On Friday, May 24, 2019, the Michigan legislature passed a no-fault reform bill on the promise that it would save drivers money on their auto insurance premiums. But will the new law really save you money, or will your money go to lawsuits and Medicaid reimbursement?
Michigan’s New No-Fault Reform Law
For years, Michigan has offered its drivers the best auto insurance coverage in the nation. The Michigan No-Fault Act promised unlimited personal injury protections, an assigned claims plan to pay for anyone who doesn’t have other coverage, and the Catastrophic Claims Association to cover those truly life-changing injuries.
Then, on Friday, May 24, 2019, Democratic Governor Gretchen Whitmer signed Senate Bill 1, a 120-page bill that overhauls Michigan’s auto insurance law in a number of ways:
- Allowing drivers to choose their level of personal injury protection (PIP) benefits, or even opt out in certain circumstances.
- Creating a right to sue the at-fault driver for medical benefits beyond their PIP coverage.
- Guaranteeing reduced prices on the PIP portion of auto insurance premiums for 8 years.
- Increasing mandatory minimum liability insurance coverage.
- Creating a fee schedule limiting how much medical providers can charge for auto accident treatments.
- Preventing insurance companies from using non-driving factors (including zip codes or credit scores) in setting premium rates.
- Limiting attendant care fees paid to family members of accident victims.
- Creating an anti-fraud unit to investigate insurance fraud.
- Allowing the Insurance Commissioner to intervene when an insurer fails to make payments.
- Other changes that will be discussed in future blog posts.
Will No-Fault Reform Save Drivers Money on Their Auto Insurance Premiums?
Days after the Michigan no-fault reform became law, auto insurance providers were already warning that drivers may not end up saving that much money overall. That’s because PIP is only one part of Michigan’s mandatory insurance coverage. The new law does promise 8 years of savings for each new tier of PIP coverage:
- 45% for drivers with Medicaid with $50,000 in PIP coverage
- 35% for $250,000 in PIP coverage
- 25% for $500,000 in PIP coverage
- 10% for those who elect to continue “no limit” PIP coverage
However, in general, PIP only amounts to 35 – 44% of a driver’s insurance premiums. And the Michigan no-fault reform law also increases other portions of mandatory coverage. Mini-tort, which is designed to cover damage to a person’s vehicle and personal property, increases from $1000 to $3000. The law also increases mandatory minimums for liability coverage that pays for bodily injury to others. Currently, the minimums are $20,000 per person and $40,000 per accident. The new law would set a “default” bodily injury limit of $250,000 and $500,000. Drivers can choose to lower those limits, and therefore their premiums. But the new minimums will now be $50,000 and $100,000 respectively.
Medicaid, Medicare, or ERISA Health Insurance Reimbursement Could Block Auto Accident Victims’ Relief
The reason for those higher minimums is to make up for the lower PIP caps. That means Third Party lawsuits against at-fault drivers will be crucial to pay for catastrophic injuries and expensive medical care. However, this could result in victims receiving far less than they would have under the current no-fault reform law. This is because federal law controls Medicaid, Medicare, and employer-provided ERISA health insurance policies. These laws trump any state law, including the Michigan No-Fault Act.
Under federal law, any time Medicaid, Medicare, or ERISA policies pay medical expenses that could be covered by some other insurance, those amounts must be repaid when the insurance benefits are received. But where an at-fault driver’s liability coverage is limited, the federal programs could easily claim all the benefits the victim receives, including damage awards for pain, suffering, disability, disfigurement, and many other damages included in an auto accident lawsuit.
Whenever a law changes as much as the Michigan No-Fault Act just did, it takes time for lawyers, judges, and lawmakers to figure out exactly how it will be applied. Much remains to be seen of how this new no-fault reform will affect Michigan drivers who are the victims of serious auto accidents, and whether Michigan drivers will end up saving much money at all.
The Macomb Law Group, is a personal injury law firm in Clinton Township, MI. Our attorneys can help you receive the benefits you need from auto insurance companies. If you or a loved one have been seriously injured, contact Macomb Law Group and get our team working for you.