Michigan Auto No-Fault Reform

Change is coming to auto insurance in Michigan, home of the highest rates in the nation.  We promised not to bore you with a bunch of facts and terminology in our blog posts, but this change is historic for the state of Michigan.  It is so significant and important that we want you to have all the necessary information to make an informed decision.  What does the no-fault auto reform bill mean to Michigan drivers?  Let’s first look at the facts regarding the law and how it will bring financial relief to residents.

Six Options for Personal Injury Protection (PIP) Coverage for Individuals

PIP pays allowable expenses for medical care, recovery, rehabilitation, wage loss, and replacement services.  PIP coverage also includes some funeral expense benefits and survivor’s benefits which are paid to the dependents of a covered person if injuries from an auto accident result in their death.  The law currently requires you to carry unlimited medical coverage to pay for your expenses if you are injured in an auto accident.  The new law allows you to choose from six levels of medical coverage:

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

It is important to note that qualified health coverage means either of the following:

1. 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
2. Coverage under both Medicare Parts A and B

Medicaid and health sharing ministries are examples of coverages that are NOT considered qualified health coverage.

 Resident relative means a relative of either you or your spouse who lives in the same household.

Three Options for Personal Injury Protection (PIP) Coverage for Commercial Business

• Option 1: Unlimited PIP coverage
• Option 2: $500,000 per person per accident
• Option 3: $250,000 per person per accident

Selections will require certification and should be made carefully because the choice you make will have financial consequences.

Rating Restrictions

Insurance carriers will no longer be allowed to use non-driving factors when calculating premiums such a gender, marital status, zip code, home ownership or occupation.  Insurers are still permitted to use some form of “territory” in setting rates to account for higher geographic costs.  A driver’s credit score will no longer be able to be used as a rating factor, however credit reports, which contain the data the credit bureau uses to determine credit scores, will be able to be used.

Controlled Medical Costs

Beginning July 1, 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.

Wow!  That is a lot of information to digest!  Now that we have looked at the facts, let’s see how this will affect you.

When Does the New Law Take Effect?

The law currently requires you to carry unlimited medical coverage to pay for your expenses if you are injured in an auto accident.  The new law allows you to choose a level of medical coverage when your policy renews after July 1, 2020.  If you are already receiving payments from your auto policy due to injuries from an auto accident, you will continue to receive the current unlimited benefit regardless of the choice you make for the future.  This is also true if you are injured in an accident between now and July 1, 2020.

Will My Auto Insurance Bill be Lower when the Law Goes into Effect?

Because the law will allow drivers to choose a level of medical coverage, insurance companies are required to reduce the premium for PIP coverage so that there will be an average reduction per vehicle based on the level of coverage chosen.  Your premium and savings will depend on the PIP option you select and other coverages you choose.  The law will require insurance carriers to implement the required rate savings on PIP for at least eight years.

How Will I Know What Choices I Have and What to Choose?

 The new law requires that agents and insurers give you a form that describes the benefits and risks of the coverage options.  It would be wise to talk with an insurance advisor to discuss your auto insurance needs.

PIP Choices – Risks and Benefits

 The choice made regarding PIP medical coverage options is a personal choice and should be made after careful consideration of the risks and benefits of each.

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, such as rehabilitation and attendant care (services to assist an injured person with tasks they would normally do for themselves; e.g. eating, bathing, dressing, grooming and 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

 Now that you have all the information pertinent to the new law and understand how the law will affect you, consider these staggering claim statistics from the Michigan Catastrophic Claims Association when making your choice.

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.