Michigan Auto Insurance Reform – Education & Resources
Below are the forms required if you wish to (1) lower your liability limits, and/or (2) to choose an option other than unlimited, lifetime medical coverage. For questions on how to complete the forms, contact the office directly.
Michigan Choice of Bodily Injury Liability Coverage Limits
Michigan Selection of Personal Injury Protection (PIP) Medical/Allowable Expenses Coverage
Every individual/family has to decide if it is worth the cost-savings on their auto insurance to decrease their unlimited medical coverage. There are a variety of factors to consider: your current health insurance coverage, young children in the household, whether your health insurance covers auto accident injuries, etc. It is a deeply personal decision for each family to consider. Here is some additional details regarding the biggest change, the ability to lower your medical coverage:
There will be new options for your PIP medical coverage. All these options have risks and benefits. To make a change to any option (besides Option 1), you must sign off and submit this to your carrier. Not everyone qualifies for every option:
· Option 1: Unlimited *the coverage everyone had prior to the law changing*
· Option 2: 500,000
· Option 3: 250,000
· Option 4: 250,000, with some or all persons excluded from PIP Medical
· Option 5: 50,000 - for those with Medicaid
· Option 6: No PIP Medical Coverage - for those with Medicare parts A & B
No additional paperwork or documentation are needed to choose Options 1 - 3.
Option 4 - This is a "hybrid" option for families with multiple different combinations of health plans in their household. This gives the ability to lower coverage to 250,000, and to exclude anyone with a Qualified Health coverage. Qualified health coverage cannot exclude or limit auto accident injuries and must have a deductible below $6,000. Medicare A & B would also be considered Qualified Health Coverage. To choose this option, you must provide a letter from your health carrier confirming they will cover auto accidents, or the Medicare card, and sign off on the "Michigan Selection of Personal Injury Protection" form, above.
RISK: If you lose your health coverage, and forget that you are excluded from the auto insurance - you would be left with NO coverage for medical accidents. You only have 30 days to update your auto policy after you lost that health plan.
Option 5 - This option is only for families where everyone in the household, young children included, all are on state Medicaid. You must give copies of all household member/family member Medicaid cards, and sign off on the "Michigan Selection of Personal Injury Protection" form, above, before you can change to this option.
RISK: You are bound to whatever coverage limits Medicaid has, with only an additional 50,000 from your auto insurance provider.
Option 6 - This option is only when everyone on the policy is over 65, and has Medicare Parts A & B. You must provide copies of your Medicare cards, and sign off on the "Michigan Selection of Personal Injury Protection" form, above, before you can change to this option. If not everyone is over 65, you could go with Option 4.
RISK: You are bound to whatever coverage limits Medicare has, with zero additional coverage from your auto insurance provider.
**Prior to the law change, both Medicaid and Medicare would not cover ANYTHING for an auto accident injury. Our agency does not know to what extent those plans will protect you. We would recommend finding out what your coverage limit will be before choosing Options 5 or 6.**
Below are the other three biggest impacts from the Michigan Auto Reform:
1. The minimum required bodily injury limits are being increased to 250,000 per person/500,000 per accident. You can sign off to reject these limits and choose lower options, but our agency does not recommend this. *Most of our customers already carry these limits, or higher. In this case, no action is needed.
2. Drivers on your policy must be both residents and relatives of your household in order to receive PIP medical coverage. This means family members who drive your car, but live elsewhere, will no longer receive PIP: they are not a resident. Non-family members who live in your house, like significant others, will no longer receive PIP: they are not a relative. If you feel this may apply to your policy, contact the office right away.
3. It will become even more important for everyone to have an umbrella liability policy. Individuals will be able to sue at-fault drivers for unpaid medical bills once drivers begin to carry different levels of PIP medical coverage. Before this was a non-issue: everyone had lifetime, unlimited medical coverage. This could financially ruin a family if you do not have an umbrella policy to protect you against lawsuits.
If you need an umbrella quote, please contact our office to start one for you. These policies are usually around $150-200/year for $1 million of additional protection, and you also get a discount on your auto and home policies!
MI Auto Insurance Reform: Unintended Consequences by Deyan and Katelyn Kozhuharov
The insurance law changes coming to Michigan on July 1, 2020 were greatly needed to reduce the large insurance premiums in the state. However, the law has several unintended consequences that can severely impact Michigan residents, and may result in rates increasing long-term. Below is a brief summary of some of those issues.
- If an individual loses their medical insurance, and had rejected PIP completely, they have only 30 days to inform their auto insurer of this change. During the 30 days, the insured gets up to $2 million coverage from the Michigan Assigned Claims Plan (MACP). After the 30 days, the insured loses PIP benefits completely. Therefore, an individual would be left with no medical coverage. See 3107D (3) for more details.
- Insureds who have chosen anything other than unlimited, lifetime PIP will be exempt from paying the MCCA (MI Catastrophic Claims Association) fee. However, if the MCCA is running a deficit, those charges will still be passed along. Therefore, consumers may not see much savings in this line item.
- The PIP/Medical rates are locked-in for eight years for insurance carriers on the costs they can pass on to their customers (until 7/01/2028). However, medical costs for medical carriers are not locked during this period. This could result in large financial costs for the insurance companies: medical providers can charge any amount, while insurance companies are locked-in on the rates they charge. Fee schedules will be in place in 2021, but auto insurance carriers will still pay more (on average 200%) than what Medicare pays year-to-year. This could result in auto insurance carriers leaving Michigan, and others may be forced into bankruptcy; those carriers remaining will have to increase the PIP rates drastically after the rate lock has expired. See 2111F (2) for more details.
Medical Fee Schedules
- Fee schedules will begin on July 1, 2021. The schedules will be between 190% and 250% of Medicare fee schedules, depending on the medical provider class.
- Since PIP rates are locked in 2020, and fee schedules are not implemented until 2021, insurance carriers will see large financial losses during that time. Again, this will lead to much higher PIP rates, when the PIP rate lock expires. See 3157 for more details.
- Insurers can no longer rate by ZIP codes, so they will rate by territories. This means that a previously lower priced ZIP code will now subsidize its neighboring higher rated ZIP codes, and see rate increases. See 2108(8) and 2111(4) for more details.
PIP/Medical Coverage Order of Priority
Drivers, occupants and pedestrians are no longer covered by the Named Insured’s policy, unless they are the Named Insured, the Named Insured’s resident spouse, or a resident relative of either. Therefore, the following individuals will no longer receive PIP benefits under the Named Insured’s policy, even if they are still listed as a driver:
- Non-resident Relative
- Unrelated Household Member
- Child of Divorced Parents (child should be added to the policy where the child resides most frequently, and/or to the corresponding address they have on their driver’s license)
- Student Away (If the student still has established residency at parents’ address, student is covered)
Due to this order of priority change, some insurance carriers will charge premium for PIP benefits for minors in the household. Previously, there was only a charge once the minor obtained their full driver’s license. This will lead to increase in PIP premiums. See 3114 (4) for more details.
Uninsured injured persons who are not occupants of a motor vehicle (pedestrian, bicyclists, etc.) will receive PIP benefits only from the MACP, up to $250,000. Previously, they had access to the unlimited, lifetime benefits of the owner of the car who injured them. See 3115 for more details.
Motorcyclists will be covered by whatever PIP limits were selected by the owner of the motor vehicle involved in the accident’s policy, not their own policy selected limits, because the priority provisions were not changed. This problem extends beyond motorcyclists, and includes occupants of vehicles operated in the business of transporting passengers (such as limousines, ride-sharing vehicles, party buses, etc.), and employees and their family members who are using company vehicles.
Motorcyclists: The biker collects PIP from only one of the following - first from the other vehicle owner, then from the driver of the vehicle, then from their own auto insurance (only if both owner and driver are not insured). If the owner of the motor vehicle involved in the accident is a Medicaid recipient with $50,000 of PIP coverage, the motorcyclist will be bound by that coverage level, and would not have access to the PIP coverage available under their own motor vehicle policy, as the law is presently drafted. See MCL 500.3114(5) for more details.
Vehicles for Hire: passengers of certain vehicles, including government-sponsored transportation vehicles, school buses, charter buses, taxi cabs, and transportation network company vehicles, are covered by their own auto insurance PIP selection. However, travelers in vehicles operating in the business of transporting passengers, such as ambulances, limousines, party buses, non-emergency medical transportation vehicles, and airport shuttles, only receive the PIP coverage limit selected by the owner or business’s auto policy. Drivers/employees of all vehicles being operated in the business of transporting passengers also receive their benefits from the insurer of the vehicle itself. See MCL 500.3114(2) for more details.
Employer Furnished Vehicles: The insurer of the employer-furnished vehicle (company car) has the highest order of priority for payment of the no-fault benefits at issue. This means the employee will only receive the benefits selected by the employer, not their own personal auto limits (even if the employee has unlimited PIP on their personal auto policy). See MCL 500.3114(3) for more details.
MI Residents Injured While Occupying a Motor Vehicle Outside the State: If a resident is not properly insured according to the new insurance laws, they can be left with no medical coverage. For example, Jon and Jane Smith have lived together for 30 years, have children, but are not legally married. Jon is the Named Insured, and Jane is only listed as a driver on the policy. They travel to Toledo, Ohio. While driving in their car in Toledo, Jon, Jane and their children, are all seriously injured. Under the current laws, Jane is entitled to receive PIP benefits under MCL 500.3111, because she is a MI resident, listed as a driver, and is occupying a motor vehicle whose owner (Jon) was insured under a MI no-fault insurance policy.
o Unfortunately, under the new version of MCL 500.3114(4), she no longer turns to Jon’s insurer for payment of her PIP benefits. She turns to the Michigan Assigned Claims Plan (MACP), as she is not a legal relative. However, the statutory provisions governing the operation of MACP make it clear that it does not provide coverage for accidents occurring outside the State of Michigan. Jane is entitled to benefits, but she has nowhere to go! She is left with no medical coverage, as she was outside of Michigan.
Michiganwill no longer be a "no-fault" state. This provision of the statute changes Michigan to a “pure” comparative negligence standard, as opposed to a “modified” comparative negligence standard regarding economic damages:
-In an accident, driver one will be able to sue driver two for allowable medical expenses, work loss, and survivor’s loss, including in excess of the applicable PIP coverage limit even if driver one was more than 51% at fault in the accident. Liability rate increases are already planned for July, in anticipation of the higher number of lawsuits and higher bodily injury liability coverage rates that will occur due to the change in negligence. See (3135(3)(C)) for more details.
-Currently, 12 other states recognize the Pure Comparative Fault Rule (AZ, CA, FL, KY, LA, MS, MO, NM, NY, RI, WA). Six of them are currently in the Top 10 states with the highest auto insurance rates (LA, RI, FL, KY, CA, NY). Below is at least one source: https://patch.com/us/across-america/here-are-states-priciest-car-insurance
The Allen Harmon Insurance Agency is dedicated to informing our customers of the upcoming insurance law changes. Currently, not enough is being done to notify Michigan residents of the key changes. It is our hope that the lawmakers will address and correct these issues, so Michigan residents do not suffer with unintended consequences.
Learn more at: Auto Insurance Reform Law