No-fault reform

The high cost of auto insurance in Michigan has been a topic of discussion for many years. Residents have made it clear that they want this problem solved. Michiganders pay some of the highest rates in the nation, and it is our duty as legislators to find a solution.

The no-fault system is one of extreme complexity and to understand why our state’s rates are so high and what reforms are needed, we must first understand how the system works.

Currently, a driver’s own auto insurance company covers all accident-related medical expenses and lost wages regardless of who caused the accident. All motorists in the state are legally required to carry Personal Injury Protection (PIP) coverage, which pays for medical expenses resulting from injuries sustained in an auto accident. This means a policyholder’s auto insurance, rather than health insurance, would cover these costs.

While rates are the chief complaint of the no-fault system, there are many issues that consumers feel are unreasonable. One of the most common complaints is the widely inconsistent rates for care provided. It is well known that costs for auto-related injuries can be double and even triple the rate of the same procedure covered by an individual’s health insurance.

Another issue that directly contributes to the systems skyrocketing rates is uninsured drivers. So many people are priced out of driving and opt to forego purchasing insurance. The problem is when they are in an accident, the hospitals don’t simply offer services for free because of their lack of insurance, other drivers are forced to bear those costs — and with the inflated costs of medical care through no-fault, those financial liabilities add up very quickly.

The other side of the argument surrounds the quality of care that no-fault offers those who are in traumatic car accidents.

Some consider Michigan’s no-fault law to be a model for other states because of the extensive lifetime injury coverage for accident victims. A serious auto accident can quickly add up to hundreds of thousands of dollars, and those who suffer catastrophic injuries – such as a traumatic brain injury or spinal cord injury – may require medical care for the remainder of their life. These costs can quickly spiral out of control and without the coverage no-fault provides, users could incur millions of dollars in care over the course of a lifetime.

When considering this, and speaking to folks who rely on this coverage, it quickly becomes an emotional issue as well as a financial issue.

Efforts have been introduced in the Senate and lawmakers have taken several hours of testimony from all stakeholders. The Senate Committee on Insurance and Banking will continue taking testimony on the strengths and weaknesses of the current system as lawmakers continue to find an agreeable solution. I look forward to continuing discussions with my colleagues, as well as taking input from folks in my district as to how we should tackle this issue.

Sen. Wayne Schmidt, R-Traverse City, represents the 37th state Senate District, which includes Antrim, Charlevoix, Cheboygan, Chippewa, Emmet, Grand Traverse, Luce and Mackinac counties.