Lower Pip Coverage...Is it Worth the Risk?

Change is coming to auto insurance in Michigan on July 2, 2020.  Some of these changes are significant, you will be required to select a limit for Personal Injury Protection (PIP).  Your decision will carry financial consequences and risk, so be informed.

What does the no-fault auto reform bill mean to Michigan drivers?

Points to Consider:

• Does your health insurance exclude auto-related claims?
• Savings on auto coverage could increase employee health care coverage costs.
• Many health plans have annual deductibles and out of pocket maximum expenses.
• The limit of coverage selected for PIP is your total limit:
  • Unlimited
  • $500,000
  • $250,000
  • $50,000
  • $0
• If your PIP medical limit is reached, you may need to rely on other health coverage; if you do not have other health coverage or your health coverage excludes auto-related claims, you may be personally responsible for the expenses.
• Health coverage does not cover these expenses, your PIP benefits do:
  • In-home attendant care
  • Lost wages
  • Home and vehicle modifications
  • Long term therapy
  • Medical appointment transportation
• No-fault has traditionally paid medical providers more money for services than other types of insurance.  With the new fee schedule, auto no fault will no longer subsidize hospitals and specialized rehabilitation centers.
• The Michigan Catastrophic Claims Association (MCCA) fee for unlimited PIP will decrease to $100 per vehicle ($220 currently).
• PIP selections will require certification and should be made carefully because the choice you make will have financial consequences.

Personal Injury Protection (PIP) – Risks and Benefits:
Unlimited Coverage:

• Risks
  • The premiums for this option are higher than premiums for other options
• Benefits
  • PIP medical will cover costs that may not be covered by health insurance:
    • Rehabilitation
    • Attendant Care (services to assist an injured person with tasks they would normally do on their own):
      • Eating
      • Bathing
      • Dressing
      • Grooming
      • Medication Administration
  • This choice will significantly limit the risk that anyone covered under the policy will have out-of-pocket costs for their care

Limited Coverage:

• Risks
  • Limited PIP medical coverage may not be enough to cover your medical expenses.  If your PIP medical limit is reached, you may need to rely on other health coverage, which may not cover all medical, rehabilitation or attendant care costs.  If you do not have other health coverage, you may be personally responsible for paying these expenses.
• Benefits
  • Lower coverage limits have less expensive premiums than plans with higher or unlimited PIP medical coverage
  • Up to the limit chosen, PIP medical will cover the cost of products and services that may not be covered by health insurance, such as rehabilitation and attendant care

No Coverage (including anyone you exclude):

• Risks
  • Persons relying on qualified health coverage to pay for auto accidents injuries should be aware that, unlike auto insurance, health insurance stops paying when the policy ends or is canceled
  • If any excluded person loses qualified health coverage, you must notify your insurer within 30 days of loss of coverage
  • Within 30 days of losing qualified health coverage, if an excluded person is injured in an auto accident, coverage will be provided by the Michigan Assigned Claims Plan if they have no other qualified health coverage or PIP medical coverage.  Michigan Assigned Claims Program is a program that may pay benefits to people injured in an accident involving a motor vehicle when there is no applicable auto insurance policy
  • A person who has not obtained qualified health coverage or PIP medical coverage within 30 days of the loss of coverage will not be entitled to any PIP medical benefits
• Benefits
  • You will pay a reduced premium because you will not be charged a premium for PIP medical coverage

We recommend you talk with your personal insurance advisor to discuss your personal auto insurance needs.

Because of the significant risk a lower PIP limit presents,  Koppinger & Associates, Inc. is strongly recommending our clients continue to carry the unlimited PIP option.

SUMMARY OF MI AUTO NO-FAULT REFORM

A.  Six Options for PIP Coverage for Individuals

Michigan currently requires individuals to purchase unlimited PIP through their auto insurer.  PIP pays allowable expenses for medical care, recovery, rehabilitation, wage loss, and replacement services as the result of an auto accident.  PIP coverage also includes some funeral expense benefits and survivor’s benefits.  The new law allows you to choose from six levels of PIP:

1.   Unlimited PIP coverage
2.   $500,000 per person per accident
3.   $250,000 per person per accident
4.   $250,000 per person per accident with exclusions
   • By selecting Option 4, you must certify that both of the following are true:
     • The named insured has qualified health coverage that is not Medicare; AND
     • Each excluded spouse and resident relative listed has qualified health coverage.
5.   $50,000 per person per accident
   • By selecting Option 5, you certify that both of the following are true:
     • The applicant or named insured is enrolled in Medicaid: AND
     • Any spouse and all resident relatives have qualified health coverage or are covered under another auto policy with PIP medical coverage.

• Option 6:  No PIP medical coverage
  • By selecting Option 6, you certify that both of the following are true:
    • The applicant or named insured has coverage under both Medicare Parts A and B; AND
    • Any spouse and all resident relatives have qualified health coverage or are covered under another auto policy with PIP medical coverage.
  • Qualified health coverage means either of the following:
    • Health and accident coverage that does not exclude or limit coverage for injuries related to auto accidents and has an annual individual deductible of $6,000 or less; OR
    • Coverage under both Medicare Parts A and B
    • Medicaid and health sharing ministries are examples of coverage that are NOT considered qualified health coverage.
  • Resident relative means a relative of either you or your spouse who lives in the same household

B.  Three Options for PIP Coverage for Businesses

1.   Unlimited PIP coverage
2.   $500,000 per person per accident
3.   $250,000 per person per accident

C.  Bodily Injury Liability Limits
Default liability limit will be $250,000 per person/$500,000 per occurrence for individuals.  Default liability limit for businesses is $510,000 combined single limit.

D.  Premium Reduction

Each insurance carrier is required to reduce statewide average PIP medical premiums for eight years.  A driver’s overall premium will depend on their individual circumstances and the coverage they select.

E.  Fee Schedule
Beginning July 2, 2021, there will be a fee schedule which regulates what medical providers can charge based on the procedure they perform, similar to workers’ compensation and Medicare.  This means that limited PIP benefits will go farther, but only after the law has been in effect for a year.  Services will not be affected.

F.  Elimination of Certain Non-Driving Factors
Auto insurance carriers are prohibited from using sex, marital status, home ownership, credit score, educational level, occupation and zip codes in setting rates.  Insurers are still permitted to use some form of “territory” in setting rates to account for higher geographic costs.

G.  Other Consumer Protections
New fraud investigation unit, prior approval of rates, and fines and penalties imposed on insurance industry for certain violations.

The link below provides the latest news regarding the new auto insurance law.

Michigan’s New Auto Insurance Law – Resources for Drivers

Facts to consider:

The Michigan Catastrophic Claims Association is a private non-profit unincorporated association created in 1978 by state legislature.  The MCCA reimburses insurance companies for PIP benefits that exceed $580,000 during the lifetime of a claimant from injuries sustained in an auto-related accident.

Catastrophic claims involve injury to the brain, and/or spinal cord which results in serious and permanent disability, e.g., paralysis, coma, and reasoning ability.

MCCA Claim Statistics from 7-1-1978 to 6-30-2018
Reported Claims:                            39,426
Open Claims:                                   18,082
Total Payments Made:                 $16,528,990,541.00