Bulletin #3 – Changes to PIP Coverage
On May 30, 2019, Governor Whitmer signed a major overhaul to the Michigan no-fault system, completely transforming Michigan car accident law. The legislation took effect on June 11, 2019 as Public Act 21 of 2019. There a number of huge ramifications for Michigan drivers, their families and anyone who uses a car, truck or motorcycle in this state.
Over the next few months I will be writing about these changes and the effects they will have on all of us. The new law becomes effective in different stages, so the effects will be incremental over time. Please call our office at 1-800 LEE-FREE (1-800-533-3733) with any questions about the new law. Our dedicated staff of Michigan car accident lawyers, paralegals and staff members are here to help.
This bulletin reviews the big changes for PIP coverage beginning on July 1, 2020.
The Previous System
For the last 45 years, under Michigan’s no-fault law, almost all individuals injured in a Michigan motor vehicle crash have been entitled to unlimited medical benefits, with no dollar limitation or cap. Unlimited PIP coverage has given injured individuals lifetimes benefits for “allowable expenses” following a Michigan car wreck, such as payment of hospital and doctor bills, rehabilitation, physical therapy and other medical expenses.
These benefits, also known as PIP (personal injury protection) coverage, are paid by the responsible car insurance company.
However, under the new law, this all changes. Beginning on July 1, 2020, there will be multiple types of no-fault PIP coverage amounts sold to the public. The ability to purchase these different PIP options will depend upon a number of factors, including whether you are a Medicare or Medicaid beneficiary, whether you have health insurance coverage that coverage auto accident crashes, and other factors.
In return for purchasing reduced PIP coverage, the insurance companies are supposed to reduce the price of car insurance in Michigan that pertains to PIP coverage. This reduction is mandated to last 8 years, although it is not fool proof and insurance carriers gave themselves wiggle room in the new law to help get around total premium reductions.
PIP Coverage Options
The PIP coverage options fall into specific categories described below.
- $50,000 PIP Coverage – This amount is available to Medicaid beneficiaries so long as family members who live in the same household are also covered by Medicaid, have other health insurance or are covered by another no-fault PIP policy;
- $250,000 PIP Coverage – Provides up to $250,000 in PIP coverage. This option is available to everyone
- $500,000 PIP Coverage – Provides up to $500,000 in PIP coverage. This is available to everyone
- Unlimited PIP Coverage – Maintains unlimited PIP coverage. This is available to everyone
- No PIP Coverage – Allows for the complete opt-out of PIP coverage for certain individuals (explained in more detail below)
PIP Premium Reductions
Each PIP option corresponds to a mandatory decrease in PIP premiums, guaranteed to last 8 years until July 1, 2028.
- $50,000 PIP Option – 45% average reduction
- $250,000 PIP Option – 35% average reduction
- $500,000 PIP Option – 20% average reduction
- Unlimited PIP Option – 10% average reduction
- No PIP Option – 100% average reduction
The reductions listed above are not a reduction in the total auto insurance premium for policyholders. The reductions apply to the cost of PIP coverage only, and even then, these decreases won’t apply to your specific insurance rates.
Instead, these decreases merely represent the “average reduction per vehicle from the premium rates for PIP insurance coverages that were in effect for the insurer on May 1, 2019.” It’s unclear how the rate reduction will be calculated.
In addition, these reductions don’t apply to the costs for bodily liability coverage or the costs for collision and comprehensive coverage. These rates are expected to increase to make up for the mandatory decreases in PIP coverage car insurance carriers must provide.
No PIP Coverage – Opt-Out Options
The ability to completely opt-out of all PIP coverage is available for certain individuals. There are two groups of people who can opt-out entirely from PIP coverage.
(1) The individual is covered under Medicare Part A & B, and the person’s spouse and any resident relative has Medicare “qualified health coverage”, or has a separate no-fault PIP policy.
(2) The individuals selected the $250,000 PIP option, and the individual, his spouse and all resident relatives have “other health and accident coverage” that covers car accident injuries. If the individual’s spouse or any resident relatives don’t have health and accident coverage, the PIP premium must be reduced to reflect reasonably anticipated reductions in risk.
The Dangers of Opting Out
Under the new law, a significant segment of Michigan drivers will be eligible to opt-out of PIP entirely. However, these individuals need to be mindful of some very important consequences for not purchasing PIP coverage beginning on July 1, 2020.
- Medicare does not cover the payment of auto accident related treatment. So individuals on Medicare Part A & B who choose not to select PIP coverage are going to be in for a rude awakening when they turn to Medicare for payment of their car crash medical treatment. Whatever payments Medicare does decide to make (and this won’t be easy), Medicare will claim a lien for full reimbursement from the beneficiary out of his negligence case.
- If a person selecting the $250,000 coverage decides to opt-out of PIP coverage and then loses his or her health insurance coverage, he or she has only 30 days to notify their no-fault carrier of the lapse to purchase new PIP coverage. If the individuals fails to do so, then gets in a car wreck, that person cannot make a claim for PIP benefits.
Will Auto Insurance Costs Actually Drop?
The caps in PIP coverage are supposed to reduce the cost of auto insurance in Michigan. Whether that actually happens is anybody’s guess. The new Michigan no-fault law was passed with the promise that it would lower premiums substantially. But it’s anybody’s guess if this will actually happen.
Instead, it is anticipated that auto carries will increase the premium for liability coverage and other coverages to make up for the decrease in PIP premiums. And without any legal or regulatory mechanism in the new law to prevent this from happening, the insurance industry will have free reign to do whatever it wants.
But whatever happens, it is absolutely a new era in Michigan car accident injury law. The era of the Michigan no-fault law as we know it is over. With PIP option coverage available next year, consumers will have to be extremely careful in purchasing the right insurance policy that meets their needs and the needs of family members.
Lee Free – Michigan Accident Attorneys
I will write about this more in future articles. However, if you have any questions about the new Michigan No-Fault Law, or have any questions about a Michigan car crash in general, please call our dedicated team of Michigan car wreck injury lawyers today at 1-800-LEE-FREE (1800-533-3733). We are standing by, ready to serve and assist you.