LANSING, Mich. (April 18, 2013 — The R Street Institute welcomed today’s announcement by Gov. Rick Snyder that he will seek legislation to end the state’s unique requirement that all auto insurance policies provide unlimited lifetime medical benefits.

Under the plan endorsed by Snyder, mandatory benefits provided under the state’s no-fault personal injury protection system would be capped at $1 million. Even with the change, which Snyder estimates will save the typical Michigan family $250 annually, the state would still have the highest minimum PIP benefit of any state in the country. New York ranks second at $50,000.

“Maybe the Michigan auto insurance law was ‘essential’ when it became law, but in the last four decades, it has become luxurious compared to all other states,” said Alan Smith, R Street’s Midwest director. “Gov. Snyder and insurance committee chairs Sen. Joe Hune and Rep. Pete Lund should be applauded for aiming at reasonable reform as the next big project.”

According to Insure.com’s 2013 survey of auto insurance quotes across the states, Michigan’s average annual premiums of $2,520 ranked second-highest in the nation, behind only Louisiana’s $2,699. Insure.com estimates the national average is $1,510.

In Michigan, part of the cost is an annual fee drivers pay to fund the Michigan Catastrophic Claims Association, a state-chartered reinsurer that is responsible for accident-related medical claims that exceed $500,000. The MCCA fee is set to rise to $186 as of July 1, from $175 currently.

R Street Senior Fellow R.J. Lehmann also expressed interest in a provision of Snyder’s plan that proposes to equalize reimbursement levels for medical treatments, regardless of what type of insurance is used.

In a report published by R Street earlier this year, Lehmann found Michigan auto insurers uniformly paid more than either workers’ comp 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.

“We would need to see more details about how that provision would work in practice, but the governor has identified one of the core problems of the current system,” Lehmann said. “Michigan has the highest average claim costs of any state with a no-fault system, and those costs spiked 81 percent over the last eight years. It’s simply not sustainable.”

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