Michigan governor and Republicans at impasse on auto insurance reform bills

May 24, 2019: Bipartisan Michigan auto insurance deal reached between Whitmer, GOP
May 14, 2019: Gov. Whitmer, Republicans see path to deal on Michigan auto insurance reform

LANSING — Democratic Gov. Gretchen Whitmer promised Thursday to veto legislation passed by the Michigan House and Senate this week that would bring big changes to an auto insurance system that has made Michigan’s rates the most expensive in the nation.

The Republican-backed bills, she argued, “serve a corrupt system where insurance companies are allowed to unfairly discriminate in setting rates.” Any bill she would consider must guarantee long-term savings for consumers and prohibit “discrimination in rate setting.”

Republican leaders Sen. Mike Shirkey and Rep. Lee Chatfield counter that they can guarantee the bills they passed would increase consumer choice and save Michigan drivers “a bucket of money,” as Shirkey put it. Republicans promised up to 80 percent savings under the Senate bill, and up to $1,200 under the House bill. 

“We’d be willing to talk to her about any changes she might recommend,” Shirkey told reporters Thursday. “But there aren’t going to be any guarantees of that for heaven sakes, it’s part of the (negotiating) process.”

Gov. Gretchen Whitmer discusses car insurance reform bills

Whitmer’s strong opposition, even following passage of a House bill early Thursday morning that added several elements favored by Democrats, sets up a high-stakes standoff between the new Democratic governor and a Legislature long controlled by Republicans.

If Republicans want Whitmer's signature on a reform bill, they should engage the governor’s office now, before the two chambers merge the bills into one, said Democratic political consultant Adrian Hemond, CEO of Grassroots Midwest.

“If the goal is to negotiate with the governor, you don’t just slap it on her desk,” he said.

Republican leaders have pitched auto reform as a top priority this session, and it’s an issue that has been important to Democrats as well. But Whitmer and other Democrats have said reaching a budget deal that provides $2 billion-plus in funding needed to fix the state’s roads and bridges is their top priority. GOP leaders want road fixes as well, but balk at Whitmer’s solution of raising the state’s gas tax by 45 cents per gallon.

In criticizing Republican insurance proposals Thursday, Whitmer spokeswoman Tiffany Brown seemed to hint that reaching a deal on insurance reform might involve finding a solution for road funding.

"The governor has made it very clear that she is only interested in signing a reform bill that is reasonable, fair and provides strong consumer protections and immediate financial relief," Brown said of the auto insurance bills. “In their current form, neither bill passed by the Legislature meets that standard. The governor has also been very clear that passing a budget that fixes the damn roads is her first priority."

House Majority Leader Lee Chatfield

But State Rep. Jason Sheppard, R-Temperance, said the GOP won’t trade auto insurance reform for the gas tax.

“We’re not going to be held hostage on insurance rate relief,” said Sheppard, one of the main architects of the House reform bill.

Although the Senate has passed insurance reform in the past, the House hadn't in the 40 years preceding Thursday morning. It finally happened, Sheppard said, because the dynamics have changed: Some anti-reform GOP members were replaced by pro-reform Republicans and others voted for the reform bills this week after previously opposing them.

Those changes are driven by polling that shows a large majority of the public wants major rate reductions, Sheppard said. He has said it’s the No. 1 topic when he talks for voters in his Monroe County district.

Michigan law requires drivers to purchase unlimited, lifetime medical benefits known as personal injury protection, or PIP, as a part of their car insurance. That’s one of the reasons it’s so expensive — the cost of PIP is about half of most insurance bills, a Bridge analysis found. Michigan’s car insurance rates are 83 percent higher on average than the rest of the country. In Detroit, rates are more than four times the national average.

The Senate plan, first released Tuesday morning and passed out of committee and the full Senate that afternoon, would allow drivers to choose between four tiers of PIP coverage, including eschewing it altogether if they have health insurance that covers car crash injuries. It would also require hospitals charge only the rates used for worker’s compensation claims, rather than charge more to treat car crash injuries.  

Democrats argued that the Senate plan does nothing to address the cost some drivers face — particularly in Detroit and surrounding areas — because insurance companies are allowed to charge more depending on where the driver lives. Other “non-driving factors” Democrats oppose are the use of gender, marital status, occupation and credit scores in determining insurance rates.

Senate Majority Leader Mike Shirkey

Opponents of the Senate bill also said it didn’t guarantee rate reductions and instead put the onus on insurance companies to pass along the savings that cutting PIP would provide.

“There’s a tremendous amount of trust in this chamber of insurance companies” and most drivers “don't have the same brimming cup of trust of insurance companies,” said Sen. Jeff Irwin, D-Ann Arbor, on the Senate floor Tuesday.

The House introduced its own plan Wednesday evening by adding an 82-page amendment to an existing bill and then passing it just after 2 a.m. Thursday. That plan also offers multiple options of PIP coverage and added some changes Chatfield said were requested by Democrats:

• A requirement that insurers reduce premiums on PIP coverage for five years.

• A requirement that insurance regulators identify non-driving factors used to determine rates (as Whitmer ordered last month) and then prohibit insurers from using them.

Further, the House plan includes a requirement that insurers offer unlimited PIP coverage (which the Senate plan did not require), but also allows them to offer other tiered levels of coverage or no PIP coverage for those with health insurance covering car crash injuries.

Democrats say the House changes don’t go far enough to guarantee rate cuts after the five-year window or prevent use of non-driving factors, which they say contributes to redlining in places like Detroit, which is both the nation’s poorest big city and the city with the nation’s highest auto rates.

“In order to guarantee savings for people we have to have the full force of the law. And these bills don’t cut it,” Whitmer said.
Chatfield countered that Republicans offered “hallmark things that (Democrats) asked us to put in legislation… There is some confusion because we’ve given them everything that they’ve asked for in this bill.”

Senate Minority Leader Jim Ananich

Democrats also have raised concerns about the speed and opacity of the legislative process, as both bills were passed quickly by Republican majorities, with little time for public testimony on the specific proposals. Republicans counter that state lawmakers have heard hours of testimony on the topic of auto insurance reform generally and felt a vote was appropriate because they knew they had the support for the bills.

The impasse comes in the shadow of a larger battle over the state budget, and some politicos have speculated Whitmer may be using the threat of a veto on auto insurance to gain leverage for her proposal to raise gas taxes 45 cents a gallon.  

Chatfield implied Thursday he’s not willing to condition passage of the auto insurance bills on passing Whitmer’s road plan. “I have said from day one that I’m not going to trade good policy for bad,” he said.

But some Democrats saw this week’s events as an indication of positive change to come.

Senate Minority Leader Jim Ananich said that while he doesn’t support the House proposal as written, he sees Republicans’ willingness to add some Democrat-requested policies as an indicator there’s a path for compromise. He hopes Democratic and Republican legislative leaders will have a final plan they can agree on by the end of the month, he said.

“There’s still an opportunity to go forward,” Ananich said. “We have a framework where Republicans moved towards us.”

Bridge reporter Mike Wilkinson contributed to this report.