CADILLAC — Tim Coffey gets asked questions from customers about Michigan’s no-fault auto insurance reform all the time.
As the owner of Coffey Insurance Agency in Cadillac, he would love to be able to provide some clarity on these questions. Unfortunately, the most honest answer he can give at the moment is this: “I don’t know.‘
Since legislators approved the reform package in May, Coffey said he hasn’t heard much more about how the new law will be implemented and how people will be affected by it.
To answer these questions, the Cadillac News reached out to one of the reform bill’s most vocal supporters — Rep. Michele Hoitenga, R-Manton.
Hoitenga said she also has heard questions from her constituents about how the reform will affect them. She said one of the most common comments she hears comes from people who have talked to their insurance provider, who tells them they likely won’t see any change in their insurance bill once the reform package goes into effect next summer.
This is simply not true, Hoitenga said.
“If your provider is telling you that, then you need to find a new provider,‘ Hoitenga said.
In all cases, Hoitenga said the amount you will be paying for insurance once the reform goes into effect will be lower than it is now.
In a nutshell, the reform bill eliminates the mandate that every driver have unlimited, catastrophic insurance and allows people to choose the level of coverage they would like.
Come July 1, 2020, if a person decides to hold on to their current unlimited coverage, Hoitenga said their insurance costs will still be about 10% lower than they are now.
If someone decides to choose a lower level of coverage, the amount they will save per year could be hundreds of dollars.
The House Fiscal Agency reported that while there is no way to know in advance which levels of coverage will be chosen by drivers, calculations suggest that total personal injury protection premiums could decline by as much as 50% and total auto insurance policy premiums would decline by roughly 23%.
Michigan is the only state in the U.S. that mandates unlimited catastrophic coverage and the rates that Michiganders pay reflects that.
According to Insurance.com, Michigan’s average insurance rate per person is $2,368 without any accidents and $3,502 after an accident, which is the highest in the country. Maine had the lowest rates at $884 without any accidents and $1,058 after an accident.
Hoitenga said insurance providers will be required to inform their customers in more detail about how their rates will be changing as it gets closer to the official start date.
She said the reason it is taking so long for the reform to go into effect is to give insurance providers enough time to update their systems and software for the change.
Another question she hears quite often is about the timing of the reform: If someone is scheduled for a plan renewal days or weeks before the reform occurs, will they still be forced to buy unlimited coverage if they don’t want it or can they choose a different level?
In the coming months, Hoitenga said legislators may be drafting some amendments to the bill to address this question and provide some guidance for consumers and insurance companies.
“We’re working on a few tweaks to the bill to make sure those questions are answered,‘ Hoitenga said.
According to the Senate Fiscal Agency, once the reform goes into effect and people start to opt-out of unlimited coverage, some of the costs faced by those in accidents who did not have unlimited coverage would shift to other insurers, including their current primary insurer, whether that is commercial insurance, Medicare, or Medicaid.
“In many severe injury cases (in which the accident victim became dependent on long-term care) costs would shift to Medicaid as most people do not have long term care coverage beyond the limited coverage provided to Medicare recipients,‘ the Senate Fiscal Agency reported. “Because of the uncertainty about the interest in unlimited (personal injury protection) coverage, it is difficult to provide a precise estimate of the potential increase in Medicaid costs. If more people purchased unlimited PIP coverage, Medicaid costs would be lower. If there were less interest in unlimited PIP coverage, then the increase in Medicaid costs would be greater.‘
Hoitenga said she doesn’t think the reform will lead to people paying more for their health insurance as a result of insurers having to cover costs that previously were covered by catastrophic insurance.
She points out that there are so few people who actually sustain the level of injuries that would qualify them to be covered by catastrophic insurance; most people who sustain injuries in a crash could be covered by their health insurance.
For those already being covered by catastrophic insurance for injuries they’ve sustained, the reform will not affect their coverage, Hoitenga said.
“Michigan is going to take care of its people,‘ Hoitenga said.