In the wake of the state House Insurance Committee passing a no-fault deform bill that would drastically cut benefits and fatten insurance company profits, Detroit Mayor Mike Duggan is proposing his own plan to allow car insurance companies to offer low-cost policies to Detroit residents. Like the insurance industry backed plan floating around Lansing, this plan is another disaster.
Under Mayor Duggan’s “D-Insurance” plan, which is still being worked out, residents could purchase no-fault insurance benefits with medical coverage as low as $25,000. Currently, there is no limit on medical coverage. Car insurance carriers must pay for all medical treatment related to a car accident for life, with no dollar limitation.
According to the plan, there is also another $250,000 for catastrophic care for injuries due to motor vehicle accidents, however, it is unclear when this added coverage would kick in.
There is no question auto insurance premiums are too high in the city of Detroit. According to the Detroit Free Press, on average Detroiters spend $3,400 annually for car insurance. Drivers in surrounding cities often pay half this amount. This immense cost has drastically increased the number of uninsured motorists.
According to Mayor Duggan, this new plan would save policyholders up to $1,000 in premium payments each year. Now where he gets this number has not been explained by the mayor.
However, there are serious questions that need to be asked before moving forward with this plan. In addition, one must look at the ramifications of this deal.
First, it is unclear how much insurance rates will truly drop. It is also unclear how long such a rate decrease would last. The plan also does absolutely nothing to address the large collision costs found in all Detroit insurance policies.
In addition, this is nothing but a cost shift from insurance carriers to taxpayers. It is extremely likely almost all individuals who can enroll in this plan will elect the cheapest coverage. Car accident victims will go through the $25,000 medical coverage quickly and then will be forced to turn to their own health insurance for care. Because many Detroit residents are on government sponsored plans such as Medicaid and Medicare, the costs for medical treatment will be shifted to Michigan taxpayers.
Further, the low medical payment coverage will cost Detroit hospitals and medical providers millions in lost revenue. The hit to the Detroit Medical Center and St. Joseph Health System will be enormous. The net result will be a huge reduction in staff members and payroll to offset the large revenue drop. Currently, area hospitals are the largest employers in the city. The economic effects of Mayor Duggan’s will be tremendous.
Another side effect is the legal bind this will place Detroit residents in. When a Detroit resident enrolled in the plan gets into a car wreck with a non-resident, he or she will first turn to her own policy for the payment of medical benefits. When that $25,000 limit is used up, which will occur in the blink of an eye, that resident will be forced to sue the non-resident for payment of outstanding medical expenses and other benefits. This result is what Michigan lawmakers were trying to avoid when they implemented no-fault in the 1970s.
In effect, Mayor Duggan is going full circle and attempting to take us back to a time when car accident victims waited years for basic compensatory awards.
The Lee Steinberg Law Firm, P.C. is going to watch this development closely. The plan has to pass the state legislature, and there is going to be tremendous debate on both sides.