The reformed Michigan no-fault law gives drivers more choices, along with some changes to their auto insurance. While some of these changes will be phased in over time, most will go into effect on July 2, 2020.

What Are My Choices?

Prior to the reform, it was mandatory for drivers to carry unlimited Personal Injury Protection (PIP) benefits, but starting July 2, 2020, drivers will be able to choose from five different coverage options:

• Unlimited PIP coverage
• $500,000 limit
• $250,000 limit
• $50,000 limit; this is the lowest limit available, but only for drivers who are on Medicaid. (Your spouse and other relatives who live with you may be on Medicaid or have other qualified health coverage.)
• Opt-out of PIP coverage entirely; however, you, your spouse and all relatives who live with you must have Medicare or qualified health insurance to be eligible. Documentation is required if you select this option.

Policyholders will be given the option to select their PIP coverage at each renewal. If policyholders do not make a specific selection with their new policy or when their current policy renews after July 2, 2020, their policy will be issued or renewed at the default level of Unlimited coverage. We strongly recommend that you keep your Unlimited PIP benefit.

What are the Risks if I Opt-Out

Here’s why we recommend that you keep your Unlimited PIP medical coverage:

• Unlimited No-Fault PIP medical benefits provides lifetime, life-altering catastrophic coverage for car accident victims such as survivors of traumatic brain injuries and spinal cord injuries.
• Unlimited No-Fault medical benefits ensure that car accident victims will have access to the medical treatment, care, services and specialists that are necessary to their care, recovery or rehabilitation.
• Unlike No-Fault PIP medical benefits, most health insurance plans will deny or place limits on the following medical services that are essential for car accident victims: Long-Term Care; Residential care; Attendant care by an agency; In-home attendant care by a family member; Prescriptions; Hospitalization; Doctors/lab; Rehabilitation services; Case management; Transportation [possibly including medical mileage]; Home purchases/modifications; Prosthesis; Equipment; and, Vehicle purchases/modifications.
• The inadequacy of the caps on No-Fault PIP medical benefits that become available after July 1, 2020, for seriously injured car accident victims, especially those requiring emergency room visits, hospitalizations, and surgeries, cannot be overstated. If a person is injured in a bad crash, the capped insurance levels could be blown through and exhausted in just one weekend at a hospital. Once the No-Fault benefits are gone, the only way for victims to pay for their accident-related medical expenses is through health insurance, suing the at-fault driver (and hoping they are independently wealthy and, thus, able to pay for the hundreds of thousands of dollars – maybe even millions – in medical care that the victim will need), relying on Medicaid or Medicare, spending down the family’s assets to pay out-of-pocket or going without necessary medical care and treatment because there’s no way to pay for it.

After going through many seminars and speaking with other insurance professionals and attorneys, it is our recommendation that clients keep their unlimited PIP medical protection. The savings is not worth the risk.

Will I Save Money?

• Insurance companies must reduce PIP premium rates, and guarantee that they will be reduced for eight years. The rate reduction applies only to personal injury protection premiums, which is one line item of your overall auto insurance costs. For policies effective July 2, 2020 and before July 2, 2028, the new No-Fault law promises the following savings:
  ▪ 45% savings for drivers with the $50,000 PIP cap
  ▪ 35% savings for drivers with the $250,000 PIP cap
  ▪ 20% savings for drivers with the $500,000 PIP cap
  ▪ 10% savings for drivers with the Unlimited benefits
  ▪ 100% savings for drivers who Opt-Out of PIP benefits. Only individuals with Medicare or a qualified health insurance plan are eligible to opt out.
• *Note that the percentage of savings is a company average and is a combination of the PIP premium and Michigan Catastrophic Claims Association (MCCA) per vehicle assessment fee.

What Else Is Changing?

• Non-driving factors can’t be used to set insurance rates. These factors include zip code, credit scores, home ownership, education level, and occupation.
• Minimum liability coverage limits will be increased from $20,000 per person and $40,000 per accident to $50,000/$100,000. The policy will default to $250,000/$500,000 (or $510,000 for commercial auto policies) if you do not make a choice. Drivers must sign a selection form to choose limits lower than $250,000/$500,000.
• Auto insurers are not required to pay for more than 56 hours per week for in-home, family-provided attendant care.
• Anti-Fraud Unit – New law creates an anti-fraud unit to investigate insurers, health providers, drivers, or anyone who is defrauding the system for personal benefit.
• The “Mini-Tort” damage cap will increase from $1,000 to $3,000 for accidents occurring after July 1, 2020.
• The order of determining who will pay for a no-fault claim – called the “order of priority” – has changed in some cases involving:
  • Relatives who do not reside in the household of the named insured unless they are away at school. These relatives (such as your children) would need to have their own insurance policy, even if they are driving a car you own.
  • Non-relatives who reside in the household, even if they are listed drivers. They would need to have their own insurance policy.

Brief history of Michigan’s no-fault law

Michigan’s no-fault auto insurance law has been in place for nearly 50 years. When it originally passed in 1973, the no-fault system was designed to:

• Make the claims process more straightforward for auto accident victims, especially if more than one driver contributed to an accident
• Allow injured persons in auto accidents to collect benefits in a timely manner, so they can recover more quickly – ultimately saving time and money
• Compensate accident victims promptly and equitably for medical costs and lost income
• Limit the number of lawsuits that result from auto accidents, and reduce the burden on the state’s court system. (Before the law was passed, there were about 69,000 auto injury lawsuits per year. Today there are about 29,000.)

Under Michigan’s no-fault law, those who are injured in auto accidents receive unlimited lifetime medical benefits and significant wage loss benefits. Severely injured persons receive these benefits immediately, rather than having to wait for a settlement to be reached in court, like the traditional tort system in other states. And, all drivers are required to carry these coverages: personal injury protection, property protection, and residual liability.

However, there have been challenges with the no-fault system, such as the rising cost of auto insurance for Michigan drivers. The Insurance Alliance of Michigan (IAM) cites that Michigan’s unlimited, lifetime medical benefits, inflation in the cost of health care and auto repair, and lawsuits are driving up the cost of auto insurance. Because of the high cost of auto insurance in Michigan, many drivers opt to not carry insurance at all, which places more stress on the system. It is because of these challenges that lawmakers passed reforms to the Michigan no-fault law in 2019.