floor, the Speaker said this issue has been talked about for the last 30 years. The ideas from folks on both sides of the political aisle were put into the version that passed Thursday morning.
“This bill is the right answer to provide rate relief,” he said. “It reduces rates and holds insurance companies accountable.”
On Tuesday, the Senate voted 24-14 mostly on party lines to pass its own version of no-fault reform in a similarly speedy fashion. It’s expected the chamber will support HB 4397.
Whitmer said through a statement on the Senate passage of SB 0001 that, “The action taken by the Senate creates more problems than it solves. It preserves a corrupt system where insurance companies are allowed to unfairly discriminate in setting rates and the only cuts it guarantees are to drivers’ coverage. I am only interested in signing a reform bill that is reasonable, fair and protects consumers and this is not it. If this bill comes to my desk, I will veto it.”
The House version would offer five levels of PIP, instead of the three included in SB 0001.
The levels would include unlimited coverage; $50,000 in coverage; $250,000; $500,000; and opting out.
Love offered the amendment on the floor to mandate rate rollbacks for five years. It will “ensure that savings are passed on to Michigan families,” according to a fact sheet about the bill provided by House Republicans.
Opting out would require a 100% rollback of PIP, which would result in an average savings of $1,200 per year.
Choosing the $50,000 coverage level would result in an 80% rollback of PIP coverage, with an average savings of $960.
The $250,000 option would result in a 60 percent rollback of PIP, with an average savings of $720 per year.
The $500,000 would get a 30 percent rollback of PIP, for an average savings of $360 per year.
And even those drivers who keep unlimited coverage would get a 10 percent rollback of PIP for an average savings of $120 per year.
Rep. Jon Hoadley (D-Kalamazoo) called the rollback a legislative “pinky swear” that insurance companies would come through with the lower rates.
HB 4397 includes a fee schedule for medical costs based on that used for workers’ compensation, which “prevents widespread abuse and patients being forced to pay three or four times what a medical service actually costs,” the fact sheet stated.
The bill also requires new higher standards for medical care, requiring national accreditation.
It includes a prohibition against “redlining.” The legislation states an insurer cannot “refuse to insure, refuse to continue to insure, or limit the amount of coverage available because of the location of the risk.”
And it includes limits on attendant care to “stop one of the most common abuses and frauds that drive up costs for everyone else,” the fact sheet stated.
Another floor amendment, by Rep. Michael Webber (R-Rochester Hills), added that after the five-year mandated rollbacks, insurers would be required to get future rates approved by DIFS. Current law, is “file and use” for rates. After the five-year period, it would be “file and approve.”
Whitsett’s amendment expanded the “tolling” deadline during which an injured person can file suit against an insurer. Currently, injured parties have one year from the day of the accident to file suit if a claim is denied. Trial lawyers testified this is a leading cause of lawsuits currently because suit has to be filed to preserve rights if the claim is not fully settled. Tolling will make the deadline one year from the date of denial.
Yet another floor amendment, also by Whitsett, will allow DIFS, already studying what “non-driving factors” should be considered discriminatory when insurers set rates, to use that information to determine what non-driving factors will be disallowed.
DIFS would be required to post a website explaining the changes to auto insurance and providing tips on ways to shop competitively for insurance.
The Michigan Catastrophic Claims Association (MCCA) would continue to operate under the House version, but would be required to undergo an audit every three years and issue a rebate if its assets are more than 120% of liabilities.
The bill would also create a 10-member Automobile Insurance Fraud Task Force.
Just before 1 a.m. Thursday, Rep. Donna Lasinski (D-Scio Twp.), complained about the late-night session, calling it “lame duck tactics.”
She urged the adoption of a substitute, which she said would address non-driving factors and provide fair medical costs. She contended the Republican version of the bill would take away rights and benefits “without real rate reduction.”
“We don’t need to get this done tonight, we need to get this done right,” said Lasinski before the amendment was defeated.
Out of the 22 House Republicans who voted no on the 2017 bill pushed by then-Speaker Tom Leonard and Detroit Mayor Mike Duggan, only nine are House members serving in the 2019-20 session. Of those nine, all of them voted for Wednesday’s bill.
Of the four Democrats who voted yes on the 2017 bill, only two of them still serve in the chamber. Love voted for Wednesday’s bill. Rep. Wendell Byrd (D-Detroit) voted no.
Among last year’s “no” votes in the House were then-Reps. Pete Lucido (R-Shelby Twp.) and Jim Runestad (R-White Lake). Both voted for SB 0001 on Tuesday as state Senators. Sen. Sylvia Santana (D-Detroit) put up a “yes” vote for HB 5013 back in 2017 and was a “yes” on SB 0001 as a member of the Senate.
Rep. Yousef Rabhi (D-Ann Arbor) asked to have HB 4397 re-referred to committee and, because it was just recently made available to members, asked the bill be read in full. Both motions were rejected.
He urged colleagues to “put aside political differences and partisan talking points” to adopt the bill.
“Do we stand with insurance companies to give them what they want?” Rabhi said. “The insurance companies who have been screwing our constituents time and time and time again with higher rates . . . What you are doing is leaving people out in the cold. That’s not OK.”
“Finally, finally, finally we are lowering insurance rates for Michigan drivers,” said Rep. James Lower (R-Cedar Lake). “We have been talking about this literally for decades.”
He said concerns about redlining and non-driving factors are addressed in the bill, so he contended accusations that those issues weren’t covered as being simply “political talking points.”