Auto insurance reform passage shows bipartisanship isn’t just a buzzword — for now

Michigan Capitol, March 22, 2019 | Susan J. Demas

After decades of fits and starts, a bill overhauling Michigan’s one-of-a-kind no-fault auto insurance law is finally zooming to a governor’s desk.

The Republican-led Michigan Legislature on Friday achieved a key goal by sending a bill to Democratic Gov. Gretchen Whitmer, who’s expected to give it her signature next week, just in time for the annual Mackinac Policy Conference.

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Rep. Jason Wentworth presiding at the House with Speaker Lee Chatfield looking on, May 24, 2019 | Nick Manes

Supporters say the plan will save motorists money by providing them more coverage-level options, but critics maintain that consumers will lose out, particularly car crash victims.

The deal, which passed with surprisingly strong Democratic support — in part, due to the UAW’s backing — showed that, at least for now, bipartisanship is more than just a buzzword this term.

After all, auto insurance reform failed to gain traction during the eight years of Republican legislative control in Michigan during GOP Gov. Rick Snyder’s two terms.

But while many hailed the deal as a perfect example of divided government coming together to solve a fundamental problem, many critics decried the closed-door process and hasty vote in a rare Friday session.

Around 4 p.m., the state House passed Senate Bill 1, sponsored by state Sen. Aric Nesbitt (R-Lawton), on a 94-15 vote, with only Democrats voting against. The same bill was approved in the Senate just over an hour later by a vote of 34-4, again with only Democrats opposed.

Let’s make a deal

As the Advance reported Friday morning, Whitmer, House Speaker Lee Chatfield (R-Levering) and Senate Majority Leader Mike Shirkey (R-Clarklake) announced they had a deal “in principle” after weeks of negotiation.

Gov. Gretchen Whitmer talks to reporters at the Lansing Brewing Co. | Nick Manes

While Whitmer had previously threatened to veto the Republicans’ previous iterations, the governor and top legislative leaders had come together over the last week, something acknowledged by Chatfield in a speech before the House vote.

“See, the fact is, what’s in this bill is not exactly what the speaker of the House would like to see. It’s not my preferred solution,” Chatfield said. “And I can tell you this, this bill is not the exact solution that I’m sure the governor would have put forward herself. But we reached a consensus because that is what government is intended to do.”

Whitmer, who is expected to do a ceremonial signing of the legislation next week during the annual Mackinac Policy Conference business and political confab, praised the passage of the bill.

“Today’s vote is truly historic. We’ve accomplished more in the last five months than in the last five years,” Whitmer said in a statement on Friday night. “This vote demonstrates that when both parties work together and build bridges, we can solve problems and make life better for the people of Michigan.”

House Minority Leader Christine Greig speaking at the Planned Parenthood summit, April 16, 2019 | Susan J. Demas

The bill also had the support of House Minority Leader Christine Greig (D-Farmington Hills) and Senate Minority Leader Jim Ananich (D-Flint).

After putting out a scathing statement on the GOP’s earlier legislation as “carte blanche for insurance fraud,” Attorney General Dana Nessel, also expressed support on Friday for the revamped version.

The issue of auto insurance reform had been the top priority for both GOP-led legislative chambers since January. Each chamber passed versions of legislation this month and it looked like they were heading toward partisan showdown with Whitmer, who threatened to veto the bills.

However, the three leaders held a series of private negotiations, which had intensified this week after Detroit billionaire Dan Gilbert began to go public with his long-planned ballot proposal on car insurance.

Speaker Lee Chatfield and Senate Majority Leader Mike Shirkey, May 24, 2019 | Nick Manes

Speaking with reporters following the votes in both chambers, Chatfield and Shirkey said that the talks and level of trust gained between the parties will go a long way toward helping with negotiations on the other big-ticket items this year, like the fiscal year 2020 budget and road-funding revenue.

But they also stressed that the deal reached Friday on car insurance has no provisions tied to the other priorities.

“I think the people in our state have made it very clear — they want the roads fixed and we’re going to focus on that along with every other issue that’s facing our state,” Chatfield said. “But it’s not tied to car insurance.”

What’s in it?

The sweeping bill was voted on without any analysis yet available from either of the nonpartisan fiscal agencies in the House or the Senate.

The key tenants of SB 1 rely on allowing drivers to opt out of the existing mandate that drivers purchase unlimited personal injury protection (PIP) in the event of an accident and instead allowing five different options.

They include the traditional unlimited option, which the Legislature estimates will now save drivers $120 per year. Drivers will now be able to choose, however, between a full opt-out of PIP in certain cases, resulting in an estimated $1,200 annual savings, a $50,000 option, $250,000 option and a $500,000 option.

The bill also includes a new fee schedule for medical providers to be implemented July 1, 2021, based on the percentage of Medicare reimbursement that will be phased in for two years after its implementation date.

Although the legislation passed with significant Democratic support, many legislators still believe the bill has significant problems — not the least of which is that the 120-page legislation was crafted mostly overnight and only given to lawmakers a few hours before the vote.

“We haven’t had an appropriate amount of time to allow our constituents to digest this very complex information,” state Rep. Rachel Hood (D-Grand Rapids) told the Advance. “I feel like you need to have a Ph.D. in insurance to be able to understand the impacts.”

Sherry Gay-Dagnogo

State Rep. Sherry Gay-Dagnogo (D-Detroit) didn’t hold back her displeasure with the deal on Twitter Friday, writing, “I will mark this as The Day I Became an Independent!” — something she also stressed in a floor speech.

SB 1 addresses one area of concern to Democrats and bans seven different non-driving factors in rate-setting, including the use of sex, marital status, ZIP codes, credit score, homeownership (except for bundling), and education level or occupation (excluding group discounts).

The legislation does outlaw the use of ZIP codes as a means of insurance providers setting rates, which many have referred to as “redlining” because it allows certain geographic areas to be priced differently.

But the use of “territory” created a major problem for many Democrats and was one of several factors that led to a “no” vote for state Rep. Yousef Rabhi (D-Ann Arbor).

“So you can use a census tract, you could use a city boundary, you could use a state rep district … those could all be your new territorial rating areas,” Rabhi told the Advance in an interview on Friday afternoon ahead of the House vote. “And that means people in Ann Arbor are still paying less than people in Detroit and that is still wrong.”

State Sen. Jeremy Moss (D-Southfield) shared a similar sentiment in a statement.

“Today’s ‘compromise’ only stands to harm the most vulnerable,” Moss said. “This legislation does not: Provide equal coverage to all motorists; address rate relief beyond the PIP line of your bill; or prohibit discrimination against specific communities. Further, the process of this bill is an affront to the open government for which I advocate, as it was written overnight and without public vetting or input.”

Senate Minority Leader Jim Ananich, May 24, 2019 | Nick Manes

Asked whether he believes that redlining will still occur under the new legislation, Senate Minority Leader Ananich dismissed those concerns, saying that he believes there’s plenty of safeguards inserted into the bill.

“I think there will be natural pressure to make sure that rates are based on a person’s driving record,” he told reporters. “And I think that’s an important step, something we haven’t had in a long time.”

One thing Democrats opposed to the bill, however, were unwilling to do, at least on the record: Criticize Whitmer in the weeks of negotiations.

Asked whether he believes Whitmer got the best deal she could, Rabhi demurred.

“I don’t want to speak to what Gov. Whitmer did or didn’t do,” he told reporters. “I don’t think this bill goes far enough. I don’t think this bill real reform.”

Yousef Rabhi | House Democrats photo

Still, for some legislative Democrats, just the opportunity to vote on a piece of legislation that is likely to become law and likely to have some impact on Michigan residents’ pocketbooks was more than enough for them to get past the bill’s shortcomings.

“It’s not perfect,” state Rep. Leslie Love (D-Detroit) said in a House floor speech. “As citizens across our state have watched this Legislature struggle to bring real reform for Michigan’s auto no-fault system, I believe that we are finally voting on legislation that will do just that.”

Interest groups speak out

The passage of the long-sought auto insurance bill on Friday led to a tidal wave of support and anger from various interest groups who have been at the core of this decades-long fight, including trial lawyers, hospitals and business groups.

“Sky-high costs for auto insurance have been a detriment to Michigan’s competitiveness for many years,” he said. When these reforms take effect, millions of Michiganders will realize significant savings in their personal budgets,” Doug Rothwell, president and CEO of Business Leaders for Michigan, said in a statement.

Michigan Capitol | Susan J. Demas

UAW spokesman Ben Rothenberg said the union did support the bill and urged a “yes” vote.

“It will ultimately save UAW members, especially those in Detroit, a lot of money. This was a great bipartisan effort between Gov. Whitmer and the Legislature,” he told the Advance.

Not all groups were as pleased by Friday’s action, however.

“The Michigan Legislature has just passed a destructive piece of legislation that decimates Michigan’s premier auto no-fault system,” said John Cornack, president of the Coalition Protecting Auto No-Fault. “It is a sell-out of Michigan citizens and a total gift to the insurance industry.”

Likewise, the Michigan Association of Justice, which works on behalf of trial attorneys, expressed disappointment, but pledged to keep fighting.

“While we are deeply disappointed in today’s vote, the fight to protect comprehensive medical care for injured auto accident victims isn’t over,” said MAJ President Debra Fried. “Rest assured, MAJ will continue to fight this injustice on every level, including activating our membership to elect pro-reform candidates in the upcoming election.”

Senate Majority Leader Mike Shirkey
Mike Shirkey | Michael Gerstein

But to Shirkey, the Senate majority leader, the level of displeasure from various interest groups is a sign they did something right.

“I’m not suggesting for a moment the bill is perfect,” Shirkey said. “But if CPAN and insurers … and the hospitals … are all concerned about the bill, I think we hit a sweet spot.”

Advance Editor Susan J. Demas contributed to this story.

Nick Manes
Nick Manes covers West Michigan, business and labor, health care and the safety net. He previously spent six years as a reporter at MiBiz covering commercial real estate, economic development and all manner of public policy at the local and state levels. His byline also has appeared in Route Fifty and The Daily Beast. When not reporting around the state or furiously tweeting, he enjoys spending time with his girlfriend, Krista, biking around his hometown of Grand Rapids and torturing himself rooting for the Detroit Lions.

1 COMMENT

  1. Lesson one to Michigan’s politicians: Your role is not to craft a political compromise, that’s a political party focus. Your role is to thoroughly understand a problem since you have the resources to do so, craft solutions to a problem so defined and produce legislation supporting the common good and general welfare. That’s a governing focus, the reason you were elected.

    You have crafted a solution to a political problem with this SB 1 compromise. The key to resolving the matter of auto insurance pricing is FOIA applied to insurance companies pricing practices. Replace “file in use” with “prior review”. Adopt the Workman’s Compensation fee schedule to begin, do not allow the medical community to charge 2.4 times medicare fees. Audit the insurance company rating and liability/risk quantification process (you were provided with testimony identifying Michigan’s non PIP liability premiums as the highest in the nation – this compromise solution ignores this). Rate on driving record only;territorial pricing is a redlining opportunity, a zip code by another name. These actions, and more will emerge as the process evolves, serve the common good and general welfare something you should be doing.

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