Michigan's No-Fault Insurance Reform: What's Changing?

On May 30, 2019, Michigan Governor Gretchen Whitmer signed a bipartisan no-fault auto insurance reform bill into law. The new law, which took effect on July 1, 2020, provides insurance coverage options, lowers rates for Michigan drivers, maintains the highest benefits in the country, and strengthens consumer protections.

The biggest change for Michigan motorists is that mandatory comprehensive lifetime no-fault personal injury protection (PIP) insurance coverage has been replaced by a tiered system that allows individuals to opt out or purchase as little as $50,000 worth of PIP coverage for medical expenses under certain circumstances. Other options include $250,000, $500,000, and unlimited coverage.

The new law also establishes a fraud investigation unit, increases fines for insurance companies, agencies, and agents for certain violations, and prohibits auto insurance companies from using non-driving factors such as sex, marital status, and education level to set insurance rates.

The new law allows drivers to opt out of no-fault medical coverage if they have Medicare

Michigan's new auto insurance law, which came into effect on July 1, 2020, allows drivers to opt out of no-fault medical coverage if they have Medicare. This is a significant change from the previous requirement of mandatory unlimited personal injury protection (PIP) coverage.

Under the new law, drivers with Medicare can choose to opt out of PIP medical benefits entirely. This means that if they are injured in a car accident, their accident-related medical bills will not be covered by no-fault insurance. Instead, it is expected that these drivers will rely on Medicare for their medical coverage. This opt-out option is also available to those with Medicare Advantage plans, which cover all services under Medicare Parts A and B.

It is important to note that having Medicare is not a requirement to opt out of PIP medical coverage. Drivers can still choose to purchase PIP medical coverage if they prefer. If they do so, their PIP medical coverage will serve as the primary payer for their medical costs after a car accident, up to the coverage limit they have selected. Their Medicare coverage will then provide additional coverage, subject to its limitations.

The new auto insurance law in Michigan offers drivers several coverage options for PIP medical coverage:

• No Limit PIP Option: This option is closest to the previous mandatory comprehensive lifetime no-fault PIP insurance coverage. It covers all reasonable expenses for the care, recovery, and rehabilitation of the injured person without a dollar limit. While this option is recommended, it may not result in any savings on insurance premiums.
• $500,000 PIP Option: This option provides coverage for up to $500,000 in expenses for the injured person's care, recovery, and rehabilitation. The new law mandates an average premium reduction of 20% or more per vehicle for this option.
• $250,000 PIP Option: This option provides coverage for up to $250,000 in expenses for the injured person's care, recovery, and rehabilitation. The new law mandates an average premium reduction of 35% or more per vehicle for this option.
• $50,000 PIP Medicaid Option: This option is only available to individuals covered by Medicaid, with specific conditions for their spouse and household relatives. The new law mandates an average premium reduction of 45% or more per vehicle for this option.
• Opt-Out Option: This option is only available if the driver, their spouse, and household relatives meet certain criteria, including being "qualified persons" under Medicare Parts A and B or other specified health insurance policies. Strict notification requirements apply if anyone covered under the policy loses their qualified health coverage.

It is important to understand that the mandated savings for each coverage option apply only to the PIP portion of the total insurance cost, not the entire policy. Additionally, insurance companies are only required to reduce their statewide average premium charges, so individual policyholders may not see any reduction in their premiums. Furthermore, the new law does not prohibit premium increases due to other rating factors.

The Michigan Catastrophic Claims Association (MCCA) will continue to pay for the medical costs of catastrophically injured car accident victims

The Michigan Catastrophic Claims Association (MCCA) is a nonprofit, unincorporated association created by the Michigan Legislature. The MCCA serves as a reinsurance fund for Michigan auto insurers, paying for the car accident-related No-Fault medical expenses of catastrophically injured car crash victims. The MCCA is funded by Michigan motorists when they purchase their personal and/or commercial auto policies.

The MCCA will continue to pay for the medical costs of catastrophically injured car accident victims claiming medical benefits through a No-Fault auto insurance policy that was issued or renewed before July 2, 2020. However, for policies issued or renewed after July 1, 2020, the MCCA will only pay for a car accident victim's catastrophic medical coverage if "unlimited" was the No-Fault PIP medical benefits coverage level selected in the policy.

Under Michigan law, an accident victim is deemed catastrophically injured and eligible for medical benefits coverage through the MCCA when their crash-related medical expenses exceed the "retention" amount, which is currently $580,000 under an auto insurance policy issued or renewed between July 1, 2019, and June 30, 2021. Prior to this threshold being reached, No-Fault medical benefits will be paid by the auto insurance company that issued the policy.

The MCCA's overall mission remains unchanged by the new No-Fault law. However, the new law does address the issue of transparency in the association's practices. The MCCA is now required to submit an "Annual Consumer Statement" to the House and Senate Insurance committees, providing information on the number and cost of claims, anticipated future costs, and the association's current financial condition and reasons for any deficit or surplus.

The new law prohibits auto insurance companies from using non-driving-related factors to set car insurance prices

On May 30, 2019, Michigan's governor, Gretchen Whitmer, signed a bipartisan no-fault auto insurance reform bill into law, which came into effect on July 1, 2020. This law prohibits auto insurance companies from using certain non-driving-related factors to set car insurance prices. The prohibited factors include sex, marital status, home ownership, credit score, educational level, occupation, and zip codes.

The new law also introduced a choice of coverage levels for Personal Injury Protection (PIP), ranging from $50,000 for drivers on Medicaid to $250,000, $500,000, or unlimited coverage. Drivers with Medicare can choose to opt out of PIP medical benefits altogether, although in that case, No-Fault will not cover any accident-related medical bills.

In addition to the changes in PIP coverage, the new law also increased the minimum required bodily injury coverage amounts. Motor vehicle owners are now required to purchase coverage of at least $250,000 per person and $500,000 per accident, with the option to reduce this coverage to $50,000 per person and $100,000 per accident.

The law also established a Fraud Investigation Unit to investigate criminal and fraudulent activity related to insurance and financial markets, and introduced increased fines for insurance companies, agencies, and licensed agents who violate the law.

While the new law aims to provide insurance coverage options, lower rates for Michigan drivers, and strengthen consumer protections, it's important to note that the mandated savings for each coverage option only apply to the PIP portion of the total insurance cost. Additionally, insurance companies are only required to reduce their statewide average premium charges, and the law does not prohibit increases in individual insurance policy premiums.

The new law established a Fraud Investigation Unit to investigate criminal and fraudulent activity related to insurance

The Fraud Investigation Unit is made up of two teams (east and west) that cover the state of Michigan. They investigate and assist federal and local law enforcement agencies in probing criminal activity related to fraud and identity theft. The unit also provides victims with resources to prevent further victimization.

Fraud crimes include but are not limited to bridge card fraud, tax fraud, health care fraud, mortgage fraud, and credit card fraud. Identity theft occurs when an impostor obtains or attempts to obtain personal identity information with the intent to commit an illegal act.

The new law also prohibits auto insurance companies from using non-driving factors such as sex, marital status, home ownership, credit score, educational level, occupation, and zip codes when setting insurance rates.

The new law requires insurers to offer an attendant care rider for those who choose a PIP limit of $50,000, $250,000, or $500,000

Michigan's new auto insurance law, which came into effect on July 1, 2020, has brought about sweeping changes to the state's No-Fault law, affecting every driver and car accident victim. One of the most significant changes is the introduction of a Personal Injury Protection (PIP) choice, allowing drivers to choose from different coverage levels: $50,000 for drivers enrolled in Medicaid, $250,000, $500,000, or unlimited/no limit.

Previously, Michigan drivers were required to carry "unlimited" No-Fault medical coverage, which proved too costly for many. The new law gives drivers the option to reduce their premiums for the medical portion of PIP by relying on their health insurance. However, this also means that if they are involved in a car accident, they may be personally responsible for any medical costs that exceed their PIP coverage limit.

Another important change introduced by the new law is the requirement for insurers to offer an attendant care rider for those who choose a PIP limit of $50,000, $250,000, or $500,000. Attendant care is defined as "allowable expenses consisting of all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person's care, recovery, or rehabilitation." This includes assistance with daily tasks such as medication management, meal preparation, transportation, and supervision of other care providers.

Under the previous No-Fault laws, PIP insurance covered attendant care costs for up to 24 hours a day, and there was no limit on the total amount that could be claimed. However, with the new law, insurers are only required to pay for 56 hours per week of in-home attendant care provided by a family member or friend. This change is intended to help reduce costs for auto accident victims, but it also means that those who require round-the-clock care may need to hire a professional caregiver or agency, which can be much more expensive.

The new law also introduces a Medicare-based fee schedule, which will be phased in over four years, resulting in 190% of the Medicare-schedule fees by July 2023. This will significantly reduce the fees that healthcare providers can charge for accident-related services.

While the new auto insurance law in Michigan offers drivers more choices and potentially lower premiums, it also shifts more financial risk and responsibility onto the individual. It is important for drivers to carefully consider their options and choose a coverage level that best suits their needs and budget.

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