LANSING — In a stinging defeat to Detroit Mayor Mike Duggan and Speaker of the House Tom Leonard, the House of Representatives defeated an overhaul of Michigan's no fault auto insurance system on a 45-63 vote Thursday night.

The vote came after 90 minutes of debate on the House floor with Republicans and some Democrats saying the bill may not be perfect, but it was a good start in providing relief from the highest auto insurance rates in the nation.

"I’m here to say that my only interest is to the 90,000 plus constituents and 10 million residents in Michigan who need relief from the highest insurance rates in the nation," said state Rep. Jason Sheppard, R-Lambertville. "Offering a choice for drivers is something we all do in all other insurances we purchase for ourselves and our family. We’re finally here today to take a giant step toward meaningful reform."

But Democrats said the bills didn't provide real rate relief because insurance companies could get an exemption and any relief that was offered could end within five years of the bill's passage.

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"So many of my constituents, they work hard they save, and they have to decide whether they’re going to pay insurance, or fill their gas tank. they deserve the same world class coverage as everybody else," said Rep. Fred Durhal III, D-Detroit. "With this plan they would not have the option. They would take the lowest possible coverage, one that isn’t even guaranteed, and if tragedy strikes, medicaid picks up cost, health care coverage picks up cost or their assets are exhausted and they're forced into bankruptcy.

"We talk about rate reduction. But is it true choice or is it capitulation," he asked.

Other Democrats said any no fault reform should include addressing the issue of insurance companies using non-driving related issues, such as zip code or credit scores to determine rates.

"Like the other urban cities, we’re charged more based on zip codes, credit scores and education attainment levels," said Rep. Sherry Gay-Dagnogo, D-Detroit. "We’re simply charged for being black in Detroit."

The original bill guaranteed a 40% reduction in insurance rates for people who choose a lower level of coverage — $250,000 in personal injury protection. But the amended bill also includes a required 20% cut for drivers who choose $500,000 in PIP coverage and a 10% reduction for the unlimited coverage that all drivers in Michigan now get. The reductions would only be realized on the personal injury protection portion of insurance premiums.

It's a plan that has been pushed by Duggan and Leonard, R-DeWitt, as a way to lower astronomical rates paid by drivers, especially in urban areas. And business leaders have waged a robust lobbying campaign in support of the bill. After the 10:30 p.m. vote, Duggan said he's not ready to give up.

"We've been here before, but we're going to keep going. We're getting closer. Four Detroit legislators voted for it, so we're making progress," he said. "Everybody in the state of Michigan outside the 36 square miles of Lansing knows insurance rates are too high and something has to be done about it. We'll come back next year and try again."

Business leaders were furious with the defeat. Michigan Chamber of Commerce President and CEO Rich Studley said the House had missed out on a real opportunity for reform.

“Unfortunately, 63 members of the Michigan House chose to turn their backs on their constituents and the state’s 7.1 million drivers and side with a handful of greedy ambulance-chasing personal injury attorneys and hospitals that profit from the status quo," he said.

Pete Kuhnmuench, executive director of the Insurance Alliance of Michigan, said he was disappointed at the lack of support from the House.

“Lawmakers should get back to the negotiating table, choose Michigan families and seniors over Lansing special interests, and get the job done to reform auto no-fault,” he said.

But Brian Peters, CEO of the Michigan Health and Hospital Association said the House did the right thing in rejecting a bad bill.

"We know that Michigan drivers want lower rates when it comes to their auto insurance premiums, and we would welcome the opportunity to work with legislators if and when they decide to go back to the drawing board when it comes to meaningful rate relief for drivers that protects benefits available to those seriously injured in auto accidents," he said.

After some changes to the bill, including a schedule of fees that insurance companies will cover for the medical services provided to accident victims, the bill gained another supporter in Rep. Ed Canfield, R-Sebawaing, a doctor who had been a hard no on the no fault overhaul.

"I think Michigan citizens have the right to be able to afford insurance and at this point we know 22% of people don't have insurance," he said.

The change that brought about his switch was increasing the rates insurance companies will cover at 160% of the rates charged for Medicare patients. Now, there is no fee schedules for hospitals, leading to charges for accident victims that are far higher than rates charged for services for workers' compensation or Medicare rates.

Other changes that the House made in the bill in an attempt to attract more votes include: allowing the state Department of Insurance and Financial Services Department to levy fines against insurance companies who didn't act in good faith on paying claims and the Attorney General to sue insurance companies.

But when it came down to the voting board opening, 22 Republicans and 41 Democrats voted against the bill.

State Rep. Kathy Crawford, R-Novi, said she couldn't support the bill because of the reduced benefits without guaranteed rate reduction.

“This legislation does not change how insurance companies charge motorists different rates based on non-driving factors such as zip code, education level, marital status, credit score, purchasing habits, age and more," she added.

Democrats, some Republicans, the Senate and health organizations were also robust in their opposition to the no fault overhaul.

It's the second time that Leonard, who has announced he's running for Attorney General next year, has put up a controversial issue for a vote without knowing if the votes would materialize. In February, he pushed a bill that would cut the state's income tax from 4.25% to 3.9% over a four-year period. But after trying to negotiation with a dozen recalcitrant Republicans, the vote failed on a 52-55 vote.

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Leonard placed the blame squarely with Democrats, saying they sided with hospitals and trial lawyers instead of Michigan's drivers.

Supporters were trying to address Michigan's highest insurance rates in the nation, in part, because of the unlimited medical benefits for people who are catastrophically injured in car accidents that is a part of the state's no-fault auto insurance. Those benefits, along with insurance companies' ability to charge different rates based on where people live, make auto insurance unaffordable for many people, especially in Detroit.

The auto insurance reform would have:

Allow drivers to choose the level of personal injury coverage: $250,000, $500,000 or the unlimited lifetime benefits that all Michigan drivers now have to have

Cut premium rates 10% to 40% in three tiers: a 40% cut for average drivers with comprehensive coverage and $250,000 in personal injury coverage; a 20% cut for people with $500,000 worth of PIP coverage; a 10% cut for unlimited coverage and a 35% cut for a retiree with full lifetime health care

Have the state regulate any rate increases for the next five years.

Set reimbursement rates at 160% of the rates charged for Medicare patients for medical services provided by health care providers to victims of car crashes. Right now, such schedules aren't in place for car crash victims, leading to inflated prices for services to people hurt in car accidents.

Allow senior citizens to use Medicare coverage, rather than auto insurance, to cover medical bills, leading to savings of $800 to $1,000 a year.

In the Senate, Majority Leader Arlan Meekhof, R-West Olive, said on Tuesday that he's still opposed to anything that mandates the rates that insurance companies or health care organizations can charge their customers.

A bipartisan package of bills has been offered that primarily would prohibit insurance companies from using any non-driving factors, such as ZIP code or credit scores, when they determine rates. But a hearing has not been scheduled for those bills.

Contact Kathleen Gray: 313-223-4430, kgray99@freepress.com or on Twitter @michpoligal