If you live in Michigan, you are probably wondering what all the talk (and advertising) around Senate Bill 248 is about. This bill is intended to “reform” Michigan’s unique no-fault law. Naturally, there are two opposing sides to this bill, often resulting in skewed marketing messages to the public. Here are some of the main points of the bill:
1) Medical providers currently charge auto insurance companies as much as 500% more than they charge Medicare for identical services. For example, the average cost of an MRI when billed to Medicare is $484, whereas auto insurance companies are billed an average of $3,279 for the same MRI when the patient was injured in a car accident. These inflated medical charges are passed down to consumers by way of increased auto insurance rates (higher costs for insurance companies = higher premiums for consumers). The bill proposes thresholds for amounts that can be billed to auto insurance companies for certain medical services, typically 150% of the amount charged to Medicare (instead of 300%, 500%, or more). This should reduce auto insurance rates in Michigan by limiting the amount that medical providers can charge auto insurance companies for their services.
2) Despite what some interest groups are advertising, unlimited lifetime medical and rehabilitation benefits will still be mandatory for Michigan residents injured in an auto accident. The bill proposes that the first $545,000 of medical expenses be paid directly by the insurance company of the injured party. Any expenses beyond $545,000 will be paid by a designated pool that all insurance companies pay into. This should not affect your coverage and should have minimal impact on rates. This arrangement is similar to how the current Michigan Catastrophic Claims Association functions.
3) A special insurance fraud unit will be created. This unit will be responsible for reducing fraudulent insurance claims in Michigan with the goal of reducing auto insurance rates. Some experts estimate that fraudulent claims result in all of us paying an extra 20% (or more) for auto insurance, so an increase in fraud prevention should lead to a decrease in insurance rates.
4) A mandatory rate reduction of $100/vehicle will be in effect for the first two years after the bill is enacted. Ideally, this mandatory rate reduction will reasonably represent the premium savings from other changes in the bill so that when the two year mandatory rate reduction expires insurance premiums will not increase significantly.
We think the proposed changes make sense, and this legislation is supported by the Michigan Association of Insurance Agents, the Insurance Institute of Michigan, Michigan Chamber of Commerce, National Federation of Independent Businesses, and the Michigan Insurance Coalition.