Michigan Auto Insurance Reform: What's Changing And Why

Michigan's auto insurance reform is a bipartisan effort to lower insurance rates for drivers while maintaining the highest benefits in the country and strengthening consumer protections. The reform gives drivers more options for personal injury protection (PIP) coverage, allowing them to choose a coverage level that suits their needs and budget. The new law also prohibits insurance companies from using non-driving-related factors such as sex, marital status, and credit score to set insurance rates.

PIP Choice

Michigan's new auto insurance law has given drivers more options for personal injury protection (PIP) coverage. PIP covers medical bills from injuries sustained in an auto accident, as well as rehabilitation costs, lost wages, attendant care, and other expenses. While personal injury protection has always been mandatory in Michigan, the new reform means drivers can select a PIP coverage that best represents their needs and budget.

The six PIP coverage options are:

Unlimited coverage

This option pays for all allowable expenses pertaining to your care, recovery, and rehabilitation resulting from a covered accident, including attendant care. Unlimited coverage is the most expensive option, but it reduces your out-of-pocket expenses in the event of a claim.

$500,000 limit

This option pays up to $500,000 per person per covered accident. It is likely less expensive than unlimited coverage, but any expenses over $500,000 will be paid by your health insurance or out of your own pocket.

$250,000 limit

This option pays up to $250,000 per person per covered accident. While this option may be less expensive 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

This option 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 lower 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

This option pays up to $50,000 per person per covered accident. It is only available if you're enrolled in and can provide proof of Medicaid. All resident relatives must also have and provide proof of Medicaid or qualified health coverage. This option is less expensive than higher coverage limits, but any expenses over $50,000 are the responsibility of your health insurer or paid out of pocket.

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. This 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.

The new auto insurance law in Michigan gives drivers more choices and lower-cost insurance options. With these new options, Michigan drivers can find a plan that suits their needs and budget.

Opt-out of No-Fault medical coverage

Michigan's auto insurance reform law, which came into effect on July 1, 2020, allows drivers to opt out of buying personal injury protection (PIP) as part of their auto insurance. However, this is only possible if their health insurance policy covers auto injuries and has a deductible of $6,579 or less. If a driver's health plan includes auto injuries, it is considered qualified health coverage (QHC) and they can opt out of PIP.

To opt out of No-Fault medical coverage, drivers must show their auto insurance agent proper documentation. Auto insurance agencies require a letter confirming QHC. This can usually be requested from the health insurance provider.

It is important to note that opting out of No-Fault medical coverage means that if a driver is injured in a car accident, No-Fault will not pay for any accident-related medical bills. In this case, it is expected that drivers will turn to their health insurance for medical coverage for injuries suffered in a car accident.

The option to opt out of No-Fault medical coverage is only available to drivers with certain types of health insurance. For example, Medicare Advantage plans cover all Medicare services and therefore allow drivers to opt out of PIP medical benefits. On the other hand, VA coverage is not considered QHC, so drivers with this type of coverage cannot opt out of PIP.

Drivers who choose to opt out of No-Fault medical coverage should carefully consider their decision, as it could have significant financial implications in the event of an auto accident. While opting out may result in short-term savings on insurance premiums, it could also lead to costly medical bills if an accident occurs.

Attendant care

Michigan's auto insurance reform has brought about changes to the state's No-Fault law, which will affect every driver and car accident victim in the state. One of the key changes is the introduction of a limit on in-home attendant care provided by family members or individuals with a prior relationship with the injured person.

Changes to Attendant Care Under the Reform

The new auto insurance reform law imposes a restriction on in-home, family-provided attendant care services. Starting July 2, 2021, auto insurance companies are only required to pay for 56 hours per week of such care. This limitation does not apply to commercially-provided services or services provided by a nurse or home health aide from a commercial agency. It also does not prohibit insurance companies from contracting to cover services beyond the 56-hour limitation.

Impact of the Changes

The restriction on in-home, family-provided attendant care is an unprecedented change from the previous law, which allowed family members to provide 24-hour care for their loved ones catastrophically injured in automobile accidents. This change may have a significant impact on the level of care and support available to car accident victims, especially those who require extensive assistance with their daily activities.

Recommendations

It is recommended that individuals review their auto insurance policies and understand their coverage options, including the different PIP coverage levels offered. Additionally, consulting with a licensed insurance agent or company can help individuals make informed decisions about their coverage and any optional coverages available to them.

Michigan Catastrophic Claims Association

The Michigan Catastrophic Claims Association (MCCA) is a private non-profit association that provides reinsurance for all auto insurers operating in Michigan. The MCCA reimburses insurers for Personal Injury Protection (PIP) claims that exceed a certain amount, which is currently $580,000.

The MCCA is funded by assessments charged per vehicle. If a driver selects the unlimited PIP option, they are charged a $100 assessment per vehicle for the period from July 2, 2020, to June 30, 2021. If a driver selects an option with limited PIP coverage, there is no MCCA assessment for the same period.

In 2022, the MCCA had a surplus of funds, and Michigan drivers received $400 per vehicle in auto insurance refunds. The surplus funds were turned over to insurance companies, who were responsible for issuing refunds to eligible policyholders. The refunds were generally not taxable for most Michiganders.

The MCCA is now required to provide an annual report to the Legislature, post an annual consumer statement on their website, and is subject to an audit by the Michigan Department of Insurance and Financial Services (DIFS) every three years. This increased transparency was implemented as part of Michigan's auto insurance reform to strengthen consumer protections.

Bodily injury liability coverage

Michigan's new auto insurance law, which came into effect in 2020, has brought about significant changes to the state's No-Fault law, including increased bodily injury liability coverage. This type of insurance coverage is mandatory for anyone who drives regularly in Michigan and provides protection if a driver is at fault in an accident that results in injury or death.

Bodily injury liability insurance in Michigan covers a driver's liability for the injured person's pain and suffering, excess medical benefits, lost wages, and other economic damages. The extent of coverage depends on the policy limit selected. Under Michigan's No-Fault insurance law, this type of insurance is also referred to as "residual liability insurance."

The minimum coverage limits for bodily injury liability insurance in Michigan are $250,000 for injury or death to one person in any accident and $500,000 for two or more persons in any accident. Drivers have the option to purchase lower limits of $50,000 and $100,000, but they must sign a specific form approved by the Michigan Insurance Commissioner.

It's important to carefully consider the coverage limits and consult with an insurance agent or legal and financial advisors to understand the financial consequences of different coverage options. If a driver is found liable for damages that exceed their policy limit, they may be required to pay the excess amount, which could result in severe financial consequences.

The new auto insurance law in Michigan provides drivers with more choices and lower-cost insurance options, allowing them to reduce their premiums while still offering a range of coverage options, including unlimited lifetime Personal Injury Protection (PIP) medical benefits.

Frequently asked questions