Gov. Gretchen Whitmer is expected to take the opportunity at this week’s Mackinac Policy Conference to sign Michigan’s long-awaited no-fault reform bill as a big bipartisan victory on Thursday morning.
But critics are making a last-minute plea that it ultimately will result in less medical coverage for the state’s neediest residents. And policy analysts say that the bill’s much-touted savings for consumers will amount to an elaborate cost shift when it goes into effect in more than a year.
The nonpartisan Senate Fiscal Agency (SFA) released its evaluation of Senate Bill 1 Tuesday, sending policy wonks off to the races with regard to where the financial burden taken off auto insurers’ shoulders may now fall elsewhere.
Unlike any other state in the nation, Michigan currently requires all drivers to purchase unlimited, lifetime medical coverage through auto insurers as part of their insurance plans, a requirement that’s costly to both parties and will no longer exist under the terms of the new bill.
The SFA predicts an increase of $70 million, or 1.3 percent, to state Medicaid costs over the next decade as a result of drivers choosing a plan that doesn’t meet their ultimate health care spending needs. That’s a much smaller figure than the $83 million predicted by Michigan’s Department of Health and Human Services in just the first year under the original, Republican-penned plans that were adapted into SB 1.
State policy experts agree that regardless of the amount, this means Michiganders will still be paying much of the exorbitant costs that made the current system so objectionable to both politicians and the average Michigan driver — it’s just that the cost will be collected now through different channels.
“Those costs are currently being borne by the insurance system and we’re paying them through higher insurance rates, so we’re going to pay it either way,” said Eric Lupher, the president of the nonpartisan Citizens Research Council in Livonia.
“Whether it should be socialized — not as a pejorative term, but just whether it should be spread among all participants — through insurance rates or through the tax system is a question for debate, but either way it’s pretty much the same group of us paying.”
Michigan currently pays for about one-quarter of its total Medicaid costs through the state’s General Fund, with the rest covered by the federal government. The state’s top budget officials again pointed out earlier this month that the General Fund has remained largely flat since the late 1990s, which “constrains the ability to have revenue for new projects.”
Lupher said Michigan will undoubtedly have to raise more revenue to cover costs, but that it will be difficult to ascribe them directly to a potential bump in Medicaid spending.
“Our general fund is very tight to begin with … something’s got to give at some point, and yes, that might lead to a request to increase taxes, but will we know for sure it’s because of insurance? It’s hard to say.”
Charles Gaba, an Affordable Care Act (ACA) enrollment analyst in metro Detroit, expanded in an email on what the newly shared burden of health care costs may look like.
“Some will be shifted to Medicare (mostly federally funded, of course, which means federal taxes); some will be shifted to Medicaid (state taxes as you note plus about double that in federal taxes); some will be shifted to private insurance in the form of higher premiums; and some won’t be paid for at all,” Gaba wrote.
He spoke in a later conversation about the financial uncertainty that might occur at both the personal and institutional level, saying, “You’ve gone from every party having a blanket plan where they’re covered no matter what, to now just a mishmash, and that’s where it tends to get messier.”
Senate Minority Leader Jim Ananich (D-Flint), who was directly involved in the “four-quadrant” meetings between Whitmer and the four legislative caucus leaders over the bill’s terms that preceded its passage last week, told the Advance Wednesday he’s confident that Michiganders will see an overall savings.
“Other states have figured out a way to make sure you hold the line with Medicaid costs, but also coordinate benefits with private healthcare,” Ananich said. “I think the citizens won’t see that [increased cost burden]… Obviously, there will be some increases in the Medicaid budget, but I think we put enough buffers in place and our protections in place to make sure that it’s not astronomical.”
The scenario Gaba described in which costs don’t get covered at all is a special concern to health professionals like Julia Pulver, a registered nurse and a Democratic former state Senate candidate.
In an op-ed published on her Medium page Tuesday, Pulver warns that under the new system Michigan consumers won’t be entitled to the same level of medical care they’ve come to expect from their auto insurance coverage. The new bill eliminates the requirement that all Michigan drivers purchase unlimited lifetime medical care, a cost-saving effort that Pulver says will hurt some of Michigan’s most vulnerable residents.
Pulver draws a distinction between the Personal Injury Protection (PIP) benefits mandated under the current system, which provide for rehabilitation and care long after initial auto injuries have healed, and the more limited care that will be offered under new plans once the bill takes effect in July 2020.
“Not only are you being asked to predict the future (which is the only way to know ‘which policy option works best for you’ since no one PLANS to be hit by a drunk driver, distracted driver, or become a victim of road rage),” Pulver wrote, “we are going to allow the insurance companies to now prey on the uninformed, poor and elderly by offering them a substandard product in the form of ‘options.’”
The new bill will offer Michigan drivers the traditional option of unlimited medical coverage, a $50,000 option for those covered by Medicaid, a $250,000 option, a $500,000 option and a complete opt-out for those with qualifying private health insurance.
Pulver’s concern about insufficient coverage was shared by lobbyists in favor of the current system like the Coalition to Protect Auto No-Fault (CPAN), which called the bill a “destructive piece of legislation” and a “total gift to the insurance industry” in a statement last week, and the Michigan Brain Injury Provider Council (MBIPC), which released a statement Wednesday urging Mackinac attendees to re-think the bill’s impact.
MBIPC president Tim Hoste wrote that “individuals with severe brain injuries will be forced to go without specialized treatment and will have limited options… the state government is dooming them to poor alternatives that will constrain their full recovery and extend their hardships throughout their lifetime.”
Another major concern of the bill’s critics is its vague commitment to preventing discrimination by location in rate-setting. The new bill explicitly forbids using the postal code where a vehicle is registered in the rate-setting process, but allows for the use of “territory,” a term with no concrete definition in the bill itself.
State Rep. Isaac Robinson (D-Detroit) was one of the 19 House members not to vote for the bill, and has been an outspoken critic since its parameters were revealed last Friday. Speaking to the Advance, he argued that he and his fellow Detroit lawmakers were unfairly shut out of the deal-making process.
Those lawmakers introduced a series of bills last week prior to Senate Bill 1’s passage that were aimed at directly assisting Detroit drivers. Their language was not adopted into the final bill. Detroit has some of the highest auto insurance rates not just in the state, but in the country.
“They had the opportunity to give me support when I had amendments to address redlining [geographical discrimination],” Robinson said. “They couldn’t even just be undecided for a while, which would have sent Whitmer back to the table to negotiate something for people who have been discriminated against for decades.”
“The governor and her communications staff… are putting out talking points that lead to people in my community believe they’re getting a reduction in their bill because they believe credit score and ZIP code don’t matter anymore, and that’s just not true.”
State Sen. Adam Hollier (D-Detroit), who voted for the bill, told the Advance Wednesday that he disagreed with the characterization of its geographical guidelines as toothless, and that he’s prepared to go back to the drawing board if it proves as such.
“Will there be some difference from one territory to another based on things that they can prove actuarially? Absolutely,” Hollier said.
“But the increase in regulation from DIFS [Department of Insurance and Financial Services] that I think Governor Whitmer is going to emphasize should deal with that… what we need to be doing is making sure we have a system and a regulator in DIFS that have the tools necessary to go after bad actors.”
“I think we’re getting a little bit closer. If there is a bad actor that isn’t [being dealt with] I’m committed to going back and dealing with that, if there needs to be a legislative push… But I think this legislation provides more consumer protections that have ever existed.”
The governor’s office did not immediately respond to a request for comment regarding Robinson’s and others’ critiques of the bill, but she and other top Democrats released celebratory statements regarding its passage last week, Whitmer saying that “when both parties work together and build bridges, we can solve problems and make life better for the people of Michigan.”
Senate Minority Leader Ananich, who represents another one of the state’s urban areas hardest hit by exorbitant auto insurance rates, said last Friday, “I think there will be natural pressure to make sure that rates are based on a person’s driving record… And I think that’s an important step, something we haven’t had in a long time.”
Advance reporter Nick Manes contributed to this report.