Navigating Michigan No-Fault Reform

It isn't much of a secret that Michigan auto insurance can be a touchy subject to some.  For most Michiganders, driving is a necessity to commute to work, running errands around town, running your children to school, and for the long awaited family vacation.  That is why it is so important to make sure our drivers and passengers are properly protected.  As Michigan's no-fault reform law (Michigan Senate Bill 1 and House Bill 4397) begins to take effect, Top O' Michigan continues to study the changes that will be required for insurance companies to implement in the coming year.

News will continue to develop about this new legislation.  For now, here's what you need to know:

Changes to Order of Priority (Currently in effect)

One major change is the order of priority and what makes this challenging is the effective date of June 11, 2019. Below are the changes made to Order of Priority:

  • Private Passenger Automobiles - Drivers or occupants of a private passenger automobile and pedestrians are no longer provided PIP unless they are a named insured, the named insured's spouse; or a resident relative of either.
    • PIP coverage will no longer extend to:
      • Relatives who do not reside in the household of the named insured unless they are away at school. 
      • Non-relatives who reside in the household, even if they are listed drivers. 
    • Instead, if they are a Michigan resident, they will be afforded PIP benefits through the Michigan Assigned Claims Plan (MACP) and be limited to $250,000.
  • Commercial Automobiles - The changes described for Private Passenger Autos above also apply to drivers or occupants of a commercial vehicle.  However, the order of priority for PIP claims did not change if you're one of the following:
    • an employee, their spouse, or a resident relative of either, occupying an employer's vehicle; or
    • occupants of some motor vehicles in the business of transporting passengers. They will generally pursue coverage through the insurer of the transportation company's vehicle unless specifically excluded.
  • Motorcycles - Motorcyclists will pursue coverage in the same order of priority as under the previous law. This means that if the motor vehicle involved has a limited no-fault policy, the motorcyclist will receive limited benefits, regardless of the motorcyclist’s own PIP coverage.  If the motor vehicle involved has opted out of PIP, the motorcyclist goes to the next order of priority.

Drivers will be able to select their level of No-Fault Personal Injury Protection (PIP) Coverage

If you are injured in an auto accident - regardless of fault - your own no-fault PIP coverage is what provides the medical insurance benefits.  In Michigan, every vehicle owner is required to purchase PIP coverage.  This provides unlimited lifetime coverage for medical treatment and rehabilitation expenses, lost wages for 3 years and up to $20 daily for personal assistance.  

Under the new law, you will be able to choose between $50,000 (for those enrolled in Medicaid); $250,000; $500,000; or unlimited PIP coverage.  Drivers with Medicare or another qualified health insurance plan may choose to opt-out of PIP Coverage.

Drivers may see auto insurance premiums go down due to PIP changes

The new legislation was primarily about reducing insurance costs. For auto policies effective after July 1, 2020, the new law will provide the following premium savings off your PIP premium:

  • 100% savings for drivers who opt-out of PIP coverage altogether
  • 45% savings for drivers who choose $50,000 in PIP coverage
  • 35% savings for drivers who choose $250,000 in PIP coverage
  • 20% savings for drivers who choose $500,000 in PIP coverage
  • 10% savings for drivers who choose unlimited PIP coverage

Additional changes you should be aware of include:

Medical Provider Fee Schedule

This legislation will establish a “no-fault fee schedule.” A fee schedule normalizes the rates charged by doctors, hospitals, clinics, rehabilitation facilities, etc. – in this case for medical care associated with auto accidents. Prior to this legislation, this was used with other types of insurance including Workers Compensation, Medicare/Medicaid, Blue Cross Blue Shield, etc

Non-Driving Factors Used in Determining Rates

Under the new law, insurance companies will no longer be allowed to consider certain “non-driving factors” when setting insurance rates, which may lead to lower rates for some drivers. Some of these factors include home ownership, educational level, and occupation.

Mini-Tort

Prior to the new Michigan auto insurance reform, the maximum recovery limit was $1,000. Under the new law, drivers may sue another driver who is responsible for an accident for up to $3,000 in damage to their vehicle.

Michigan Catastrophic Claims Association ( MCCA) Fees

Drivers who elect less than unlimited PIP coverage will pay lower MCCA fees under the new law. The MCCA is a nonprofit association established in 1978 by the Michigan Legislature, which reimburses insurance companies  or any auto-related medical claim costs over a threshold of $580,000. The MCCA fee is an annual per-insured-vehicle assessment used to fund the MCCA.

Increased Minimum Liability Limits and Suing for Excess Medical Benefits

The new legislation allows drivers to sue for excess medical costs and economic expenses beyond the no-fault PIP coverage they have chosen. Because of this change, drivers will also have new requirements when it comes to bodily injury liability insurance, which protects you in case you cause an accident and injure or kill someone.

Currently, drivers are required to have mandatory minimum limits of $20,000 for bodily injury or death per person, or $40,000 per accident. Under the new law:

  •    These mandatory minimum limits will increase to $50,000 per person and
    $100,000 per accident
  • New “default” liability limits of $250,000 per person and $500,000 per accident
  • Drivers may select more or less than the default limits, but never less than the
    mandatory minimum limits of $50,000 per person and $100,000 per accident

Our solution providers are available to help answer questions and will keep you up to date.  You can easily find this information on our website, blogs, social media, personal contact and open forums planned in the near future. 

Helpful Links for Navigating Michigan No-Fault Reform

We understand that insurance can be confusing and time consuming.  This is why our solution providers are digging in to the details to keep you up-to-date. If you're interested in learning more on the Michigan No-Fault Reform, check out the links below:

 

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