LANSING, Mich.  (May 3, 2013) – Legislation approved last night by the Michigan House Insurance Committee will help tame out-of-control claims costs that have led the state’s drivers to pay the second-highest auto insurance rates in the nation, the R Street Institute said.

Sponsored by Insurance Committee Chairman Pete Lund, R-Shelby Township, H.B. 4612 would cap mandatory benefits provided under the state’s no-fault personal injury protection system at $1 million. The change would still leave Michigan, currently the only state that requires insurers offer unlimited lifetime benefits, with the highest minimum PIP benefit in the country. New York ranks second at $50,000.

The measure also proposes to equalize reimbursement levels for medical treatments, regardless of what type of insurance is used. In an R Street report published earlier this year, Senior Fellow R.J. Lehmann found Michigan auto insurers uniformly paid more than either workers’ compensation insurers or Medicare for 21 common medical services and procedures. In Detroit, auto insurers paid one-third or more than workers’ comp insurers, and 50 percent or more than Medicare, for 18 of the 21 services.

“Looking at the data, there just simply is no question that PIP is the least efficient payment method for catastrophic injuries, which helps explains why providers have traditionally fought changes to that system,” Lehmann said. “Capping PIP benefits at some reasonable level and finding ways to bring reimbursements more in-line with those paid by Medicare, workers’ comp and private health insurance would offer tremendous savings and leave far more resources available to actually treat the injured.”

The measure also would create a special fraud prevention authority, similar to a proposal made in 2011 by R Street President Eli Lehrer. A similar public-private fraud authority in Pennsylvania, mostly funded by that state’s insurance industry, is credited with saving the state’s consumers more than $113 million since its creation.

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