American government is a bold conception — a belief that the people’s freedoms are best preserved through representative government. America’s Founders — and Michigan’s — thus vested the power to make laws not in a monarch or in his "swarms of officers," but in the people’s elected representatives in the legislature. Holding to this doctrine, the Michigan Supreme Court has held as recently as 2000, "Policy determinations are fundamentally a legislative function."
Nevertheless, the multiplying bureaucracies of modern government constantly challenge the view that people should be governed only by representatives of their own choosing. In a troubling recent example, Michigan’s Office of Financial and Insurance Services has banned otherwise legal activities by Michigan insurers, thereby attempting to exercise powers that actually belong to the Legislature. The problem with the OFIS decisions is not just theoretical: The rulings could adversely affect Michigan consumers while depriving Michigan’s residents of the opportunity to hold their elected officials responsible for important public policy decisions.
In one example of the OFIS’ administrative overreach, the agency banned the use of people’s credit ratings in setting their insurance rates. In a second case, the OFIS proposed rules that would severely limit insurance companies’ ability to offer contracts related to coverage for damage caused by an uninsured or underinsured motorist.
In both cases, the OFIS no doubt had good intentions. For instance, some argue that it is unfair to allow a person’s financial mistakes to raise their auto insurance premiums. Similarly, the limitations placed on insurance policies for damage caused by uninsured motorists may have reflected OFIS’ concern that the policies were unfair to consumers, since some of the contracts prohibited motorists from submitting claims if more than one year had elapsed since the accident.
Yet both of these activities by insurers are legal under the laws passed by the people’s representatives. Moreover, insurers argue that credit scores are in fact related to driver habits, meaning that the OFIS’ ban on the use of credit scores could raise insurance rates for safer drivers by forcing them to subsidize high-risk ones. Similarly, the proposed OFIS rules on insurance policies for damage caused by uninsured motorists could limit the number of insurers who provide such policies, thereby raising the cost of such coverage.
The arguments both for and against the OFIS rulings indicate that these decisions involve a genuine policy debate — something that should, under the Michigan Constitution, be decided in the Legislature. No matter what the Legislature decides, the consequences of the decision are important, and the people should be able to hold their representatives accountable at the ballot box. Important policies should not be foisted upon voters by an agency that almost no one has heard of and that is staffed by unelected officials.
The problem is particularly acute given that the OFIS is part of the executive branch. Constitutional powers are divided among the executive, legislative and judicial branches to prevent one arm of the government from becoming too powerful. Under Michigan’s Constitution, "No person exercising powers of one branch shall exercise powers properly belonging to another branch except as expressly provided in this constitution." This inevitably includes officials at the OFIS.
When the OFIS’ rule banning credit ratings was challenged in Barry County Circuit Court, Judge James H. Fisher ruled that the agency had indeed exceeded its powers. In failing to recognize the legislative limits on its power to regulate insurance companies the OFIS is, in Judge Fisher’s words, "attempt[ing] to rewrite the Insurance Code through administrative rulemaking."
Administrative entities like the OFIS, the Department of Environmental Quality or the Public Service Commission are at most supposed to develop rules that assist with the implementation of statutes enacted by the Legislature and the governor. The agencies are not supposed to create new policies. This is for a fundamental reason: The agencies are unelected and largely unaccountable. Giving them lawmaking power is inappropriate in a representative government.
One can legitimately question whether even the Michigan Legislature should have some of the powers that the OFIS is now attempting to wield. But when major policy decisions that will affect Michigan’s residents are made openly by the people’s representatives, the people have at least some chance to influence those policies and to hold their representatives accountable for them. The Michigan courts should recognize this fundamental constitutional fact, restrain the OFIS and reinforce the notion of a government of the people, by the people and for the people.
Patrick J. Wright is senior legal analyst at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.