Vehicle Insurance

Detroit Mayor Mike Duggan complicates fixing no-fault auto insurance flaw

Detroit Mayor Mike Duggan is muddying the already dirty waters of Michigan’s 2019 auto insurance reform law by demanding a change that is not realistic.

As advocates of catastrophically injured motorists descended on the Capitol this past week to protest the 2019 law’s price-fixing measures that may hinder their access to care, Duggan sought to resurrect the issue of banning geography-based auto insurance rates that critics argue is a form of redlining.

Detroiters have historically paid considerably more for the same exact car insurance coverage as suburban residents based on claims data for vehicle accidents. Duggan wants to tie a ban on using geography to set car insurance rates to halting the impending 45 percent cuts for medical providers who treat injured drivers.

“Geographically, Detroiters are still being charged more,” Duggan conceded Tuesday during a news conference on an unrelated matter with Gov. Gretchen Whitmer in East Lansing. “And as I have said to [advocates of injured drivers], before you start making changes to raise the rates, let’s get everybody’s rates level, and I would fully support what they are proposing, if it’s coupled with a provision that everybody in Michigan pays the same geographic rate.”

Duggan tossed out this idea when asked about the fast-approaching July 2 implementation of price controls on certain medical services for critically injured drivers that was scribbled into the bill hours before the Legislature passed it on the Friday before Memorial Day in 2019. Spreading debate to geographic pricing would far overcomplicate the process of fixing the problem at hand.

Duggan — one of the savviest minds in Michigan politics — must know the idea of “leveling” auto insurance rates by effectively making suburban and rural residents pay more so Detroiters pay less is never, ever going to fly in the current GOP-controlled Legislature.

There would be a bipartisan voter revolt in the suburbs if motorists had to pay higher rates so Detroiters could get relief on insurance costs.

The new law barred insurers from setting auto insurance premiums by ZIP code.

But the law didn’t ban territorial ratings entirely. Some insurance companies have simply merged a couple of ZIP codes together to get around the ban — a loophole some of Duggan’s fellow Democrats warned would be exploited by insurers.

Fast forward to an election year, the mayor knows the new law is not the panacea he hoped. For some Detroiters, it has not yet produced significant savings to insure a vehicle inside Detroit’s 137 square miles.

A 2019 study by The Zebra car insurance price comparison website found the cost of insuring a 30-year-old male driver and a 2014 Honda Accord EX in Detroit rang in at $5,464.

The Zebra’s most recent study found the cost of insuring a 30-year-old male driving a 2016 Honda Accord EX hovered around $5,072 — still almost twice the statewide average and a paltry 7 percent decrease since the new law kicked in.

“I don’t think it’s right to be raising rates on Detroiters when they’re still higher than the rest of the state,” Duggan said.

While the mayor is highlighting a legitimate and longtime grievance for Detroiters, he also is repeating the insurance industry’s talking point that ensuring drivers injured before 2019 get access to the same level of care as they’ve had for years will somehow cause premiums to soar for current motorists.

The two don’t have to be directly connected.

The 2019 law’s promised consumer savings already kicked in July 2020 when motorists were allowed to drop unlimited medical insurance for lower rates on the Personal Injury Protection portion of their insurance.

For 11 months, motorists have been allowed to drop unlimited PIP coverage and elect to drive with $500,000 of coverage, $250,000 of coverage or no PIP at all if their regular health insurance plans or Medicare covers auto injuries. The $500,000 and $250,000 PIP coverage plans came with an average reduction in just the PIP portion of a driver’s premiums of 35 percent and 20 percent, respectively.

That’s Duggan’s “driver’s choice” law.

But the 45 percent cut in provider rates for home health care companies, brain and spinal cord injury rehabilitation care not covered by Medicare will likely hit Detroiters injured in car accidents years ago. The new law also caps family member paid home care at 56 hours per week.

Advocates for some 18,000 catastrophically injured motorists are feverishly trying to get GOP legislative leaders to reconsider the price-fixing measures that providers say will drive them out of business.

Motorists injured before 2019 who get their care paid for by the Michigan Catastrophic Claims Association are in limbo not because of the mandatory rate reductions that have already kicked in, but because of the mandatory cost reductions the law generously awards auto insurance companies.

The MCCA is a $23 billion trust fund for injured motorists that covers medical bills above $580,000 for the remainder of their lives. The MCCA is funded by a line item separate of PIP and other charges in the monthly premiums of each insured vehicle in the state.

Ensuring previously injured motorists get daily in-home skilled nursing or speech and physical therapies paid out of the MCCA trust fund is not directly tied to current or future PIP premiums.

The architects of Michigan’s no-fault insurance law specifically walled off these costs four decades ago as a means of pooling expenses for the costliest car accidents separate from your typical fender-bender seat belt whiplash injury.

Contrary to what Duggan is saying publicly, the Legislature could pass a law that says any driver injured before 2019 is to be grandfathered in with no cap on medical reimbursements and insurers still have to honor last year’s rate reductions.

“They’re acting like the insurers can just dictate everything — and they have,” said Steve Sinas, a personal injury attorney at the Sinas Dramis Law Firm in Lansing.

If a compromise on provider rates for home health care companies and rehab centers could be reached that was less draconian than a 45 percent haircut, then the MCCA would still be reaping significant savings when coupled with the new law’s cap on hospital and outpatient providers rates at 200 percent of what Medicare pays them.

Again, there’s $23 billion in the fund that’s supposed to pay for the care of these injured drivers.

Duggan’s attempt to toss the anvil of territorial pricing around the neck of catastrophically injured motorists is exactly why so many past efforts to reform Michigan’s auto insurance law failed to make it to a governor’s desk: The politicians go big, then go home without anything accomplished.