Haris Ashley
Michigan has historically been a no-fault state for car accidents, where individuals seek compensation for damages from their insurance company. However, in May 2019, Governor Whitmer signed a bipartisan reform bill that significantly changed the no-fault insurance system. The new law provides insurance coverage options, lowers rates for Michigan drivers, and offers a choice of coverage levels. While the reform aimed to reduce Michigan's notoriously high premiums, challenges remain, and further modifications to the insurance landscape are being considered. This includes speculation about potential changes driven by a Republican-led house majority. As such, the future of no-fault insurance in Michigan remains uncertain.
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What You'll Learn
Michigan is no longer a pure no-fault state
On May 30, 2019, Michigan Governor Whitmer signed historic bipartisan no-fault auto insurance reform legislation (Public Acts 21 and 22 of 2019). The new law provides insurance coverage options, lowers rates for Michigan drivers, maintains the highest benefits in the country, and strengthens consumer protections. The changes in Michigan's no-fault auto insurance law are substantial, affecting auto insurance carriers and health insurance carriers as they adopt administrative changes.
Michigan has historically been a "no-fault state" for car accidents. After the amendment to the No-Fault Law in May 2019, the rules regarding available coverage and benefits were significantly changed, and Michigan is no longer a pure no-fault state. In a pure no-fault state, individuals seek compensation for damage caused by their accident by filing a claim directly with their personal insurance company. This is called a first-party claim. For example, collision damage to your car is paid for by your insurance company. Your deductible is waived if you are less than 50% at fault, and you have broad coverage.
Under the new law, the mandatory comprehensive lifetime no-fault personal injury protection (PIP) insurance coverage has been replaced by a tiered system. This 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 no limit. The most significant decision that Michigan drivers will make is selecting a level of PIP coverage.
The new law also affects uninsured motorists. Uninsured motorist coverage means that you can be compensated for your injuries even if the at-fault driver does not have insurance. Without this coverage, you may be left trying to go after personal assets that don’t exist. Under the old law, the at-fault driver could not be sued for payment of medical expenses unless the vehicle involved was uninsured at the time of the accident.
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The new no-fault system increases financial liability
Michigan's no-fault insurance law underwent significant changes in 2019 and 2020, shifting the state away from a pure no-fault system. The new no-fault system introduces a tiered structure for personal injury protection (PIP) coverage, allowing individuals to opt out or choose varying levels of coverage. While these changes aimed to lower rates and provide insurance coverage options, they also result in increased financial liability for motorists in several ways.
Firstly, under the new system, motorists are potentially liable for millions of dollars in damages they were not responsible for previously. This increased liability arises from the possibility of being held financially responsible for someone else's medical expenses following an accident. As such, motorists are advised to select the highest coverage available to protect their assets, including their homes, cars, and bank accounts. This shift represents a notable departure from the previous no-fault framework, where individuals primarily sought compensation from their insurance companies, regardless of fault.
Secondly, the new no-fault system impacts pedestrians and bicyclists. Previously, they were entitled to unlimited medical benefits under no-fault policies. However, under the revised law, their No-Fault PIP medical benefits are limited to the coverage levels chosen in their policy or that of their spouse or resident relative. If no such coverage is available, pedestrians and bicyclists must apply for benefits through the Michigan Assigned Claims Plan, with a maximum coverage of $250,000. This change significantly reduces the financial protection previously offered to vulnerable road users.
Additionally, the new no-fault system affects employees, particularly regarding health plan coverage related to auto accidents. Employers who sponsor qualifying health plans must now develop a process to provide notice to employees upon request. Employees need to understand that the benefits under auto PIP coverage differ from those provided by a group health plan, with PIP benefits being more extensive and covering non-medical services as well. This distinction can have financial implications for employees, as they may need to rely on their health plans to cover auto accident-related expenses, depending on their chosen PIP coverage level.
Moreover, the new no-fault system's impact on insurance fraud cannot be understated. Between July 1, 2023, and June 30, 2024, the Michigan Department of Insurance and Financial Services (DIFS) received nearly 3,800 fraud reports, with 50% involving auto and no-fault claims. This high incidence of fraud contributes to increased rates across the board, making Michigan a riskier market for insurers. As a result, motorists may experience higher insurance costs, further exacerbating the financial liability associated with the new no-fault system.
In conclusion, while the revised no-fault insurance law in Michigan offers coverage options and aims to lower rates, it also brings about increased financial liability for motorists. This heightened liability stems from potential exposure to significant damages, changes to pedestrian and bicyclist protections, health plan complexities for employees, and the impact of insurance fraud on overall rates. Motorists in Michigan are encouraged to carefully consider their coverage options and select the highest feasible protection to safeguard their assets in the event of an accident.
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New PIP coverage options
Michigan's new no-fault law gives drivers more options for personal injury protection coverage, or PIP benefits. PIP covers medical bills from injuries sustained in an auto accident, as well as rehabilitation costs, lost wages, and attendant care services.
While personal injury protection has always been mandatory in Michigan, the new reform means drivers can choose a PIP coverage plan that best represents their needs and budget.
- Unlimited coverage: Pays for all allowable expenses pertaining to your care, recovery, and rehabilitation resulting from a covered accident, including unlimited attendant care. You pay more for the unlimited coverage option, but it reduces your out-of-pocket expenses in the event of a claim.
- $500,000 limit: Pays up to $500,000 per person per covered accident.
- $250,000 limit: Pays up to $250,000 per person per covered accident. While this option may cost less than higher coverage limits, any expenses greater than $250,000 will be paid by your health insurance or out-of-pocket.
- $250,000 limit with some or all persons excluded from PIP: Pays up to $250,000 per person per covered accident with you, your spouse, a resident relative(s), or household member(s) excluded from PIP coverage. You pay a lesser premium for this coverage due to reduced coverage for anyone who is excluded. Proof of qualified health coverage is required for each household member that is excluded.
- $50,000 limit: Pays up to $50,000 per person per covered accident. This coverage is only available if you’re enrolled in and can provide proof of Medicaid. All resident relatives must have and provide proof of Medicaid or qualified health coverage.
- No PIP coverage: If you have and can provide proof of Medicare Parts A and B, and all resident relatives have and can provide proof of qualified health coverage, you can select no PIP coverage. That means you and anyone else covered under your auto policy will rely on health coverage to pay for medical expenses resulting from an auto accident.
If you don't make a PIP medical coverage selection, your policy will be issued with unlimited PIP medical coverage, and you will be charged the appropriate premium for this coverage.
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Uninsured motorist coverage
Michigan's no-fault insurance law is intended to protect insured persons from being sued as a result of automobile accidents, except in certain situations. While this law has been in place for some time, there have been recent moves to reform it. On May 30, 2019, Governor Whitmer signed a bipartisan no-fault auto insurance reform bill to provide insurance coverage options, lower rates for Michigan drivers, maintain the highest benefits in the country, and strengthen consumer protections.
One of the challenges that the state of Michigan faces is the high number of uninsured drivers. It is estimated that 21% of all Michigan drivers do not have the legally required no-fault insurance. In some cities, like Detroit, over half of all drivers are estimated to be driving without auto insurance. This means that there is a 1 in 5 chance that a person involved in a car accident will be unable to obtain full compensation from the at-fault driver for their injuries.
It is important to note that UM coverage has limitations. It typically only applies if the insured person is the one driving the vehicle, not if they are a passenger in another vehicle. Additionally, UM coverage may not be necessary if a person already has sufficient health insurance to cover their medical bills in the event of an accident. Overall, while UM coverage is not required by law in Michigan, it can provide valuable protection and peace of mind for drivers and their families.
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Changes to health plans
Michigan's no-fault auto insurance law underwent significant changes in 2019, which came into effect in 2020. These changes were aimed at reducing the state's high insurance premiums and included allowing drivers to opt for lower levels of personal injury protection (PIP) coverage.
The changes to Michigan's no-fault insurance law have had a notable impact on health plans, particularly in the case of auto accidents. Here are the key details regarding these changes:
- Impact on Employees: The changes affect all Michigan employees with auto insurance, as their health plan coverage related to auto accidents will be impacted. Employees will need to understand the differences between auto PIP coverage and their group health plan coverage.
- Differences in Benefits: PIP benefits are generally more extensive than health plan benefits and cover critical non-medical services. Health plans may have new liabilities due to the changes, depending on how they address injuries from auto accidents.
- Coordination of Coverage: Employees must understand the coordination between their health plan and auto coverage. Coordinated coverage, where the health plan pays first for auto-related medical claims, is less expensive but may not be suitable for everyone. Uncoordinated coverage, where the auto carrier pays first, is more expensive.
- Liability for Self-Insured Plans: Non-ERISA self-insured plans have two options: primary stance, where the health plan pays first and assumes higher liability, and exclusionary stance, where the health plan does not pay for auto accident-related medical expenses.
- Increased Liability for Employers: Employers who sponsor qualifying health plans must now develop a process to provide the required health coverage notice to employees upon request.
- Impact on Unlimited PIP: With the new options available, health plans may have more liabilities. If an employee elects uncoordinated auto coverage with unlimited PIP, the health plan is unlikely to pay any expenses.
- Fully Insured Plans: Fully insured plans must adopt a primary stance and pay before no-fault auto PIP coverage.
- Potential for Stricter Cost Control Measures: Given the high incidence of fraud in Michigan's insurance market, there may be a push for stricter cost control measures. This could include maintaining or tightening caps on medical reimbursements.
These changes to health plans under Michigan's no-fault insurance law aim to provide more flexibility and choice for individuals while also addressing the challenges posed by high insurance premiums and fraud.
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Frequently asked questions
No, but there have been some recent changes. In May 2019, Governor Whitmer signed legislation revising Michigan’s no-fault auto insurance law.
The mandatory comprehensive lifetime no-fault personal injury protection (PIP) insurance coverage has been replaced by a tiered system. This allows individuals to opt out or purchase as little as $50,000 worth of PIP coverage for medical expenses.
Michigan had the highest auto insurance benefits, but also the highest costs. The mandatory unlimited PIP coverage proved too expensive for many Michigan families. The new law lowers premiums while still offering a choice of coverage options.
Drivers now have more choice in their coverage options, including unlimited lifetime PIP medical benefits. However, under the new law, all owners and drivers are potentially responsible for millions of dollars in damages they were not responsible for previously.
The new law has made Michigan a riskier market for insurers, leading to increased rates across the board. This is due to the high incidence of fraud, with 99% of fraud reports being insurance-related.
