Several bills aimed at modifying Michigan’s insurance fraud laws have advanced in the state legislature, with proposed changes including new penalty structures and expanded enforcement authority under the Health Care False Claims Act.
House Bills 4713 through 4719 cleared the House insurance committee, according to state Rep. Ron Robinson (pictured above), a Republican from Utica.
HB 4713, sponsored by Robinson, would revise the definition of “health care insurer” in the Health Care False Claims Act to include auto carriers that provide personal injury protection (PIP) coverage. Robinson said this change would allow for stronger enforcement when PIP benefits are involved.
The Health Care False Claims Act, enacted in 1984, prohibits fraud and conspiracies to obtain benefits or payments related to health care insurance, and it bars kickbacks and bribes connected to such coverage. The act also outlines enforcement powers, civil legal actions, and penalties.
HB 4718 proposes that insurers be required to report suspected or known insurance fraud to the Michigan Department of Insurance and Financial Services unless an internal investigation finds the act was not fraudulent.
HB 4715 would permit insurers, government agencies, and certain organizations to share information about suspected or confirmed fraud in good faith without facing civil liability. The bill also extends protections for sharing fraud-related information between insurers, the National Insurance Crime Bureau, and authorized government agencies.
HB 4716 would replace Michigan’s current single-penalty system for fraudulent insurance acts with a tiered penalty structure. The proposed system would consider the number of fraudulent claims, the total dollar amount involved, conspiracy participation, and prior convictions.
Currently, insurance fraud is a felony punishable by up to four years in prison, a fine of up to $50,000, and restitution, regardless of the scope of the offense.
If enacted, the new penalty structure would make claims totaling less than $1,000 or involving fewer than five fraudulent claims a misdemeanor, with a maximum sentence of one year in prison and a fine of $2,000 or three times the fraudulent claim amount, whichever is greater.
Incidents exceeding $100,000 or more than 100 fraudulent claims would be felonies, carrying a maximum 20-year sentence and a fine of $50,000 or three times the claim amount, whichever is greater.
HB 4714 would provide guidance for assigning class levels to felony charges, while HB 4717 would add fraudulent insurance acts to crimes that could be included in a racketeering charge.
Regulatory developments in other states
Recent developments in other states reflect a broader trend toward insurance fraud reform. Florida and Georgia have advanced tort reforms to address large jury verdicts, known as nuclear verdicts, that have affected insurance markets.
In 2023, Florida enacted reforms that eliminated one-way attorney fees and revised bad-faith and comparative negligence rules, which analysts say have improved market conditions for larger carriers.
In Georgia, recent legal changes have altered standards for negligent security liability, changed how medical amounts are presented to juries, and restricted certain legal tactics in pain-and-suffering awards. These adjustments are being closely watched for their potential to impact claim severity and defense strategies in the insurance sector.
In Florida, a proposal under consideration would introduce prevailing-party attorney fees in certain insurance disputes. Industry groups have cautioned that this could increase litigation costs and reintroduce pricing and reinsurance pressures if enacted.
“When fraudsters game the system, everyone pays higher premiums,” Robinson said. “These reforms will make it harder to commit fraud and easier to hold criminals accountable, which ultimately means more money stays in the pockets of hardworking Michiganders.”
The Insurance Alliance of Michigan has expressed support for the legislative package, noting that it builds on the state’s 2019 no-fault auto insurance reforms.
“The 2019 auto no-fault reforms helped rein in rampant fraud that was and continues to be part of no-fault auto insurance, contributing to higher costs for Michigan consumers,” said Erin McDonough, executive director of the Insurance Alliance of Michigan. “Bad actors should be punished and giving DIFS strong tools to eradicate fraud is critical, and that’s why we support the bills passed out of the House Insurance Committee.”
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