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Michigan No-Fault Reform: Less Coverage, More Cost

October 30, 2019

For many years, Michigan’s auto no-fault law has been a debated topic among consumers, insurance companies, and healthcare providers. Various competing benefits of interested parties to the no-fault law have led to ongoing pressures for change. The most recent impetus for change was the unlimited nature of personal injury protection (PIP) under the no-fault statute.  Michigan was the only state with unlimited PIP protection for those catastrophically injured in car crashes.  The unlimited coverage is what many believe led to higher auto insurance rates. The most recent reform of the no-fault law takes away the mandatory unlimited PIP protection and allows consumers to choose PIP benefits.  The new legislation was signed on May 30, 2019 after passing both the Senate and House. The new law will mostly take effect in July 2020.  So what is the debate over the new law and what does it mean for consumers? Unfortunately, the takeaway is: less coverage, more cost.

Prior to the amendment, the lifetime PIP benefit was provided to every insured driver in Michigan. This made Michigan the only state requiring lifetime PIP benefits. Under the reformed law, insured drivers will be able to select a level of no-fault coverage.  It will provide consumers a choice of coverage based on how much auto insurance premium the consumer wishes to pay. The unfortunate truth, however, is that consumers are likely to select the cheapest option.  Consumers always think a catastrophic event will happen to someone else, and wrongly assume they are covered by health insurance for injuries they receive and that insurance will cover all of their expenses.  For those who choose to opt out of PIP coverage, health insurance then becomes the only source of medical expense indemnity for that person. Unfortunately, job loss is common after a serious injury and is often accompanied by the loss of employment-related benefits, like health insurance. Also, even if job loss does not happen, private health insurance often has deductibles, co-pays, and does not always reimburse 100%.  When you suffer a catastrophic injury, even being responsible for a small percentage of health care can be financially devastating.

Another change includes raising the minimum limits of liability to $50,000/100,000 from the very low requirement of $20,000/$40,000. Because not all consumers will have unlimited PIP benefits, in a not-at-fault setting, the injured person can now sue the other driver to try to bridge the medical coverage gap, assuming that person has adequate liability limits. But resolving a lawsuit is just not a quick or inexpensive process, and the monetary reimbursement is usually limited to the coverage liability of the at-fault driver (minimum of $50,000). And for the individual who excludes no fault benefits and the accident is their fault? They are out of luck, especially if his or her injuries prevent continuing employment and health insurance through the employer is lost.

The new law also mandates that the charges by health-care providers be paid according to a schedule in relation to Medicare reimbursement. This is worrisome to many that health-care providers will discontinue providing care for those catastrophically injured in car crashes because the reimbursement will be so low.

Finally, the new law also shifts accident costs to Medicare. Seniors may now “opt out” of the no-fault system altogether. However, benefits available under Medicare are more limited than what was previously available under no fault. The new law does not allow Medicaid beneficiaries to opt out, but they can elect to cap their no fault benefits at $50,000. If the beneficiary was at fault for the accident, Medicaid is all that is left after the $50,000 cap is exhausted. And in a not-at-fault setting, now the Medicaid beneficiary’s only remedy is to sue the at-fault driver. That’s hardly a cost savings for the taxpayers or the courts.

Bullet Point Summary of Michigan’s No-Fault Reform

  • PIP becomes a choice for consumers after July 1, 2020, ranging from $50,000 for those covered by Medicaid, to unlimited coverage.
  • Consumers may opt out of PIP medical benefits if they have Medicare coverage.
  • There will be a no-fault medical benefit fee schedule based on Medicare fee schedule.  This schedule will apply to treatment or rehabilitative occupational training after July 1, 2021.
  • Mini tort law maximum raised immediately to $3,000 from $1,000.
  • There are limits on attendant care by family attendants for insurers not to pay for more than 56 hours per week.
  • There are higher liability limits required on auto insurance.
  • Lawsuits for excess medical benefits are permitted.
  • A new definition of serious impairment of bodily functions for suing at-fault drivers

The economic exposure and coverage uncertainty that will result from this reformed legislation’s reduced options and opt outs did not exist before. Unfortunately, the reality is consumers will face less coverage and more cost. At the Buchanan Firm, we are here to help you understand the new reform and what it means if you have been injured in a crash. Whether and to what extent you recover reimbursement for your losses from a car crash depends on correct application of the new reformed no-fault law. It is therefore important for anyone injured in such an accident, and especially those who suffered serious injuries, to immediately seek help from an attorney experienced with Michigan’s no-fault law. Even a relatively minor delay can cause you to lose the right to reimbursements. We will review your claim and guide you in obtaining fair reimbursement for the harms and losses. At Buchanan Firm, we are skilled at investigating car crashes and successfully negotiating fair settlements with insurance companies, and persuasively presenting cases at trial when insurers refuse to do what is right.