CPAN statement on SB 1014 and 787: Auto Insurance Bills Passed by State Senate Would Make Children, Seniors, Young Professionals & Others Second-Class Citizens

Legislation Would Shift Cost of Care Resulting from Catastrophic Car Injuries to Michigan Taxpayers

Lansing — The Michigan Senate today passed Senate Bills 1014 and 787, which would erode protections for residents who suffer catastrophic injuries in car accidents and shift the cost of care to Michigan taxpayers. SB 1014 addresses the Assigned Claims Plan (ACP) and would cap the cost of care to $400,000. SB 787 would offer a so-called “carve-out” for senior citizens that in reality severely decreases their protections. The bills fail to address the real factors behind the state’s high auto insurance rates.

Coalition Protecting Auto No-Fault (CPAN) President John Cornack issued the following statement in response to the Senate’s last-minute ramming through of these bills just before the Senate leaves for the summer to begin campaigning.

“These bills would turn anyone who doesn’t own a car into second-class citizens, and the cost of their care would be shifted to Michigan taxpayers. This legislation would severely harm children, seniors, bicyclists and others who rely on public transportation, such as young professional living in downtown Detroit.

“We are extremely sensitive to what Michigan drivers pay for auto insurance, particularly those who live on a fixed income, such as seniors. Unfortunately, this legislation does not adequately address the high costs of insurance in this state and does nothing to guarantee rate reductions.

“CPAN has fought for the creation of a balanced fraud authority, one which will fight fraud on all sides. This legislation, however, would protect only one side — insurers. Insurers win and consumers lose because the legislation would not investigate fraud in all forms.

“The bills passed by the Senate today do not provide comprehensive reform to address the costs in the auto no-fault system, including real factors behind Michigan’s auto insurance premiums: the discriminatory practice by insurance companies of using factors like credit scores, occupation, ZIP codes and gender to set rates.”


The Coalition Protecting Auto No-Fault (CPAN) is a broad-based coalition of organizations representing consumer advocacy groups and health care professionals of all political persuasions. These organizations are united to preserve Michigan’s model no-fault auto insurance system and to make sure that the Michigan auto insurance industry kept the original no-fault promise it made to Michigan citizens when the No-Fault Act was passed in 1972.

Top Ten Outrageous Auto Insurance Quotes in Michigan

Buying auto insurance in Michigan is frustrating for just about everyone, especially in Detroit. While reviewing hundreds of premium quotes offered by some of the state’s major auto insurers on behalf of the Coalition Protecting Auto No-Fault (CPAN), auto insurance expert Doug Heller identified 10 quotes that are particularly outrageous examples of the various ways auto insurance companies have cheated good drivers in Michigan, even as the insurers blame anybody but themselves for the high cost of their product. A PDF showing screen shots of each quote is available here.

Under Michigan law, every driver is required to purchase auto insurance coverage, yet the state has among the highest levels of uninsured drivers in the nation. A significant reason for this is that insurance companies have unaccountable pricing practices that result in inexplicable and unfair premiums for certain, typically lower-income, yet good drivers.

# 10 $128 More for Female Driver with Perfect Record than a Male Who is Caught Speeding
Progressive quoted a woman with a perfect driving record $1,428 per year for basic coverage. When tested, instead, as a male driver who was recently cited for speeding (and everything else remained the same) Progressive quoted a premium of $1,300 per year for the same coverage.

That’s 10% more for the safer driver, if the safer driver is a female and the driver with a speeding violation is male.

#9 $49 More for 6-month Policy After Having a Break in Coverage While Serving our Country
Auto Club quoted a driver living in Detroit $991 for months for basic coverage but increased his rate to $1,040 when he reported that he was not currently insured due to a military deployment. A 5% penalty for protecting our country.

#8 Premium Rises $1,676 Because Driver only has “Above Average” Credit Score and not “Excellent” Credit
Using Progressive’s online price comparison tool, we found that Allstate would charge a 35-year old driver in Detroit $1,972 per year for basic coverage if she had excellent credit, but it would charge her $3,648 if her credit was in the “Above Average” range, despite her having a perfect driving record. (It rose to $4,960 if she had “Average Credit”—a $3,000 annual penalty for only having average credit.)

#7 No Payment Plan Offered to Customers Without a College Degree; Only Coverage Option Is to Pay $2,271 Up-Front
Esurance, the online subsidiary of Allstate, offers customers the option of paying their six-month premium all at once or in monthly installments. Except, that is, if you don’t have a college degree. Drivers with only a high school diploma were not offered the installment plan with their online quote and appear to be required to pay the entire premium up front. That means the good driver in Detroit without a college degree has to write a $2,271 check to get six months of basic coverage, while the same driver with a college degree has the option of making six $385 monthly installments or paying $2,090 at once. Having only a high school diploma also means the driver’s premium is 9% higher.

#6 Woman charged 27% More Than Man for the Same Basic Coverage Policy
Progressive offered a 35-year old male driver in Detroit with a clean driving record an annual premium of $1,122 for a minimum coverage policy with coordinated PIP benefits. The company raised the annual cost of coverage to $1,428 if the driver was, instead, female, even though she had the same perfect driving record, drove the same car, and lived at the same address.

#5 $306 Auto Insurance Rate Hike Because You Rent Your Home
State Farm added $306, or 5%, to the annual premium of a good driver living in Detroit solely because the customer rents a home rather than owns it. Allstate also charges a sizable surcharge to renters; our test found its auto insurance premium quote rose by $210 in Detroit, simply due to the driver’s homeownership status.

#4 The Widow Penalty: Hundreds of Dollars More per Year After Husband Dies
Our testing found that Liberty Mutual and Esurance charged women between 4 and 13 percent more if they are widows rather than married. In Detroit, the widow penalty cost a 60-year old woman $204 with Liberty Mutual and $280 with Esurance. Esurance specifically asks its customers if they are widows before imposing the rate hike, while Liberty Mutual just asks if customers are married or not.

#3 $3,898 Penalty for Living on the Wrong Side of the Street
Two 35-year old women living within 279 feet of each on either side of Mack Ave. – one in a Grosse Pointe Park zip code, the other in Detroit – have the same car, the same perfect driving
record, and are the same in every other regard – are charged dramatically different premiums for basic coverage from Allstate. The annual premium to the Grosse Pointe Park resident is
$3,452 per year, while her neighbor across the street is quoted an annual premium of $7,350, more than double for the same coverage.


#2 $848 More for a Better Driver Due to a Short Break in Coverage
The Auto Club (AAA) quoted a premium of $2,752 for six months to a Detroit insurance executive with an MBA degree who caused an accident this year. But for the exact same coverage, a janitor with a high school diploma who has never caused an accident, received a ticket, or filed a claim but had a brief break in insurance coverage was quoted a six-month premium of $3,600. $848 more for the working-class driver despite a better driving record. If the good driver wanted to buy full coverage, his or her premium would be $1,570 more for a six-month policy than the worse driver with the higher socioeconomic status and continuous coverage.

#1 The $31,432 Premium: Below Average Credit Score Raises Detroit Good Driver Premium by more than 600%!
Using Progressive’s online price comparison tool, we found that State Farm would sell a basic coverage policy to a 20-year old good driver in Detroit with an excellent credit score for $4,410 per year. However, if that same Detroit driver with a perfect driving record has a below average credit score, the annual premium will increase to as much as $31,432 for basic coverage.

“These premium quotes are just ten examples of tens of thousands of times that safe drivers in Michigan pay more for auto insurance than they should simply because insurance companies are allowed to charge whatever they want, with little oversight, and fewer scruples,” said Douglas Heller, an insurance expert who conducted the research for CPAN.

About CPAN:

The Coalition Protecting Auto No-Fault (CPAN) is a broad based coalition of organizations representing consumer advocacy groups and health care professionals of all political persuasions. These organizations are united to preserve Michigan’s model no-fault auto insurance system and to make sure that the Michigan auto insurance industry kept the original no-fault promise it made to Michigan citizens when the No-Fault Act was passed in 1972.

About Douglas Heller:

Douglas Heller is an independent consultant and nationally recognized insurance expert. During nearly two decades of work on public policy and regulatory matters related to property-casualty insurance, Heller has written several reports on auto insurance pricing in the United States, overseen regulatory challenges to insurance company rates and practices, and, for nine years, served as the Executive Director of the national consumer advocacy organization, Consumer Watchdog.

The Rating Game

How Auto Insurance Giants’ Pricing Practices Drive Up Rates for Safe Drivers Across Michigan

All drivers must buy auto insurance, but insurance companies raise rates on good drivers based on personal and economic characteristics

Every driver in Michigan – whether rich or poor, married or single, male or female – must buy auto insurance. Although the state regulates consumer behavior with this mandate, the insurance companies that sell coverage have been allowed to price policies however they want. As a result, insurance companies slice and dice and price Michiganders in ways that are unfair to safe drivers, including:

  • Higher premiums for good drivers with working class job titles than to white collar professionals
  • Higher premiums for good drivers with high school diplomas than those with master’s degrees
  • Higher premiums for good drivers who rent their home rather than own it
  • Higher premiums for single women than single men
  • Higher premiums for widows than married drivers
  • Higher premiums for good drivers with good, average, or poor credit scores than those with excellent credit scores

Other insurance company pricing strategies hamper Michigan’s goal of ensuring that all drivers have coverage

Research conducted by CPAN has found that insurance companies either dramatically increase premiums or refuse to insure drivers who have had a break in coverage, even if the break was due to military service. For example:

  • One major insurer quotes a 5% higher premium to service members who had a break in coverage while on active duty than to civilians with no break in coverage
  • Another major insurer refuses to provide an online quote to service members who had a break in coverage while on active duty
  • Several insurers surcharge good drivers between 12% and 63% if they report having had a break in coverage, even if they have never caused an accident, gotten a ticket, or filed a claim

Allowing insurance companies to raise premiums by hundreds or thousands of dollars, or deny coverage to people trying to re-enter the insurance market and comply with the law, adds additional barriers to coverage and leaves many safe drivers uninsured.

Punishing lower‐income good drivers limits economic opportunities, leads to increased levels of uninsured motorists, and raises premiums for all Michigan drivers

When basic insurance prices unnecessarily rise for safe drivers because of non-driving related factors, many working families, the unemployed and underemployed, single women, and others struggling financially either cannot drive or they drive uninsured. Choosing not to drive dramatically limits economic opportunity, while driving uninsured exposes motorists to fines, license suspension, and possible jail time.

These pricing practices also weigh on drivers who purchase coverage. With as many as a million or more Michigan drivers uninsured, and more simply not driving because insurance is unaffordable, drivers paying for coverage face higher rates. When so many good drivers are squeezed out of the insurance pool and risk is not as widely spread as it could be, those in the market pay higher premiums. More fairness in pricing would make the market affordable to more Michigan drivers, which would help lower premiums for everyone.

No-Fault Repeal Legislation: Bad Policy, Poorly Written

A blog post by CPAN Legal Counsel George Sinas

The sponsors of the 7-bill package identified as HB 5517 – 5523 claim that these bills will repeal the Michigan No-Fault Act and return Michigan to a system of pure tort law. Apart from the social irresponsibility of such legislation, is the harsh reality that these bills, as currently written, are a drafting nightmare that are virtually impossible to fully understand.

Clearly these bills outlaw the sale of all no-fault PIP policies after January 1, 2020. Therefore, people injured in auto accidents after that date must pursue other legal rights. Yet those rights are unclear under the language of these bills. The point is well demonstrated by a review of the language of HB 5517 which appears at page 42, line 19 through page 45, line 22. Anyone supporting these bills should be challenged to explain exactly what that language really means. On one hand, this language could be read to mean that victims of accidents occurring after January 1, 2020 have full legal rights to pursue, in tort, economic and non-economic loss claims against the at-fault driver. However, this language could also be read to mean that, for policies issued after January 1, 2020, the tort law provisions of the statute do not apply in any respect. As a result of this confusion, no clear rules emerge for auto accidents occurring after January 1, 2020. In fact, the ambiguity is of such a nature that one could argue there are no specific rules governing the rights of people injured in auto accidents occurring after January 1, 2020.

At a minimum, the language deficits that exist in this legislation, if passed, will probably result in years of litigation seeking clarification from the Michigan appellate courts regarding the true intent of the legislature. Michigan citizens deserve far better than this mess. If the legislature is going to seriously consider repealing the Michigan Auto No-Fault Law and replacing it with a pure tort law system (a policy decision that would be an egregious mistake), those offering such legislation have a duty to write it in a manner that is precise and unambiguous. These bills are a colossal failure in that regard.

What is even worse, is that the proponents of these bills do not seem to care much about the current ability of the Michigan tort system to fully replace the No-Fault System. Apparently, it is the intent of this legislation to provide that auto accident victims will have only one place to turn for reimbursement of medical expenses, lost wages, and diminished quality of life – the at-fault drivers’ liability insurance policy. Nevertheless, these bills have left in place the antiquated state minimum liability insurance requirements mandating that drivers carry only $20,000 of liability insurance. That minimal level of coverage will not be enough to pay for even a few days of hospitalization, let alone compensate the other substantial expenses incurred by accident victims.

In addition to the fundamental failures discussed above is the disturbing fact that this package of bills sets the stage for insurance companies to help themselves to the $21 billion-dollar MCCA bank account after the MCCA closes out its last PIP claims. Under the MCCA “Plan of Operation,” insurance companies can theoretically act to refund to themselves any “surplus” that may exist in the MCCA coffers. The only protection against such a taking is the prohibition contained in the current no-fault statute that allows the Michigan Department of Insurance and Financial Services Director to invalidate any provision in the MCCA Plan of Operation that would be inconsistent with the objectives of the MCCA. Recognizing that this provision could interfere with a money grab by insurance companies, the bill [HB 5517] at page 39, line 17 to page 40, line 1, eliminates the power of the Department Director to block such efforts to commandeer money belonging to Michigan policy holders. Perhaps that is the real motivation for the repeal of the Michigan No-Fault System – to allow insurance companies to seize the $21 billion-dollar fund amassed from the MCCA assessment fees Michigan drivers were required to pay over the past four decades.

No one who is sincerely interested in creating an auto insurance reparation system that adequately meets the needs of seriously injured citizens could ever support such a reprehensible piece of legislation as that which is embodied by HB 5517 – 5523. CPAN believes it is time to stop playing politics and look for reasonable and realistic solutions to reform the Michigan Auto No-Fault Law – a law which has consistently achieved national recognition as a model insurance system.

Theis-Led No-Fault Elimination Plan is an Irresponsible Cost Shift to Taxpayers

Viable “Fair and Affordable Reform Package” still awaiting a committee hearing

LANSING – A select group of Republican state lawmakers introduced legislation today that would completely dismantle Michigan no-fault auto insurance system. House Bills 5517 – 5523, co-sponsored and led by Rep. Lana Theis (R-Brighton), would take away the lifetime auto injury coverage guaranteed under Michigan’s current auto insurance system and replace it with a tort system where injured drivers would sue at-fault drivers to recover costs for their injuries.
“Tort auto insurance systems force both at-fault and innocent accident survivors into lengthy lawsuits that unnecessarily delay care that is so critically important to their recovery,” said Coalition Protecting Auto No-Fault President John Cornack. “The result will be more lawsuits, a clogged court system and worse coverage for every single driver in this state.”
Cornack notes that with tort system like in Ohio and Indiana, families injured in an accident who are deemed to be at-fault will have nowhere to turn to for payment of their medical bills because they will not be able to sue anyone for their care. As a result, even more Michigan residents could be forced into medical bankruptcy and then on the state Medicaid System. When Colorado changed from a no-fault to a tort state, its Medicaid cost increased by 205 percent.
Recent legislation that would have capped auto injury coverage in Michigan was estimated to cost state taxpayers an estimated $80 million after 10 years. A complete switch to a tort system would likely cost Michigan taxpayers tens of millions of dollars more.
“It is extremely disappointing that lawmakers would even consider such fiscally irresponsible legislation when there are viable reforms sitting on the table,” said Cornack. “Rep. Theis has a bipartisan bill package sitting in her committee that would contain medical costs, stop fraud and put an end to unfair insurance company rating practices. These are real reforms that will make auto insurance in Michigan more fair and more affordable, so what are we waiting for?”
CPAN will continue to urge Michigan lawmakers to consider reforms that will improve Michigan’s no-fault system, such as the Fair and Affordable No-Fault Reform package.

The Top Five Things Mike Duggan and Tom Leonard Don’t Want You to Know about their Auto Insurance Bill

Vote No on HB 5013

LANSING – The House Insurance Committee just voted to move legislation forward that would have dramatic and draconian effects on Michigan auto insurance system. House Bill 5013, sponsored by Rep. Lana Theis (R-Brighton), is being pushed by Detroit Mayor Mike Duggan and House Speaker Tom Leonard. The bill would make significant changes to Michigan’s auto insurance system by setting stringent caps on medical coverage, taking away legal rights from Michigan auto accident victims, imposing unsustainable fee schedules on health care providers and shifting costs to Michigan taxpayers.

The House Insurance Committee passed the bill on a 9-5 vote, with two legislators passing. In response to today’s events, Coalition Protecting Auto No-Fault President John Cornack issued the following statement:

“The number of problems with this bill could be stacked as high as the Capitol dome. There are ways to reduce Michigan’s auto insurance rates and improve the system without destroying it. Unfortunately, this bill’s supporters would rather sweep the criticisms under the rug so that they can rush forward with a vote rather than working on a comprehensive, long-lasting solution.”

Here are the top five facts about the Duggan-Leonard no-fault bill that its supporters don’t want to talk about:

1) The Cap on Care is $25,000 NOT $250,000
Contrary to statements made by the bill’s supporters, the $250,000 cap proposed in the bill only provides $225,000 in emergency care. Once the patient is stabilized the cap drops to $25,000 for all non-emergency and post-acute medical needs.

While supporters of HB 5013 will contend that accident victims will be able to rely on traditional health insurance or Medicaid, these insurance plans do not provide for many of the rehabilitative services needed by serious auto accident victims.

In addition, many of the very backers of HB 5013 are the same politicians who opposed the expansion of Medicaid through the Affordable Care Act.

2) HB 5013 is a Tax Increase for the Entire State
Because many seriously injured drivers will have capped care, the House Fiscal Agency Analysis predicts a massive cost shift to state taxpayers. Once an accident victim exceeds the cap, they will ultimately need to rely on Medicaid for their care. As a result, it is estimated that Michigan taxpayers will see a $10 million increase in the first year the bill goes into effect with costs rising to $150 million per year after 10 years.

3) HB 5013 Punishes Children
Under Michigan’s current law, virtually all Michigan children involved in an auto accident – even those whose parents fail to purchase auto insurance – receive lifetime coverage for their injuries. Under HB 5013, children will be subject to the coverage limits their parents purchase. This could leave a catastrophically injured child with just $25,000 in care to meet their needs for the rest of their life.

4) Shields Insurance Companies and Agents from Lawsuits
The legislation virtually eliminates a patient’s right to sue an insurance company due to the chilling effect that strengthened legal powers granted to insurers under this bill. HB 5013 includes language that requires patients to pay insurance company attorney fees and court costs if the benefits in question were found to be “not medically necessary” as opposed to “reasonably necessary,” as is stated under the current law. The phrase “medically necessary” has a very strict legal definition that essentially refers only to life-sustaining care.

In addition, insurance agents who fail to accurately inform consumers of the limitations of their insurance coverage are completely immune from any civil liability for their actions. This places all responsibility on the consumer to understand the complexities of Michigan’s auto insurance laws and zero responsibility on the agent who sells the policy.

5) Unprecedented Immunity for At-Fault Drivers
Unlike other no-fault states that cap care, HB 5013 would make Michigan the only state in the nation that makes reckless, drunk or otherwise negligent drivers immune from being sued for unpaid medical expenses. This immunity problem does not exist under the current law because the accident victim’s medical expenses are not capped.

Cornack notes that any no-fault reform package passed by the legislature must include a ban on the use of unfair rating practices that allow insurers to charge higher rates based on non-driving factors like gender, job title and credit score. That is why CPAN is supporting the Fair and Affordable No-Fault Reform package.

Learn more about the impacts of HB 5013 by reading CPAN’s legislative analysis.


New Legislation Will Make Michigan Auto Insurance More Fair and Affordable

House Bills 5101-5111 include medical cost-containment requirements, bans on unfair auto insurance rating practices and fraud prevention measures

LANSING, MI – A framework of bills, dubbed the “Fair and Affordable No-Fault Reform Package”, was introduced last week that provides a clear alternative to the reforms being pushed by Detroit Mayor Mike Duggan, House Speaker Tom Leonard and the insurance industry. The legislation is among the most comprehensive auto insurance reform packages to be introduced in the past 10 years.

The effort to announce House Bills 5101-5111 is being led by Representatives Frederick (R-Owosso), Webber (R-Rochester), Lasinski (D-Scio Township) and Gay-Dagnogo (D-Detroit), with every bill having bipartisan cosponsors.


The legislative package also includes two previously introduced bills. House Bill 4672, introduced by Rep. Joe Graves, creates a fraud authority designed help lower rates by cracking down on auto insurance fraud. House Bills 4049, sponsored by Rep. Patrick Green, will bring more transparency to Michigan’s auto insurance system by requiring the Michigan Catastrophic Claims Association to publicly disclose the actuarial calculations used to set the annual fee it charges to every insured vehicle in the state (currently $170 per vehicle).

“These bills provide a great framework for making lasting improvements to Michigan’s no-fault auto insurance system. While we are still analyzing the language of the recently introduced bills, we believe this package offers the best opportunity to make auto insurance more fair and affordable for every single driver across the state,” said CPAN President John Cornack. “There are many factors driving Michigan’s high auto insurance rates, including fraud, unfair insurance company pricing practices, increasing medical costs and inefficient billing practices. These bills go a long way toward addressing each of those issues.”

The Fair and Affordable No-Fault Reform package includes:

  • A ban on on-driving rating factors, including credit score, gender, occupation and education level, from being used to determine auto insurance rates.
  • A fee schedule set at 185 percent of Workers Compensation for all medical providers treating auto accident victims, with cost-of-living adjustments. Level 1 and 2 trauma centers would not be subject to the fee schedule. The fee schedule legislation will also streamline the claims process, improve fairness, and reduce costs and improve efficiency by requiring electronic billing between providers and insurance companies.
  • A $15 per hour rate schedule for family-provided attendant care, with allowable waivers to ensure fair compensation for certain patients whose disabilities and needs justify more skilled care. The bill also ensure patients who require 24/7 care will have access to it.
  • The creation of fair standards and qualifications regulating physicians who conduct independent medical exams when requested by insurance companies.
  • Bill language to strengthen an existing law requiring that auto insurance premiums are “appropriately reduced” for any consumer buying policies that coordinate auto and health insurance coverages.
  • Crucial fixes to Michigan court cases that have had a detrimental impact on auto accident patients and health care providers who treat them:
    • Admire Fix – Mitigate the unfairness of the Admire vs. Auto Owners decision, which has been used by insurance companies to deny paying legitimate expenses needed by catastrophic auto accident victims, including handicap accessible transportation and barrier free accommodations.
    • Bahri Fix – Mitigate the unfairness of the Bahri vs IDS Property Casualty Insurance Company decision, which allows insurance companies to void an entire policy for any claims containing errors that the insurance companies claims are fraudulent.
    • Bazzi Fix – Re-instate the innocent party rule, which was overturned in the Bazzi vs Sentinel Insurance Company case, thereby protecting innocent third party claimants who did not participate in fraudulent procurement of a policy.

In addition, two final bills are expected to be introduced today to complete the Fair and Affordable No-Fault Reform package. They include:

  • A solution to allow senior citizens to lower their rates by ensuring Medicare and auto insurance are not providing duplicate coverage for an auto accident.
  • A Covenant Fix – This legislation will resolve issues created by the problematic ruling in Covenant Medical Center vs. State Farm, by restoring medical providers’ legal right to sue insurance companies who fail to pay for a patient’s care and related expenses.

“Some auto insurance companies are charging women as much as 30 percent more just because of their gender. Others charges hundreds of dollars more per year because they have a less-prestigious job title, so stopping insurers from using unfair rating practices should dramatically reduce rates by itself. Add on the fraud prevention and other cost containment measures and those things will add up to some very real and meaningful savings for Michigan drivers,” said Cornack. “We are urging all Michigan lawmakers to support this bill package and move it through the legislative process as quickly as possible.”


Catastrophic Accident Survivor Brian Woodward Talks No-Fault Reform

Detroit resident Brian Woodward was catastrophically injured 30-plus years ago in an auto accident. Listen to him share what his life would be like if he would have purchased an auto insurance policy with a $250,000 cap such as the Duggan/Leonard PIP Cap Plan plan (HB 5013) being discussed in the House Insurance Committee Hearing tomorrow.

Click below to listen to his interview on the Mildred Gaddis Show, WPZR 102.7 FM.

Comparing the Competing No-Fault Reform Plans

How does the Duggan/Leonard PIP cap plan compare to the Fair and Affordable No-Fault Reform proposal?

In the past two weeks, two competing auto insurance reform proposals have been announced in Lansing. While both proposals have some level of bipartisan support and both seek to address fraud and rising medical costs to treat accident victims, there are some significant differences that will impact all stakeholders in Michigan’s no-fault auto insurance system. This post will provide a quick overview of each proposal, but look for a more comprehensive legal analysis of the Duggan/Leonard plan (HB 5013) soon.

The Duggan/Leonard No-Fault PIP Choice – Pip Cap Plan
Detroit Mayor Mike Duggan joined House Speaker Tom Leonard and a group of Detroit pastors and business leaders this week to announce a plan that has as its key feature a cap on personal injury protection (PIP) coverage. This plan proposes to allow drivers the choice of either keeping the lifetime PIP coverage they have today, or to buy lower PIP policies of either $250,000 or $500,000. At least that is how the legislation was announced.

In reality, the Mayor Duggan and Speaker Leonard oversold the coverage offered in their proposal. The bill language shows that the majority of the $250,000 coverage is for “an emergency medical condition and related emergency care only.” That coverage will get a driver through an emergency, but once the real recovery starts the lifetime PIP cap is only $25,000. This is nowhere near enough to cover the lengthy rehabilitation therapy, and possibly years of care needed after a catastrophic accident. What’s worse is that the $25,000 cap would also include wage loss, replacement services and survivor’s loss benefits.

It should also be noted that PIP choice proposals are not new in Lansing. The last time a serious proposal was introduced to cap PIP coverage in Michigan, CPAN commissioned a study by Public Sector Consultants, that found the cost shift to the state Medicaid system would be $30 million in the first year alone.

Other provisions of the Duggan/Leonard PIP Choice – PIP Cap Plan include:

  • A cap on family-provided attendant care of just 56 hours per week. The weekly limit would apply even if the patient requires 24-hours per day  support.
  • Fee Schedules on health care providers treating auto accident victims that would be set at the Medicare reimbursement rate. A schedule of 125 percent of Medicare would apply to services for emergency care or related to an emergency medical condition.
  • People 62 or older would be allowed to opt out of PIP coverage under this plan and rely solely on Medicare. The proposal ignores the fact that Medicare does not cover the long-term care needed by seniors recovering from a catastrophic accident.
  • The creation of a fraud authority that would have a board represented by the insurance industry, law enforcement, prosecutors, one member of the general public and one Detroit resident. This authority would not be subject to the Freedom of Information Act.
  • Mandatory auto insurance rate reductions by insurance companies. For those who purchase the $250,000 plan, insurers would be required to reduce the premiums for the PIP coverage by 40 percent and drivers would not be required to pay the $170 per vehicle Michigan Catastrophic Claims Association fee. However, drivers should not count on the savings as guaranteed because the bill language allows insurance companies to make an exception if they can explain why the required rate reductions are not achievable.
The Fair and Affordable No-Fault Reform Plan
Led by Republican State Rep. Ben Frederick and Democrat Rep. Donna Lasinski, the Fair and Affordable No-Fault Reform proposal aims to reduce costs for drivers, while also preserving lifetime injury coverage and adding consumer protections to Michigan’s auto insurance system.

Key features of this proposal include:

  • A medical fee schedule for health care providers treating auto accident victims. The schedule would be set at 185 percent of the Workers Compensation rate, which is far more reflective of the complex treatment and increased attention that auto accident victims require. In addition, this fee schedule would NOT apply to Level 1 trauma centers, which helps preserve funding for those facilities that are among the first to receive and stabilize catastrophic auto accident victims.
  • An hourly rate schedule for family-provided attendant care that would allow for rates that are reasonably related to the nature and extent of the patient’s disability and needs, including providing for patients who require 24/7 care.
  • A ban on insurers from using non-driving related factors such as credit score, gender and job title from unfairly impacting auto insurance rates. These factors have nothing to do with how cautious someone drives or how expensive their vehicle is to fix.
  • A requirement for the fees charged by the Michigan Catastrophic Claims Association to be transparent by making its ratemaking data available to the public.
  • The creation of a Fraud Prevention Authority, that is meaningful and balanced. This authority will address fraud committed by claimants and providers as well as prevent insurance companies from wrongly and knowingly denying legitimate claims, which drives up litigation and expenses.
  • Amends wage loss benefits to better align with the auto accident victim’s actual wage/salary loss.
  • An Admire Fix – Correct the Admire vs. Auto Owners decision, which has been used by insurance companies to deny paying for legitimate expenses needed by auto accident victims, including handicapped accessible transportation and even specialized food needed by patients.
  • A Bahri Fix – Corrects the unjust decision of Bahri vs IDS Property Casualty Insurance Company, which allows insurance companies to void an entire policy if a claim submission was made in error, or if the insurance company alleges fraud.
  • A Bazzi Fix – Re-instates innocent party rule, which was ended in the case of Bazzi vs Sentinel Insurance Company, thereby protecting innocent third party claimants who did not participate in fraudulent procurement of a policy.
  • A Covenant Fix – Corrects the disastrous court ruling Covenant Medical Center vs. State Farm, which prevents medical providers from suing insurance companies, on behalf of auto accident patients when insurers refuse to pay for treatment that has been rendered.
CPAN will be working diligently with its coalition partners and all stakeholders to garner support for the Fair and Affordable No-Fault Reform legislation. This proposal is a far more comprehensive reform package that will provide an overall improvement to Michigan’s auto insurance system while continuing to maintain the lifetime coverage that is so critical to the quality of life for our state’s auto accident victims.
We encourage all members to meet with their state lawmakers and encourage their support for this well-thought out, bipartisan proposal. You can write your lawmaker directly from the CPAN website at
In addition, the Legislative Coffee Hours page on our website includes information on how to look up your lawmaker and is updated regularly with the dates and times each lawmaker holds their coffee hours.

Way Too Many Faults in Mayor Duggan’s No-Fault Reform Proposal

Caps on injury coverage would cost state taxpayers hundreds of millions in new Medicaid expenses, leave patients without care while forcing them into poverty

Lansing – Detroit Mayor Mike Duggan joined House Speaker Tom Leonard and Rep. Lana Theis today to announce a proposal to slash injury care for Michigan auto accident victims. The proposal calls for allowing motorists to purchase insurance policies that cap care at either $250,000 or $500,000, or drivers can continue purchasing lifetime injury coverage.

In response to the proposal, Coalition Protecting Auto No-Fault (CPAN) President John Cornack issued the following statement:

“All stakeholders in the no-fault debate are working on creating a better auto insurance system, but what was proposed today cuts costs on the backs of some of Michigan’s most vulnerable people,” said Cornack. “People who are paralyzed, people with brain injuries and children whose parents who purchase these bare-minimum policies will all suffer under this proposal because they won’t get the care they need. And to make matters worse, the costs of caring for these accident victims will ultimately result in a cost increase for Michigan taxpayers.”

Cornack notes that today’s proposal is similar to failed legislation that that also capped personal injury protection coverage. A 2011 Public Sector Consultants report found that capping no-fault medical benefits would result in a cost shift of $30 million to Michigan’s Medicaid system in the first year alone.

“What was announced today is nothing more than a recap of failed ideas from the past – capping coverage and shifting costs to Michigan taxpayers who can’t afford to pay tens of millions more in Medicaid every single year. If we want lasting reform that brings real savings for drivers and the state of Michigan then we need a comprehensive, bipartisan solution that addresses the core issues behind the excessive rates,” said Cornack.

Rather than putting caps on accident victims, CPAN is supporting the bipartisan “Fair and Affordable No-Fault Reform” legislation announced by a group of 15 State House members from both parties.

The Fair and Affordable No-Fault Reform legislation would:

  • Rein in medical costs related to auto injuries by setting reasonable fee schedules that are 185 percent of Workers Compensation and set attendant care limits that accommodate the nature of a person’s injury;
  • Stop non-driving related factors such as credit score, gender and job title from unfairly impacting auto insurance rates;
  • Bring transparency to the Michigan Catastrophic Claims Association by making its ratemaking data available to the public;
  • Aggressively tackle fraud and claims handling abuse by creating a state fraud authority.

CPAN is urging lawmakers to support the comprehensive Fair and Affordable legislation, which maintains lifetime injury coverage for accident survivors while still making significant cost reductions to Michigan’s auto insurance system.

“We think the Fair and Affordable No-Fault reform package is a better, more responsible solution that makes real and lasting reforms without increasing costs to Michigan taxpayers and without taking away coverage for catastrophic accident victims,” said Cornack.


Read the full language of the Duggan / Leonard / Theis Cap on Care Bill here.