Years ago, Wendy’s had a TV commercial. A wonderfully tongue-in-cheek grandmother named Clara Peller would exclaim at the top of her lungs, “Where’s the beef?” Looking back at Senate Bill 1 of 2019, we ask something similar.
To steal a line from the Governor Whitmer, where’s the goddamn beef? When she signed the no-fault reform bill on Mackinac Island on a sunny May afternoon, a smiling crowd of Democrats and Republicans proudly congratulated themselves. Change without error has been elusive for more than two generations. With this “reform,” they proclaimed, we Michigan drivers would make huge cost savings. They made us believe that our highest car insurance premiums were a thing of the past.
Here’s the reality. Zebra.com, now considered the auto insurance authority, tells us in its 2022 state of auto insurance coverage: Michigan saw average annual rates fall from $3096 in 2019 to $2535 in 2020, a drop of 18%. But rates increased four percent from $2535 to $2639 in 2021.
So we saw marginal savings at best.
Digging into the report, Michigan retains its dubious distinction of having the highest rates anywhere. On an individual basis, Zebra reports Michiganders with the highest individual auto insurance rates in the nation and Detroit, the city with the highest auto insurance rates in the nation. Again, we ask “where’s the beef?”
So what happened?
We checked in with Amanda Nothaft, Ph.D. She does a lot of math for Poverty Solutions at the University of Michigan. The legislature depended on Poverty Solution’s data to try to bring about this no-fault reform. Dr. Nothaft told Local 4, “the law is a really great first effort to do this,” but added “there’s still more work to be done.” We’ll discuss that part in a moment.
Why we didn’t see rates fall in the promised way is a threefold problem. Dr. Nothaft says three things need to change for our rates to drop to “there’s the meat.”
1. The bill did not end long-term lifetime medical benefits under what is called PIP, or Personal Injury Protection. Instead, the vast majority of Michiganders chose to keep it. This put a floor on how low rates could fall. Nothaft says of this development “a car accident of that magnitude is a very low probability event, but people want to protect themselves and are used to this coverage.” “I think there are people who are just waiting to see how this all plays out, how the reforms work out before they opt for lower coverage.” To get an idea of how much coverage we buy, New Jersey is the closest state to PIP and the limit is $250,000 in coverage.
2. Senate Bill 1 eliminated the use of non-driving factors such as zip codes and credit scores. Good idea. However, the reality is that insurance companies have developed so-called “territories” and “insurance scores”. These keep many buyers’ rates high. Nothaft believes: “Those territories could mirror affected postal codes because the law does not dictate how the territories are defined. An insurance score is just a credit score with a different weighting”.
3. Senate Bill 1 limits medical expenses. This was done because of abuse in medical billing. The system became full of inflated medical costs. The bill uses Medicare as a guideline for paying benefits. This had serious unintended consequences. With less money coming into the system, many medical providers who cared for serious accident victims who needed long-term care had to make ends meet or even went out of business. With this, those patients, most famously perhaps former Detroit Red Wing defenseman Vladmir Konstantinov, are losing the daily care they depended on for years. There is a lawsuit against this corner of the law. Nothaft believes this is the biggest shortcoming of Senate Bill 1: “the bill needs to be reconsidered about the costs of long-term care and provide, provide the providers with some sort of relief or recourse when they feel that what they are being reimbursed for is in line with the care that they offer.”
Sure, insurance companies aren’t always the bad guy here. Failure-free insurance in itself is an extremely expensive system. People are still stealing cars and trucks all over Michigan, especially Detroit. This drives up costs.
Many still drive without insurance, which also drives up costs. Medical providers aren’t always the bad guys here, either. Unwinding the Gordian Knot created by a 1970s insurance law is difficult. It came with the right intentions, but led to all the wrong results. The reform has failed many of our most needy. These long-term care patients need urgent help.
While House Speaker Jason Wentworth has said he doesn’t expect any new or significant legislation this year to address this issue, that hasn’t stopped representatives on both sides of the aisle from working on solutions. Where this will go in the next few days is anyone’s guess. But we would all like to see a better solution, as gas prices and inflation have long since eaten away at that meager 18% that the legislature and governor so proudly promised three years ago.
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