Trading decent coverage for a token cash payment
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DETROIT – Michigan Gov. Gretchen Whitmer wants to give everyone who owns a car in Michigan a cash refund of several hundred dollars from a fund established for motorists catastrophically insured in car or truck accidents.
Sounds like a great idea, doesn’t it?
Sure — until you know what’s really going on. Two years ago, the governor, a Democrat, teamed up with the Republicans in the legislature to enthusiastically enact auto insurance “reform” that was supposed to improve coverage and lower premiums for everyone.
Instead, it made things worse– much worse. Michigan’s car insurance costs are still the highest in the nation, but people have a lot less protection than they did before.
The experts predicted this would happen, and people are increasingly figuring this out. So the governor, who may face a tough reelection next year, wants to shower voters with a little cash. Last week she asked the Michigan Catastrophic Claims fund to distribute their current surplus of $5 billion to car and truck owners.
The board of the association agreed in principle to give some money back, but hasn’t yet settled on an amount. If they approve the full amount the governor wants, it would mean people would get back about $675 per vehicle.
That may make her popular, at least for a while, but many of those who understand the issue say it is a terrible idea.
Tom Watkins, a former state health department director and state schools superintendent, is one. “This is pulling the wool over the citizens’ eyes,” he said. “This is a political ploy to divert attention from the poorly thought-out legislation she signed two years ago that benefits insurance companies and cuts off medical and social supports for catastrophically injured people.”
State Rep. Yousef Rabhi (D-Ann Arbor) the minority floor leader in the Michigan House of Representatives, was even more scathing. He is normally supportive of the governor and her agenda – but has bitterly opposed what has happened with car insurance.
“This proposal is terrible – on a par with the original legislation. This money should go to the survivors of catastrophic auto accidents.”
It hasn’t been, in large part because they don’t have the kind of coverage they had for decades. Prior to the “reform,” which took effect last year, those who insured their cars in Michigan had one thing going for them: The Michigan Catastrophic Claims fund, which paid all medical bills over $550,000 for life for anyone terribly injured in an auto accident.
Motorists paid part of their premiums into the fund, which at one time had as much as $18 billion. Insurance companies didn’t like this system and sent their lobbyists to try to influence the politicians.
Republicans, who control both houses of the legislature, then drafted and passed bills that called for a token lowering of rates on the personal injury protection part of their policy, but for only eight years. In return, drivers lost full protection against catastrophic accidents. They could choose how much protection to buy, and some chose only $50,000, which might last only days.
But while many Democrats like Rabhi were dead set against it, Detroit Mayor Mike Duggan, also a Democrat, pushed hard for Whitmer to sign it. Detroit has long had the highest car insurance rates in the nation, and that has helped prevent the city from attracting new residents. Three years ago, one survey found that someone who paid $1,277 for car insurance in Cleveland would pay $5,414 for the same car and same coverage in Detroit.
So the governor signed the bill, which was rushed through the legislature without proper hearings and without proper consideration of the language. “There was nothing redeemable about the original proposal, nothing,”Rabhi said.
“Some said it would get rid of redlining (allowing insurance companies to discriminate based on who you are or where you live) but they didn’t get the language right, so it didn’t even do that.”
The new insurance law, he said, “makes no appreciable difference in cost, and even if you did save money, the coverage you get is worse.” Rabhi said he initially saved $100 on his personal auto insurance, but that disappeared when he needed to buy liability insurance in case he is sued in the case of a catastrophic accident.
But the most he could buy was $1 million. Before last year, catastrophic claims were covered regardless of who was at fault.
“Now, “you can have an accident, with, say, an elderly lady whose only has Medicaid, and she can sue you and the sky is the limit.”
Efforts are being made to draft legislation to repeal or sharply modify the disastrous 2019 insurance bill, but since Republicans still control the legislature and Whitmer would have to admit error, the chance of that happening seems unlikely.
Meanwhile, people are being insured in catastrophic accidents, and soon running out of money to pay for their care. Coverage is still guaranteed for those injured before 2020, but not for new victims.
Terry Davis, an attorney at Shumaker Loop and Kendrick in Toledo, grew up in Michigan and now divides his time between both states. He likes Governor Whitmer, but this disappoints him.
“This move is purely political and the wrong thing to do. Just using the fund as a short-term, feel-good excuse to hopefully buy votes down the line instead of maintaining the fund to use it as intended for catastrophic losses,” is a mistake,” he said.
Ultimately, Tom Watkins added, “The insurance companies will get the gold mine and the consumer and those severely disabled by a catastrophic car accident will get the shaft.”
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(Editor’s Note: A version of this column also appeared in the Toledo Blade.)
