Michigan's New Auto Insurance Law: Effective Date And Changes

On May 30, 2019, Governor Gretchen Whitmer signed a bill to reform Michigan's no-fault auto insurance system, which came into effect in July 2020. The new law offers Michigan drivers more choices and lower-cost insurance options. It also prohibits auto insurance companies from using non-driving factors, such as credit scores, gender, and marital status, to set rates.

New auto insurance law lowers costs, maintains highest benefits, and increases consumer protections

Michigan's new auto insurance law, which came into effect on July 1, 2020, offers drivers more choices and lower-cost insurance options. The law, signed by Governor Gretchen Whitmer, is designed to lower costs, maintain the highest coverage options in the country, and strengthen consumer protections.

Lower Costs

The new law provides insurance coverage options and lower rates for Michigan drivers. It offers a choice of coverage levels, allowing drivers to select a plan that suits their needs and budget. The Personal Injury Protection (PIP) Choice gives drivers the option to reduce their premiums for the medical portion of PIP by relying on their health insurance for accident-related medical bills.

Maintains Highest Benefits

Michigan is the only state that continues to offer unlimited PIP medical coverage as an option. The new law maintains the highest coverage options in the country, with the available limits equaling or exceeding the highest benefits available elsewhere.

Increases Consumer Protections

The new law strengthens consumer protections by prohibiting auto insurance companies from using non-driving factors such as gender, marital status, credit score, and educational level when determining rates. It also establishes a Fraud Investigation Unit to investigate criminal and fraudulent activity related to insurance and financial markets. Additionally, the Michigan Catastrophic Claims Association (MCCA) is now subject to greater transparency requirements, including annual reporting and audits.

PIP choice: drivers can now choose from five levels of coverage

Michigan's new auto insurance law, which came into effect on July 1, 2020, has brought about significant changes to the state's no-fault auto insurance system. One of the most notable changes is the introduction of Personal Injury Protection (PIP) choice, which allows drivers to choose from five levels of coverage. This is a departure from the previous requirement that all drivers carry "unlimited" No-Fault medical coverage.

The five PIP coverage options are as follows:

• No Limit PIP Option: This option is available to anyone purchasing No-Fault Insurance and is similar to the coverage offered under the old law. It covers all reasonable expenses incurred for the care, recovery, and rehabilitation of the injured person. While the new law mandates premium reductions of "an average of 10% or greater per vehicle", these reductions are not guaranteed for each policyholder and only apply to the PIP portion of the insurance premium.
• $500,000 PIP Option: This option is also available to anyone purchasing No-Fault Insurance and covers up to $500,000 for the injured person's care, recovery, and rehabilitation. The new law mandates premium reductions of "an average of 20% or greater per vehicle" for this option, but these reductions are not guaranteed and only apply to the PIP portion of the premium.
• $250,000 PIP Option: Available to anyone purchasing No-Fault Insurance, this option provides coverage of up to $250,000 for the injured person's care, recovery, and rehabilitation. The new law mandates premium reductions of "an average of 35% or greater per vehicle", but these reductions may not be realized by all policyholders and only apply to the PIP portion of the premium.
• $50,000 PIP Medicaid Option: This option is specifically for individuals covered under Medicaid, whose spouse and household relatives are also either on Medicaid, have other health insurance, or have PIP coverage through a different policy. The new law mandates premium reductions of "an average of 45% or greater per vehicle", but these reductions only apply to the PIP portion of the premium and are not guaranteed for each policyholder.
• 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 qualifying health insurance policies as defined in the No-Fault Act. Strict notification requirements are in place if anyone in the household loses qualified health coverage.

It is important to note that the mandated savings for each coverage option only apply to the PIP portion of the total insurance cost, and the new law does not prohibit increases in individual insurance policy premiums. Additionally, these reductions refer to the insurance company's average, not a specific policy.

The selection of a PIP coverage level is a critical decision for Michigan drivers, as it can have significant financial implications in the event of a car crash. With the new law in place, drivers now have the flexibility to choose the level of coverage that best suits their needs and budget.

Opt-out of No-Fault medical coverage for those with Medicare

Michigan's new auto insurance law, which came into effect in July 2020, offers drivers the option to opt out of No-Fault medical coverage if they have Medicare. This means that drivers with Medicare can choose to waive No-Fault Personal Injury Protection (PIP) medical benefits. However, it is important to note that if these drivers are injured in a car accident, No-Fault will not cover any accident-related medical expenses. The intention behind this change is that individuals with Medicare will rely on their Medicare coverage for medical expenses resulting from car accidents.

This opt-out option is one of several new choices and lower-cost insurance options available to Michigan drivers under the new law. The law gives drivers five options for their insurance, ranging from maintaining the current system of unlimited lifetime benefits to opting out entirely from the PIP portion of insurance coverage. The PIP portion of insurance accounts for about 50% of the cost of an insurance policy, and the new law guarantees savings in this area, ranging from 10% to 100%.

It is important to note that the new law also includes a fee schedule for medical providers, which will result in lower prices for treating car crash victims. Additionally, insurance companies are prohibited from using non-driving factors such as credit scores, zip codes, marital status, and gender when determining rates. However, there are some loopholes in these restrictions. For example, while insurance companies cannot use credit scores, they can use credit reports, which show a person's history of making late payments. Similarly, while using zip codes is banned, insurers can base rates on "territories," which could be as small as a census tract.

The new auto insurance law in Michigan aims to provide significant reductions in premiums, guaranteed for eight years, and create a better no-fault system for drivers. However, it is essential for drivers to carefully consider their options and make informed choices about their coverage to ensure they have adequate protection in the event of a car accident.

New fee schedules for medical providers

Michigan's new auto insurance law, which came into effect in July 2020, has implemented new fee schedules for medical providers. This means that doctors, hospitals, clinics, and other medical providers who treat car accident victims will have to adjust their charges for services to a new Medicare-based fee schedule. This change is designed to address the issue of medical providers charging higher prices for the treatment of car crash victims compared to patients whose healthcare bills are paid for by Medicare or workers' compensation.

The new fee schedule is part of a broader set of reforms aimed at lowering costs for Michigan drivers, maintaining the highest coverage options in the country, and strengthening consumer protections. Under the new law, drivers have more choices and lower-cost insurance options, with savings guaranteed in the Personal Injury Protection (PIP) portion of insurance policies ranging from 10% to 100%.

The reform gives drivers five choices for their insurance coverage, including the option to keep the current system of unlimited lifetime benefits or to opt out of personal injury protection entirely. For those who choose lower rates of personal injury coverage, the annual Michigan Catastrophic Claims Association (MCCA) fee, which covers unlimited lifetime medical benefits, will decrease from $192 to $43 per year.

It is important to note that these changes apply to policies issued or renewed after July 1, 2020. Additionally, while insurance companies are prohibited from using non-driving factors such as credit scores and gender when determining rates, there are some loopholes in this area. For example, while credit scores cannot be used, credit reports, which show a history of late payments, can be considered.

Increased bodily injury liability coverage

Michigan's new auto insurance law, which came into effect on July 1, 2020, has introduced significant changes to the state's no-fault auto insurance system. One of the most notable changes is the increase in bodily injury liability coverage, which will have a significant impact on drivers' protection and financial security.

Under the new law, drivers are required to carry bodily injury liability insurance with higher coverage amounts. The default coverage limits have been increased to $250,000 for injuries or death of one person in an accident and $500,000 for injuries or death of multiple people in an accident. These limits are often referred to as 250/500 coverage. This change means that insurance companies will cover a larger portion of the costs associated with injuries or fatalities caused by the policyholder in an accident. This increased coverage provides drivers with greater financial protection in the event of a serious accident, reducing the risk of personal financial liability.

While the new law sets the default coverage limits at 250/500, drivers have the option to purchase lower limits of $50,000 for injuries or death of one person and $100,000 for injuries or death of multiple people. This option allows for some flexibility, especially for those who may not require higher coverage limits or are looking to reduce their insurance premiums. However, it's important to carefully consider the financial consequences of selecting lower coverage limits. In the event of a severe accident, the selected coverage limit may not be sufficient to cover all the resulting expenses, leaving the driver financially liable for the excess amount.

The increase in bodily injury liability coverage is a significant aspect of Michigan's new auto insurance law, as it directly impacts the financial protection available to drivers in the event of an accident. While the higher default coverage limits provide added security, drivers must also weigh their individual needs and budget when deciding on the appropriate coverage amount. It's crucial for drivers to understand the potential risks and financial implications associated with their chosen level of coverage to make informed decisions regarding their auto insurance policies.

To comply with the new law, insurance companies are required to offer the increased bodily injury liability coverage options to their customers. Drivers should review their policies and consult with their insurance providers to ensure they have the appropriate level of coverage that meets their specific needs and budget. Understanding the details of their bodily injury liability coverage will help drivers make informed choices and better protect themselves and their families in the event of an accident.

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