The Michigan Senate recently passed legislation that would amend Michigan's auto insurance laws. If approved by the House and signed by Gov. Gretchen Whitmer, these changes would severely compromise the 2019 bipartisan reforms that produced savings for millions of drivers in Michigan.
The thrust of the legislation the Senate just approved is to increase the prices medical providers can charge insurance companies for services they perform for people injured in car accidents. They could bill two-and-a-half times Medicare’s going rate for the same treatments. It is not clear why these services need to cost more than they would under Medicare.
Anita Fox, the Whitmer-appointed head of the state's insurance department, identified the significant problems with these changes in a letter to the Michigan Senate. She highlighted consequences that would harm the typical Michigan resident. The proposal would artificially boost the price insurers must pay for services provided to people injured in car accidents, and Michigan insurance plans would become more expensive as a result.
State law requires drivers to purchase insurance, so increasing these costs falls especially hard on low-income families and individuals. The more expansive the insurance coverage the state requires, the fewer people will be able to afford it. More drivers in Michigan will go without insurance coverage, and those who do will get zero benefits if injured in a crash. They’ll also risk fines and other penalties for driving without mandated coverage — a double whammy that disproportionately affects low-income individuals and families.
Fox notes in her letter that the cost-cutting reforms instituted in 2019 have worked to increase insurance coverage in Michigan. More than 200,000 people who previously had no insurance now have some. Some coverage is better than none, always. Having more insured drivers on the road is better than the alternative.
Even drivers who can afford the higher-priced insurance this legislation would mandate will be worse off. If the state artificially raises the costs of services provided to accident victims, drivers with limited coverage will be able to afford fewer services if injured. Their coverage will not go as far. This also disproportionately harms low-income households as they are more likely to purchase the less expensive, limited coverage.
Whitmer's administration is spot on with this assessment. The legislation passed by the Senate benefits a few — medical providers specializing in servicing auto insurance claims — at the expense of the many — all Michigan drivers, and especially low-income households who struggle to afford insurance. The Legislature will have to decide if they want to enrich a special interest group of medical businesses by putting auto insurance further out of reach for low-income families.
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