Michigan Auto Insurance: Understanding The Recent Changes

Michigan's new auto insurance law, which came into effect on July 2, 2020, has brought about significant changes for drivers in the state. The law was enacted to address the high cost of car insurance in Michigan, which was previously the most expensive in the country, with drivers paying an average of $3,096 per year—twice the national average. The new legislation introduces a range of Personal Injury Protection (PIP) coverage options, allowing drivers to opt for lower coverage levels in exchange for greater discounts. It also increases the minimum liability coverage offered to drivers and bans the use of certain personal information, such as gender, marital status, and education, in insurance pricing. Additionally, the law introduces new limits on medical billing and stricter insurance regulation, requiring state approval of new rates before they are charged to customers. These changes aim to reduce the economic burden of car insurance on Michigan residents and provide them with more affordable coverage options.

New PIP coverage options

Michigan's new auto insurance law has brought about significant changes for drivers in the state, offering them more choices and lower-cost insurance options. One of the most notable changes is the introduction of new Personal Injury Protection (PIP) coverage options.

Previously, PIP coverage was mandatory in Michigan, but the new reform gives drivers the flexibility to choose a coverage level that aligns with their specific needs and financial situation. There are now six PIP medical coverage levels available, each providing varying degrees of financial protection in the event of an accident.

The first option is unlimited coverage, which takes care of all allowable expenses related to an individual's care, recovery, and rehabilitation. While this option offers comprehensive protection, it comes at a higher cost. For those seeking a more affordable alternative, the $500,000 and $250,000 coverage options present viable choices. These options have lower premiums but may result in out-of-pocket expenses if the medical costs exceed the coverage limit.

The $250,000 coverage option with PIP medical exclusions is specifically designed for individuals with non-Medicare health coverage or household members with health insurance that covers auto accident injuries. This option further reduces the premium by excluding certain individuals from PIP coverage. The $50,000 coverage limit is tailored for individuals enrolled in Medicaid, and their household members must have alternative auto insurance, Medicaid, or health insurance for accident injuries.

Lastly, individuals with Medicare Parts A and B and household members with qualified health coverage or auto insurance that includes PIP can opt out of PIP medical coverage entirely, relying solely on their health insurance for medical expenses resulting from auto accidents.

The new PIP coverage options empower Michigan drivers to make informed choices based on their unique circumstances. It is advisable to carefully review the benefits and risks of each option before selecting the coverage that best suits their needs and budget.

More required liability coverage

Michigan's auto insurance law requires more liability coverage than before. The state has increased the minimum liability coverage requirements for bodily injury and property damage.

Previously, the minimum coverage limits for residual bodily injury liability were $20,000 for a person who is hurt or killed in an accident and $40,000 for each accident if several people are hurt or killed. The new law raises these limits to $250,000 per person and $500,000 per accident. Drivers can choose to purchase lower limits of $50,000 and $100,000, but attorneys recommend carrying at least $500,000 per person and $1,000,000 per accident for full protection.

For property damage liability, the minimum coverage limit has remained the same at $10,000. However, attorneys suggest carrying a minimum of $100,000, especially when travelling to other states. For example, if a Michigan driver causes a crash in Ohio, a tort state, they would be responsible for all of the other driver's car damage.

In addition to the increased minimum liability coverage, Michigan's auto insurance law now offers drivers a choice of Personal Injury Protection (PIP) medical coverage limits. Drivers can select from six PIP coverage options, ranging from unlimited coverage per person per accident to no PIP coverage, depending on their health insurance plan and other factors.

The new liability coverage requirements and PIP coverage options provide Michigan drivers with more flexibility and choices to meet their individual needs and budgets.

Banned personal information in insurance pricing

On July 2, 2020, Michigan banned the use of certain personal information in insurance pricing. This includes gender, marital status, occupation, education level, zip code, credit score, and residential status. These factors are now prohibited from being used by auto insurance companies when setting rates for their customers.

This change was implemented as part of a broader set of reforms to Michigan's auto insurance laws, which were designed to lower costs and provide more choices for Michigan drivers. The reforms also included new Personal Injury Protection (PIP) coverage options, increased liability coverage requirements, and stricter insurance regulation.

The use of personal information in insurance pricing has been a controversial topic, with some states banning the practice altogether. Michigan's decision to prohibit the use of certain factors is a significant step towards fairer insurance pricing for its residents.

While this change addresses many factors, it is important to note that insurers are still allowed to use certain credit information, such as payment history. Additionally, they can use "territories" as an alternative to zip codes, which may still impact rates based on geographic location.

New limits on medical billing

Michigan's new auto insurance law, which came into effect on July 2, 2020, has introduced several changes related to medical billing. The state previously required all drivers to purchase unlimited Personal Injury Protection (PIP) as part of their car insurance, covering health and recovery benefits for injured drivers with no cap on the amount of medical expenses the insurance company was obligated to pay over a person's lifetime.

The new law has introduced six options for purchasing medical benefits coverage, with caps on the amount that insurance companies are required to pay. The options are:

• Unlimited PIP Coverage: This is the same as the previous law, covering unlimited medical expenses over an injured person's lifetime.
• $500,000 PIP Coverage: This covers medical treatment and expenses up to $500,000.
• $250,000 PIP Coverage: This covers medical bills for accident-related injuries up to a maximum of $250,000.
• Limited PIP Medical Coverage of $250,000 Exclusions: This allows persons who choose the $250,000 maximum to opt out of coverage for themselves and relatives.
• $50,000 PIP Coverage: This option is available to persons enrolled in Medicaid, who must also have their own health insurance that covers auto-accident-related injuries.
• No Medical Coverage: This option is only available to applicants or named insureds who are covered under Medicare Parts A and B and have their own health insurance that covers auto-accident-related injuries.

In addition to these changes, Michigan has also implemented a new medical fee schedule to cap how much insurers are required to pay for medical services and treatments. The reimbursement rates will be phased in, starting at 200%-250% of what Medicare would pay for a medical procedure and eventually dropping to 190%-230% by 2023. This change aims to address the issue of price inflation in medical claims from car crashes, where auto insurers have paid significantly more than Medicare for the same procedure.

Furthermore, Michigan has also enacted legislation to protect consumers from surprise medical billing. This legislation amends the state's public health code by adding Article 18, which establishes disclosure requirements and limitations on payments for out-of-network providers. The law prohibits out-of-network healthcare providers from sending large balance bills to patients and requires them to disclose that the patient's health plan may not cover all the scheduled healthcare services, provide a good-faith estimate of the costs, and inform patients that they can request an in-network provider.

Stricter insurance regulation

Michigan has implemented stricter insurance regulation as part of its auto insurance reform. Starting on July 2, 2020, the state insurance regulator must approve new rates before insurers can start charging customers. This prior approval rule means auto insurance rates and policies must be filed with and approved by the Department of Insurance and Financial Services before being offered to consumers. This is a significant change from the previous "file and use" system, which allowed insurers to start using new rates as soon as they were submitted to the state. While state regulators could later reject those rates, it was rare for this to happen.

The new regulation also includes increased fines for insurance companies, agencies, and licensed agents who violate the law. Additionally, a new Fraud Investigation Unit has been established to investigate criminal and fraudulent activity related to insurance and financial markets, working with law enforcement to prosecute these crimes. This unit aims to reduce premium costs for drivers by addressing fraud, which drives up insurance premiums.

The stricter insurance regulation in Michigan is intended to strengthen government oversight of car insurance rates and provide greater protection for consumers. These changes give the state more control over the rates charged by insurance companies and provide additional consequences for insurance-related crimes, ultimately benefiting Michigan drivers.

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