LANSING – Policy changes are needed to reduce the cost of no-fault insurance in the state without necessarily reducing benefits, the Citizens Research Council said in a report released last week.

The report found that Michigan insurance rates are 17 percent higher than in other states, in part because medical costs for similar crashes are 57 percent more.

The report also found that, unlike health insurers, no-fault carriers are unable to negotiate payments with hospitals and other providers, so they generally pay more for the same services. And the requirement to pay all necessary expenses means no-fault insurers are paying for more services than health insurers or auto insurers in other states might.

“Michigan’s no-fault insurance system provides Michigan drivers with a robust medical safety net,” the report said. “Michigan drivers may take comfort in knowing they have comprehensive medical coverage in the event they are injured in an auto accident. This coverage is likely more expansive than the coverage they would receive through private health insurance if they were injured in some other way. However, the trade-off for this more generous medical coverage is higher auto insurance premiums for Michigan drivers.”

The report found the state could reduce rates by returning to the tort system used in most other states, but it could also reduce rates by creating a service fee schedule for no-fault or at least requiring no-fault carriers to pay no more than health insurers would pay.

For instance, an emergency room visit that would cost Medicare $66 and workers’ compensation $91 would cost a no-fault carrier $297, the report said.

The Michigan Catastrophic Claims Association system also lends itself to fraud and abuse and does not promote cost containment, the report said.

“Because MCCA reimburses auto insurers for the claims, the organization does not have contact with providers directly,” the report said. “As part of their statutory responsibility, the MCCA tracks claims procedures and auto insurer practices to ensure that they are not out of line compared to other auto insurers, but otherwise has very limited ability to contain costs.”

The requirement that payments be made within 30 days of the loss also reduces the ability of insurers and the MCCA to fight fraud, the report said.

Costs could also come down if insurers were allowed to offer different levels of coverage, either with limits on reimbursement or with the choice between no-fault and the tort system to cover injuries. While the report acknowledged that people would tend to under-insure themselves if allowed, 2007 figures showed 94 percent of claims were less than $50,000.

Legislators could also consider making health insurance, rather than no-fault, the primary payer for crash-related injuries, meaning no-fault insurers would pay only the difference between the service costs and the amount paid by the health insurer. The report said such a shift in Colorado cut auto insurance injury claims by 40 percent.

Rates would drop even further if no-fault health benefits were simply shifted to health insurance, the report said.

The report warned, though, that reducing amount paid by auto insurance too much could mean loss of capacity in some health facilities or increasing prices elsewhere because those facilities would lose the ability to shift costs from Medicare, Medicaid and others that might not reimburse enough to cover the actual costs of care.

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