No-fault negotiations drag on as House plan moves forward

Michigan Capitol | Susan J. Demas

Negotiations are ongoing between top GOP leaders and Gov. Gretchen Whitmer as the Legislature continues to negotiate over how best to overhaul the state’s no-fault auto insurance law.

Both the state House and Senate last week somewhat unexpectedly passed different plans that Republicans say will result in lower auto insurance costs for drivers, although Democrats argue otherwise.

Gov. Gretchen Whitmer at Spectrum Health, May 15, 2019 | Gov. Whitmer photo

Whitmer has threatened to veto both chambers’ legislation because she said it doesn’t stop insurance companies from using discriminatory practices to set coverage rates.

The Senate adjourned late Wednesday afternoon without taking up the House plan. The lower chamber’s legislation took into account some Democratic concerns and mandated a five-year rate rollback, which Whitmer said should be longer.

There’s been widespread speculation that the Legislature will take action on the issue — a top priority for Republicans in both chambers — before the Mackinac Policy Conference, which convenes after Labor Day.

Whitmer toured Spectrum Health in Grand Rapids on Wednesday to highlight the impact of big changes to Level 1 trauma centers under the GOP proposals. There’s also concern that auto insurance reform will basically amount to a cost shift from that industry to health care providers, who have lined up against legislation.

Spokespeople for Whitmer, state Senate Majority Leader Mike Shirkey (R-Clarklake) and House Speaker Lee Chatfield (R-Levering) declined to indicate where their negotiations may lead. But Whitmer told reporters this week that she’s holding out hope the three can reach an agreement on how to offer auto insurance relief in an era of divided government.

Senate Majority Leader Mike Shirkey
Mike Shirkey | Michael Gerstein

“Conversations are being had, and I think there might be a path forward, but it’s too early to tell,” Whitmer told reporters on Tuesday.

“I said I’m going to veto the bills that they passed,” the governor continued. “They’re not sending them to me yet. So the fact that there is a conversation at the staff level proceeding should give everyone the sense that there’s potential.”

But by Wednesday, a special House committee on auto insurance offered no indication that it is working on a plan more in line with Democrats’ wishes.

Despite the governor’s threat to veto legislation that “preserves a corrupt system where insurance companies are allowed to unfairly discriminate in setting rates,” the committee rejected amendments from Democrats that would have stopped insurers from using ZIP codes to determine the price of insurance.

House Speaker Lee Chatfield (left) and Rep. Jason Wentworth (right) | Nick Manes

The House panel instead approved a substitute bill that swaps language from the existing House bill into SB 1, the Senate’s separate no-fault plan which formerly did not compel insurance companies to mandate rate rollbacks for reduced medical coverage options.

Committee Chair Jason Wentworth (R-Clare) told the Advance that the latest plan would leave it up to the state to determine which “non-driving” factors would be “rationally related to risk” and therefore permitted in setting rates.

“Singling out those, to me [that] doesn’t make any sense,” Wentworth said.
“We’ve already banned all non-driving factors that are rationally related to risk.

“We said we’re allowing DIFS (the Department of Insurance and Financial Services) to promulgate those rules. It’s not up to me to make that decision … and the governor appoints the director of DIFS,” he continued.

A Senate panel also approved a bill Wednesday from state Sen. Adam Hollier (D-Detroit) that would stop companies from using gender to determine rates. It was amended in committee to include existing language passed under the Senate plan that would stop insurance companies from denying coverage based on where they live.

Adam Hollier

Hollier, one of two Democrats to vote for SB 1, said he’s still negotiating with Republicans on another provision to stop insurance companies from using credit scores to set rates — a section that was removed in committee. He said he hopes his bill will serve as a vehicle to continue ongoing talks on non-driving factors on which Republicans may be willing to budge.

“This would protect many people in many ways from ZIP code [rate-setting],” he said. “Perfect? No. Better? Without question.”

How the House plan works

The current House plan creates a tiered system with several coverage options ranging from $50,000 worth of medical costs covered to a lifetime of Personal Injury Protection (PIP) associated with an auto accident. Under House Bill 4397, reduced medical coverage options would be required to come at a lower cost for five years.

The bill passed before a non-partisan analysis was available from the House Fiscal Agency, which breaks down what legislation does and its financial impact. No public hearings for the plan were held, either, as is common for most legislation that will see a full chamber vote.

A Senate Fiscal Agency analysis was made available on Monday. It said HB 4397, like a similar Senate plan without mandated rate rollbacks, would shift costs to Medicaid “as most people do not have long term care coverage beyond the limited coverage provided to Medicare recipients” in cases of severe injury.

The analysis says that could increase costs to Medicaid by about $65.9 million over a period of 10 years — a roughly 1.2 increase overall over that time period. The precise amount “would depend on the interest in unlimited PIP [personal injury protection] coverage,” the analysis said.

The smaller the pool of people is purchasing lifetime PIP coverage, the higher the cost will be to Medicaid.

State Rep. Mari Manoogian (D-Birmingham) called the plan “irresponsible” in a statement and slammed the “rushed legislative process.”

“Term-limited legislators who will never face the voters again have crafted a sweetheart backroom deal for the insurance industry and Michigan taxpayers will be on the hook for it,” she continued. “This is a bad bill and cannot be allowed to become law.”

Mari Manoogian

The Michigan Association of Justice (MAJ), which represents Michigan trial lawyers, also criticized the plan in a statement on Monday.

“Rushing poorly thought-out plans to gut medical protections under the cover of darkness in order to increase insurance company profits is not the solution Michigan drivers and their families are looking for,” said MAJ President Debra Freid. “We call on Governor Whitmer to veto these bills.”

House Democrats announced they will unveil a separate plan Thursday morning that they claim will cut auto insurance rates by 40 percent.


  1. Dear Committee:

    The legislation prepared to address Michigan’s high auto insurance premiums is defective.

    Section 2111 F (2) provides for the definition of a “PIP Premium” by the insurer to which is applied a savings percentage for policy holders that opt to reduce their catastrophic care amount. 100% of zero is still zero. The calculation of “PIP Premium” is not identified.

    Insurers are free to set the base for savings at their discretion with no over site. This is representative of a major problem with Michigan’s No Fault law, the secrecy surrounding the rate setting business practices of insurance companies.

    Solution: Subject auto insurance companies to FOIA.

    Section 3157 (2) limits reimbursement to established worker’s compensation fee schedules, and for services not covered by worker’s compensation to an average of compensation provided for non-PIP related claims.

    Further in the bill’s language the Director is given discretion as to rate changes. Even further it appears that the insurer is given greater discretion over approval for the necessity of the services provided.

    As a lay person, to me this language is suspect and appears to contradict the application of worker’s compensation fee schedules. The discretion of the Director rules – with no over site.

    Section 2111 (2) b speaks to the rating classifications that insurers will be allowed to use. Earned income and number of dependents, a sly way of introducing gender and age discrimination into the rate setting process, contradicting the statement in sub (3) about not using gender or marital status. Allowing risk to be assigned territorially is an invitation to redline.

    Sub (9) provides the Director with the discretion to determine non-driving factors that can be used. Basically, insurers are still allowed to use non-driving factors to set premiums.

    Solution: Only driving record can be used to establish premiums. Testimony provided to you affirms that any other factors have no actuarial basis for their use.

    There are more questionable provisions in this legislation and I am sure (hope) you have received honest input as to their efficacy.

    Recommended solutions: Set fee schedules for medical, professional service, pharmaceutical, medical devices and attendant care; change “file in use” to “prior review”; set rates based upon driving record only; make insurers subject to anti-trust and FOIA.

    Thank you for your attention. Please reject this legislation.


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