Months into her first term, Gov. Gretchen Whitmer signed into law in May 2019 an overhaul of Michigan's no-fault auto insurance system with a goal of lowering premiums that, by many measures, were the most expensive in the country.
She proclaimed at the signing ceremony that while the bipartisan bill wasn't perfect, it gave consumers new choices and protections and “guarantees lower rates for every Michigan driver for eight years.”
Now more than five years later, Michigan no longer appears on most surveys as No. 1 for the most expensive auto insurance. But it didn't move far down the list; Michigan still regularly ranks among the top six or so states for highest prices.
Whether or not the revamped law is working as intended and saving most drivers money is a matter of debate.
Many drivers attest to seeing little, if any, savings in their insurance bills since the new system took effect in July 2020, aside from the $400 per-vehicle refund checks that the Michigan Catastrophic Claims Association mailed out in spring 2022, the same year Whitmer, a Democrat, was up for reelection.
Critics of the new law say it not only failed to lower insurance rates for most Michiganders, but upended the lives of thousands of catastrophically injured car crash survivors by imposing overly tight cost controls on their medical providers. The cost controls were aimed at reining in excessive billings and profiteering, which had contributed to Michigan's off-the-charts auto insurance rates.
Yet some Michigan drivers are seeing genuine savings from the new law, in some instances around $100 a month in savings in traditionally more expensive cities such as Detroit.
These drivers are typically those who make use of the law's new consumer options for medical coverage that is purchased as part of auto insurance, known as "personal injury protection" or PIP.
The effects of the 2019 no-fault overhaul are showing up in nationwide reports on auto insurance prices.
Surveys by Insure.com show that from 2019 to 2024, Michigan went from being the No. 1 most expensive state, with an annual policy average of $2,611, to the No. 6 most expensive state this year with a $2,266 average policy. The nationwide average for full coverage in this year's survey was $1,895.
Notably, Michigan was the only state in the top 10 to show a lower average premium in 2024 than in 2019; premiums in the other states went up during those five years.
“Auto insurance rates are still high in Michigan compared to the rest of the country, but not as high in comparison to other states as we were before the no-fault reforms were enacted," said Robert Klein, a professor emeritus of risk management at Georgia State University who lives in Michigan and has studied the state's auto insurance market.
As for why many Michiganders report seeing no savings in their own policies or even higher prices, insurance experts point to how the majority of drivers across the state are still choosing unlimited PIP — the most expensive coverage option — and aren't getting the potential savings that come with a lower PIP. Unlimited is also the default for those who don't select a PIP option when signing up or renewing their auto policy.
“So it is saving people money if they make smart decisions and shop around" with different insurers, Klein said. “But if they are not shopping around, they could get stuck with a carrier who’s going to charge them more than somebody else would and, two, if they are making bad choices on PIP and other coverage, that’s another problem.”
A nationwide inflationary phenomenon
What's more, the price of auto insurance across the country has surged in recent years, a phenomenon that industry experts attribute to higher costs for vehicles, parts and repair work, as well as riskier driving behavior since the pandemic and general inflation.
The price of auto insurance nationwide surged 48% in the three years between June 2021 and this past June, according to Bureau of Labor Statistics data. From June 2017 to June 2020, the price actually fell by 3%, the data shows.
The soaring inflation in other portions of an auto insurance policy, such as collision coverage, could mean that some or all of the savings for Michigan drivers on their PIP coverage could be getting wiped out.
“So while they (insurance companies) may have adjusted their rates for no-fault, they haven’t adjusted their overall rates that would reflect a reduction because they’re being offset by these tremendous inflationary losses," said Eric Poe, CEO of CURE Auto insurance.
CURE started doing business in Michigan in 2021 because of the reform and is one of the few — if not the only — insurer in the state that says it doesn't use consumer credit histories when pricing rates.
The 2019 reform also significantly raised Michigan's default option for bodily injury liability coverage to $250,000 per person/$500,000 per accident — among the highest in the nation — which added more expense to policies.
Most still choose 'unlimited'
PIP acts as either a primary or secondary layer of health insurance after a vehicle crash, and covers things that even the best commercial Blue Cross health plans do not, such as lost wages, extensive in-home attendant care and long-term care in specialized centers.
Prior to the overhaul, Michigan was the only no-fault state that required drivers buy potentially unlimited, lifetime levels of PIP. There also were no statutory controls on the prices of medical services, and no-fault insurance often gave the most generous reimbursements for medical providers of all forms of insurance.
A 2017 Free Press investigation found that before the law change, unlimited PIP was an incentive in Detroit for some medical providers and accident attorneys to profiteer and drive up costs in the system with large billings and questionable claims.
A survey conducted this April by the Insurance Alliance of Michigan, an industry group, found Michigan drivers making the following choices for their no-fault medical coverage:
- Unlimited PIP: 62%
- $250,000 PIP: 12%
- $500,000 PIP: 3%
- $50,000 PIP (available to Medicaid recipients only): 2%
- Opt out/PIP with exclusions: 11%
- Unknown: 10%
The 2019 law did mandate that insurers make cost reductions for eight years on the PIP portion of customers' policies, ranging from a minimum 45% reductions for those choosing the $50,000 PIP to 10% for those staying with unlimited PIP. That requirement was apparently the lower rates "guarantee" Whitmer mentioned at the bill's 2019 signing ceremony on Mackinac Island.
Andre Clark, 58, of Warren, is among the 11% of Michigan drivers — and 17% in Wayne County — who have chosen to drop PIP coverage, an option that didn't exist before the new law. In an interview last week outside a Secretary of State office in Detroit, Clark said he is saving about $200 a month on his policy that covers three vehicles, compared to when he still carried unlimited PIP.
This $0 PIP option is only available for those on Medicare or with commercial health insurance that covers auto accidents and has a deductible below $6,001. And it entails the hassle of rounding up paperwork every six months to show insurance companies proof of "qualified" health insurance.
“It’s a bit of a pain in the butt," Clark said, "but it is what it is if you want the savings."
Andrew Johnson, 52, of Detroit, also visited the Secretary of State office that day to renew his driver's license. He said he pays about $800 a month to insure three vehicles in the city, and hasn't noticed any price drop in recent years.
However, he said he was unaware of the new options for adjusting PIP coverage to get a lower premium. Those like Johnson who don't pick an option will default to unlimited PIP — the most expensive.
“I’m going to check into that immediately," Johnson said.
A missed opportunity?
One consumer advocate says the 2019 no-fault overhaul was a missed opportunity by Michigan lawmakers to bring greater fairness and equity to the state's auto insurance market.
Doug Heller, director of insurance for the Consumer Federation of America, criticized the reform for not stopping insurers from using geographic territories and consumers' credit histories when setting rates.
Although the law did ban the use of some nondriving factors, including gender, home ownership, education credentials, marital status, ZIP codes and FICO credit scores, it still allowed insurers to slice and dice customers into geographic territories when setting premiums and let them continue to use "insurance scores" that derive from a person's credit history.
The result is that someone with a good driving record, but less-than-perfect credit history, and who lives in a poorer section of Detroit is likely to still pay more for insurance than a driver in the suburbs with a worse driving record, according to Heller, who has studied Michigan's market for years.
“The people who are bearing the heaviest burden for auto insurance in Michigan are the people who are least able to afford coverage," said Heller, who also is a consultant for the Coalition Protecting Auto No-Fault, or CPAN. "There is an absolute inequity in requiring people to buy a product, and then judging them based on something that has nothing to do with the product.”
Heller said his research has also found that drivers on Medicaid who choose the $50,000 PIP option often pay more for that significantly reduced coverage than some drivers with unlimited PIP.
That odd circumstance is likely a result of insurance companies penalizing the Medicaid recipients for where they live — a lower-income census tract — and by their continued use of credit histories when setting rates.
"My assessment is that things just haven't changed," he said of Michigan's insurance market.
Why car location matters
To be sure, past studies have found a connection between lower insurance scores and the likelihood of a person filing a claim. And urban areas such as Detroit see more accident claims and claims with lawyer involvement, which are costlier for insurance companies.
An actuarial study commission by the city of Detroit released in 2015 found the Detroiters were using their PIP coverage twice as often and for twice the average amount as policyholders in the suburbs — $60,000 in Detroit versus $32,000 in claims among suburban drivers.
“When you’re looking at how the cost of insurance is derived, where your car lives is important," said Erin McDonough, executive director of the Insurance Alliance of Michigan. "Densely populated areas have more thefts and crashes and vandalism, and you also see medical and litigation costs higher.”
One part of the 2019 reform law that Heller does applaud was the now-expired financial amnesty period that shielded those without continuous auto insurance coverage from paying penalties or higher premiums once they signed up for a policy.
Prior to the overhaul, an estimated 20% of Michiganders and 60% of Detroiters were believed to be driving without insurance.
The amnesty period ran from July 2020 to January 2022 and brought in more than 202,000 previously uninsured drivers, including over 83,200 who had been without coverage for three or more years, according to the Department of Insurance and Financial Services.
Catastrophic crash survivors
The strongest criticism of the 2019 law has concerned the effects of the new cost controls on medical services covered by no-fault insurance.
The first set of cost controls applies to the type of medical services that also have a Medicare bill code. Hospitals and clinics are generally limited to no-fault reimbursement at 190% of whatever Medicare would pay for the same service, with higher reimbursements for hospitals with Level 1 or Level 2 trauma centers or large number of indigent patients.
That payment level is in line with what research by the government-funded Rand Corp. found was an average commercial health insurance reimbursement to Michigan hospitals in 2022 — 192% of Medicare rates.
There is bigger controversy over the second set of cost controls, which apply to services that lack an applicable Medicare bill code, such as extended hours of in-home attendant care. The law took a 45% across-the-board reimbursement cut to whatever price providers of those services charged at the start of 2019.
A source close to the Whitmer administration last year told the Free Press that this 45% cut was premised on the generous reimbursements that some high-charging medical providers were getting before the reform, and it was assumed the Michigan Legislature could tweak that aspect of the law at a later date. The source spoke anonymously to share sensitive information.
But not all medical providers to catastrophic patients had such large profit margins. The reimbursement cuts ultimately resulted in some providers shutting down, dropping patients or threatening to drop patients.
In July 2023, the Michigan Supreme Court ruled that contrary to assumptions by state insurance regulators, the cost controls in the revamped no-fault law do not apply to catastrophically injured people whose car accidents happened prior to June 2019.
Such individuals have their medical bills paid by the Michigan Catastrophic Claims Association, which reimburses auto insurers once a person's bills exceed a set amount, recently $635,000. According to the MCCA, there were 12,734 individuals with still-active catastrophic claims as of June 30.
After that court decision, legislation to loosen the cost controls for all car accident victims — including the 2,254 people with active catastrophic claims whose injuries occurred after June 2019 — passed the state Senate last fall, although didn't make it out of the House's Insurance and Financial Services Committee.
Proponents of that legislation contend that the value of unlimited no-fault coverage is greatly reduced until medical providers can once again afford to take patients who aren't grandfathered in to the older reimbursements.
"We were told that auto reform would lower costs," state Rep. Tyrone Carter, D-Detroit, said last fall at a rally outside the Capitol for accident survivors. "We were also told that crash survivors wouldn’t lose their care. Well I’m here to tell you today — both lies. Those promises were not kept."
Insurance executives warned that the initial version of the proposed legislation wasn't the "narrow fix" that proponents claimed for helping just catastrophic survivors, but would raise reimbursements for all no-fault medical services.
MCCA fee not only cost
The MCCA's care for catastrophic crash survivors is funded by per-vehicle fees, currently set at $90 per year for those with unlimited no-fault medical coverage. The fee is lower for those choosing anything less than unlimited PIP, or a $20 per year "deficit recoupment" fee.
A common misconception is that MCCA fees represent the only cost to Michigan drivers for no-fault medical benefits.
In fact only a small fraction of accident claims are big enough to cross the $635,000 threshold to become a catastrophic claim. The vast majority of medical costs in the no-fault system are for claims far below the threshold, and they are reflected in the price of PIP coverage.
Prior to the overhaul, the average size of no-fault medical claims in Michigan was $33,437 in 2017, according to a study by the National Insurance Research Council.
Effect on lawsuits
Wayne County experienced a surge in auto accident-related lawsuits in the years before the 2019 law.
The biggest jump was in first-party no-fault lawsuits, those generally filed by motorists and passengers in accidents who are seeking benefits from their own auto insurance companies. (Medical providers also file first-party lawsuits against patients' auto insurers to get their own bills paid.)
Accident attorneys can take a one-third cut of their client's medical billings after a first-party lawsuit is settled, which can be an incentive for generating high medical bills.
Attorneys insisted they were forced to file lawsuits to make recalcitrant insurance companies pay what is due to victims. But others said that Michigan's no-fault system, enacted in 1973 and with no statutory price controls until the reform, was ripe for scams that benefited lawyers and medical providers — resulting in unaffordable premiums.
The other type of auto accident lawsuits are negligence suits, generally when one driver sues another after a crash. Under Michigan's no-fault system, these lawsuits are only allowed in cases of serious bodily impairment, disfigurement or death.
Data from the Michigan Courts Data Dashboard shows that since the 2019 law, there has been modest increases in both types of litigation in Wayne County Circuit Court.
Statewide, however, the number of first-party lawsuits in all circuit courts fell 7% between 2019 and 2023 while negligence lawsuits experienced a slight uptick.
Poe, the CEO of CURE Auto insurance, said he believes that if Michigan moved toward an arbitration system for no-fault medical coverage disputes, similar to that in some other states such as New Jersey, it could significantly reduce costs in the system.
"We’re the only state that has this type of coverage level and no arbitration system," he said.
Contact JC Reindl: 313-222-6631 or jcreindl@freepress.com. Follow him on X @jcreindl
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