On May 30, 2019, Governor Whitmer signed an auto insurance reform bill into state law. The interpretation of the law has raised a number of questions that are currently being sorted out. There have already been three changes to the law since it was signed, with undoubtedly more to follow.
Some of the more common questions we hear from our clients include:
Does my health insurance offer the same coverage as the medical coverage on my auto insurance policy?
Under an auto insurance policy, medical is covered through Personal Injury Protection (PIP). The coverage provided under an auto policy is broader than a health insurance policy. In addition to covering medical expenses it includes coverage for:
My auto policy currently has mandated unlimited medical benefits. Can I choose lower limits in the future?
Currently every policy has unlimited benefits. As of July 1, 2020, auto insurers in Michigan will offer different limits for PIP. Michigan is the only state that offers unlimited medical benefits. Going forward, unlimited coverage will still be available, along with options for lower limits.
Does my health insurance cover auto accidents and if so, do I still need to purchase PIP coverage under my auto policy?
Not all medical policies cover auto-related injuries. You will want to confirm this with your health carrier prior to making any decisions on PIP coverage. Even if your medical policy covers auto-related injuries, you will want to take into consideration the additional coverage afforded by an auto policy’s PIP coverage before deciding.
Are there requirements I must meet in order to opt out of purchasing PIP coverage?
YES. Effective July 1, 2020, the new law allows an opt-out option for medical benefits under the auto policy if all members of a household have other “qualified health coverage” or their own auto policy with PIP benefits. “Qualified health coverage” is defined as coverage that does not exclude or limit coverage for injuries related to motor vehicle accidents and for which the deductible is $6,000 or less per individual.
The combination of Medicare Parts A& B is considered “qualified health coverage.” It is important to remember that if different health plans cover different members of your family, all plans must be “qualified” in order to opt out.
If I choose a lower limit will there be a fee schedule to help control medical costs?
Starting July 1, 2021, there will be a fee schedule which regulates what medical providers can charge, based on the procedure they perform, similar to workers’ compensation and health insurance. However, for the first year the law is in effect, the fee schedule will not apply. The effect of this is that medical costs will remain higher and a lower PIP limit won’t go as far.
Will I have more liability as a driver in Michigan after July 1, 2020?
YES! Under the current no-fault law, unlimited medical is mandatory. Currently, if you were at fault in an accident, you could only be sued for pain and suffering caused by serious injury, disfigurement or death. Under the new law, not only are you still responsible for those damages, but you can be responsible for the uncovered medical expenses of the other party.
For example, if an individual decides to purchase a $250,000 PIP limit and has bills totaling $1 million, you could now be responsible for the remaining $750,000.
In addition, today you can be liable for up to $1,000 for physical damage to another person’s vehicle if you are at fault in an accident and they do not carry collision insurance, or they have a deductible. This limit will be increased to $3,000 and can be covered under mini-tort coverage on your auto policy.
Will the same people still be covered under my policy for PIP?
NO! Children who no longer call your home their residence or partners of people who live together, but are not married, may not find PIP coverage under your policy. If any of these circumstances apply to you, talk to your agent to learn how to obtain coverage.
Will I see a reduction in my auto insurance rates?
The law mandated that insurers lower their rates for the PIP portion of a policy depending on the limit selected. Consumers must remember that the percentage reduction mandated by the law only applies to the medical portion of the policy premium.
Is there anything I should do to protect myself when the new law takes effect?
When your current policy renews, it will be providing coverage for a time period when the new law is in effect. For example, a policy that renews on November 1, 2019 running through November 1, 2020 will fall under the new law from July 1, 2020 to November 1, 2020. Near the end of the policy period, the new law will apply, creating a greater liability.
You will want to review your liability limits and consider increasing them, or adding umbrella coverage. Remember that without a fee schedule for medical in the first year of the law, there is a greater risk if you are sued. In addition, you will want to review your uninsured/underinsured limits on your policy, which covers you if the at-fault party has minimal liability limits or no insurance.
Saginaw Bay Underwriters has made every attempt to ensure the information contained in this document has been obtained from reliable sources. For specific language, please refer to your insurance policy, in addition to state statutes, laws and regulations. Current as of: October 2, 2019.