Auto Insurance: Who Started Catastrophic Coverage?

Governor Gretchen Whitmer of Michigan initiated the no-fault auto insurance reform bill, which includes catastrophic auto insurance. The bill was signed into law in 2019 and took effect in July 2020. The law ends the state's unique requirement that motorists purchase auto insurance policies that guarantee uncapped lifetime medical benefits in the event of catastrophic crash injuries. Instead, insurers will be able to sell reduced coverage policies but will be required to reduce medical premiums for eight years.

The reform bill was signed into law by Governor Gretchen Whitmer in 2019

Governor Gretchen Whitmer signed a reform bill into law in 2019, which ended a decades-long debate over the 1973 auto insurance law. The new law ended the state's unique requirement that motorists purchase auto insurance policies that guarantee uncapped lifetime medical benefits in the event of a catastrophic crash. Instead, insurers can now sell reduced coverage policies but are mandated to reduce medical premiums for eight years.

The reform bill was signed into law by Governor Whitmer during the Mackinac Policy Conference, which took place on the porch of the Grand Hotel on Mackinac Island. The bill was approved by the GOP-led Senate and House, and it addressed the main cost drivers of auto insurance in Michigan. It was the result of bipartisan negotiations, with Whitmer conceding to GOP leaders on at least one major point. The law created a tiered fee schedule for medical providers, capping the rates they could charge auto insurers for motorist care.

While the bill allows insurers to use "territory" as a factor in setting rates based on geographic designations like census tracts, they are prohibited from considering other non-driving factors such as sex, marital status, and credit score. The reform also gave motorists with Medicare or private health insurance the option to purchase policies without personal injury protection. At the same time, lower-income motorists with Medicaid health insurance could choose auto plans with as little as $50,000 in medical coverage.

The new law required insurers to adjust rates by July 2020, and motorists would see savings the next time they renewed their policies. Over eight years, insurers were mandated to cut average personal injury protection premiums by between 10% and 100%, depending on the level of medical coverage selected by the driver. The reform bill was a significant step towards lowering Michigan's highest-in-the-nation auto insurance rates and providing cost savings for its residents.

The reform law reduces auto insurance rates in Michigan, the highest in the nation

Michigan has historically had the highest auto insurance rates in the country. By mandating unlimited personal injury protection (PIP) for all drivers and failing to regulate reimbursement rates for medical providers, the state's average insurance rates had ballooned to over $3,000 per year by 2019, nearly $800 higher than the next closest state. In Detroit, the average rate was over $6,300. In response, Governor Gretchen Whitmer signed a historic bipartisan auto no-fault reform bill in 2019, which came into effect in the summer of 2020. The bill was designed to lower costs for Michigan drivers, maintain the highest coverage options in the country, and strengthen consumer protections.

The new law ends the state's unique requirement that motorists purchase auto insurance policies that guarantee uncapped lifetime medical benefits in the event of a catastrophic crash. Instead, insurers can now sell reduced coverage policies but are required to reduce medical premiums for eight years. The plan creates a tiered fee schedule for medical providers that caps the rates they can charge auto insurers for motorist care.

The reform has had a significant impact on rates, with early data suggesting a nearly 20% reduction in insurance costs across the state. However, Michigan's insurance rates remain the highest in the country, and average rates in Detroit still account for over 18% of the city's median household income.

To further lower rates, lawmakers could offer greater choice in personal injury protection coverage and require insurance companies to use specific factors and weights when calculating rates. Additionally, reimbursement rates for services not on the Medicare schedule should be revisited, and the Catastrophic Claims Fund should be utilised to support long-term care.

While the reform law has helped reduce auto insurance rates in Michigan, the state continues to have the highest rates in the nation. Further efforts are needed to ensure that insurance costs do not remain a barrier to economic mobility for Michigan residents.

The law ends the requirement for uncapped lifetime medical benefits in the event of a crash

Governor Gretchen Whitmer of Michigan signed a historic no-fault auto insurance reform bill in 2024, which ended the requirement for uncapped lifetime medical benefits in the event of a crash. The bill addressed the 1973 auto insurance law, which had made it mandatory for motorists to purchase auto insurance policies that guaranteed uncapped lifetime medical benefits in the event of a catastrophic crash.

The new law allows insurers to sell reduced coverage policies, but they are required to reduce medical premiums for eight years. This means that drivers with Medicare or private health insurance that covers auto crash injuries can purchase policies without personal injury protection. The plan creates a tiered fee schedule for medical providers, capping the rates they can charge auto insurers for motorist care.

While the changes in the 120-page bill will be phased in, and drivers won't see rate relief for at least another 13 months, the reform is expected to lower Michigan's highest-in-the-nation auto insurance rates. The bipartisan deal was celebrated by Whitmer, who urged continued cooperation on road funding. Detroit Mayor Mike Duggan also thanked Whitmer and other state leaders, noting that the legislation should create rate relief for Detroit, where average costs range above $5,000.

The reform has been criticised for potentially stripping important treatment guarantees for catastrophically injured motorists and shifting costs to other forms of insurance, including taxpayer-funded programs like Medicaid. However, supporters of the reform argue that serious auto accidents are rare compared to everyday conditions that drive healthcare costs, and that the reform will not drive up other insurance costs.

Insurers will be able to sell reduced coverage policies and will be required to reduce medical premiums for eight years

Governor Gretchen Whitmer of Michigan signed a historic no-fault auto insurance reform bill into law in 2019. This legislation aimed to address Michigan's notoriously high auto insurance rates, which were the most expensive in the nation. The new law ended the state's unique mandate that motorists carry auto insurance policies with unlimited medical benefits in the event of a catastrophic crash.

Under the reform, insurers will be able to offer reduced coverage policies, providing motorists with more choices. However, to balance this change, insurers will be required to reduce medical premiums for eight years. This means that, depending on the level of medical coverage selected by a driver, insurers will have to cut average personal injury protection premiums by between 10% and 100%. This will result in significant savings for Michigan drivers, with the average costs in Detroit being above $5,000.

The reduced coverage policies will not include the previous guarantee of unlimited lifetime medical benefits in the event of a catastrophic crash. Instead, motorists will be able to choose from a range of coverage options, including $50,000, $250,000, $500,000, or unlimited protection. This change provides flexibility for drivers to select a plan that aligns with their needs and budget.

The reform also includes a provision for a tiered fee schedule for medical providers, capping the rates they can charge auto insurers for motorist care. Additionally, insurers will not be allowed to base rates on ZIP codes but can still consider "territory" as a factor in setting rates based on geographic designations. Overall, these changes are expected to lower costs and enhance consumer protections for Michigan drivers.

The reform law will create a tiered fee schedule for medical providers

Governor Gretchen Whitmer of Michigan signed a historic no-fault auto insurance reform bill in 2024. This legislation aimed to address Michigan's highest-in-the-nation auto insurance rates, which had been a topic of debate for decades. The new law ended the state's unique requirement for motorists to purchase auto insurance policies with uncapped lifetime medical benefits in the event of catastrophic crash injuries. Instead, insurers can now offer reduced coverage policies but are mandated to decrease medical premiums for eight years.

One of the significant changes brought about by the reform is the creation of a tiered fee schedule for medical providers. This schedule caps the rates that medical providers can charge auto insurers for motorist care. While insurers are prohibited from using ZIP codes to set rates, they can still consider "territory" as a factor, utilizing geographic designations like census tracts with small populations of around 4,000 residents. This reform is expected to bring rate relief, especially for areas like Detroit, where average auto insurance costs are above $5,000.

The tiered fee schedule is part of a broader plan that grants motorists more flexibility in their insurance choices. For instance, motorists with Medicare or private health insurance that covers auto crash injuries can now opt out of personal injury protection. Similarly, lower-income motorists with Medicaid health insurance have the option to purchase auto plans with as little as $50,000 in medical coverage, while other drivers can select plans with $250,000, $500,000, or unlimited protection. This flexibility allows drivers to choose the level of coverage that best suits their needs and budget.

Insurers are required to adjust their rates by July 2020, and motorists will see savings the next time they renew their policies. Over eight years, insurers must reduce average personal injury protection premiums by between 10% and 100%, depending on the level of medical coverage selected by the driver. This reform is expected to generate significant savings for Michigan drivers, with Governor Whitmer announcing that $2.2 billion in auto insurance refunds have been issued to eligible Michiganders as of June 2024.

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