My friend Andrea, a lawyer from Grand Rapids Michigan, put this information on Facebook regarding Michigan’s new insurance regulations signed into law by Governor Gretchen Whitmer on 05/30/2019. It appears that the win will be for the insurance companies while, once again, the voters get a small benefit that could ultimately cost them their lives. (Click here for PDF file Michigan Insurance Changes What You Need to Know )
*Andrea writes;
Here is some information about Michigan’s new no fault law. It is meant to be informational, not political and was put together by a law firm that handles auto accident cases. However, I thought it was a good summary of what is to come.
Michigan’s New No-Fault Plan:
What It Means For You
On May 24, 2019, Gov. Gretchen Whitmer and the state Legislature reached an agreement to overhaul Michigan’s no-fault auto insurance system. The Governor is expected to sign the legislation (Senate Bill 1).
Here at Christensen Law, our goal is to keep you informed of how changes in the law will affect you. So to put it matter-of-factly, the new no-fault plan is definitely not a “win” for Michigan residents. In fact, it is one of the worst no-fault proposals we have ever seen.
Contrary to how the plan has been pitched to Michigan consumers, it does not guarantee any long-term, significant insurance rate reductions. And, in the end, the plan will adversely affect insurance coverage for all Michigan motorists.
John Cornack, President of the Coalition Protecting Auto No-Fault (CPAN), summed it up perfectly in this statement:
“The Michigan Legislature has just passed a destructive piece of legislation that decimates Michigan’s premier auto no-fault system. It is a sell-out of Michigan citizens and a total gift to the insurance industry. … Rather than passing legislation that would more fairly regulate what insurers can charge, Michigan legislators have attempted to solve the problem by taking away people’s rights when they are injured.
… As a result of this legislation, thousands of Michigan families will have no choice but to put their family at risk with the low levels of insurance coverages that this legislation now authorizes.”
After reviewing the plan in detail, the attorneys at Christensen Law believe the Governor should not sign the legislation. Let us explain why … and how the sweeping changes will affect you and your family.
Pick Your Coverage
For more than 40 years, Michigan motorists have been required by law to purchase unlimited personal injury protection (PIP) benefits. This no-fault coverage mandate has ensured that insurance companies will pay for all accident-related injuries during a person’s lifetime, including medical expenses, rehabilitation costs, attendant-care expenses and wage-loss benefits.
Under the new no-fault insurance plan, Michigan drivers will be able to choose from five types of coverage beginning July 1, 2020:
1. Unlimited coverage (same as the current system).
2. Coverage up to $500,000.
3. Coverage up to $250,000.
4. Coverage up to $50,000 (available to those on Medicaid who cannot opt out entirely).
5. Opt out entirely (for those with other insurance/Medicare covering car accident injuries).
In addition, those who do not select unlimited PIP coverage will no longer have to pay an annual fee to the Michigan Catastrophic Claims Association (MCCA), the entity that reimburses insurers for PIP claims in excess of a set amount. Currently, the annual MCCA fee is $192 per vehicle. This fee increases to $220 per vehicle on July 1, 2019. For insurance policies issued after July 1, 2020 with unlimited PIP coverage, the MCCA will still be responsible for paying catastrophic claim benefits.
What happens if you are injured in a Michigan car accident, have not chosen unlimited PIP coverage but have medical expenses that exceed your coverage limit? If the crash is not your fault, then you must file a lawsuit against the at-fault driver to recover the costs beyond your chosen coverage limit.
Meanwhile, with more motorists likely choosing less comprehensive coverage to reduce their insurance premiums, there is also concern that costs may skyrocket for those who decide to keep their unlimited PIP coverage.
Temporary Rate Reduction
The new no-fault plan will require that insurance companies lower their rates. Here is the discount schedule:
1. Unlimited PIP coverage – an average 10 percent rate reduction in PIP premium only.
2. Coverage up to $500,000 – an average 20 percent rate reduction in PIP premium only.
3. Coverage up to $250,000 – an average 35 percent rate reduction in PIP premium only.
4. Coverage up to $50,000 – an average 45 percent rate reduction in PIP premium only.
5. Opt out entirely – 100 percent rate reduction in PIP premium only.
Keep in mind, however, that these savings only apply to the PIP portion of your auto insurance premium, which is roughly 35 percent of your total bill. Given this, it is anticipated the new plan will not make a significant financial difference for Detroit drivers who already cannot afford automobile insurance. Reducing a $5,000 – $7,000 premium by a couple hundred dollars is not expected to help those drivers.
The above rate reductions are required to stay in place until July 1, 2028. After that, insurance companies will not have to offer the discounted rates, although they will still have to get their rates approved by the Michigan Department of Insurance and Financial Services (DIFS) before offering them to consumers. The cost savings they realize at drivers’ expense will stay in place permanently.
Another shortcoming of the new plan is that it has a “safety net” for insurance companies. If an insurer finds itself in financial trouble, it can take its case to the DIFS, which may permit the insurance company to change its rates. Another downfall is that the plan does not provide for any transparency when it comes to insurance company profit margins.
Financial Concerns
A Senate Fiscal Agency analysis of the new no-fault plan was completed after the Legislature and the Governor reached their agreement on May 24, 2019. The analysis prepared by the Agency on May 28, 2019 presents several concerns about rising Medicaid costs.
The analysis states:
“Enactment of the proposed bill would lead to a gradual increase in Medicaid costs that would depend on the availability of and public interest in unlimited PIP coverage. … Some of the costs faced by those in accidents who did not have unlimited coverage would shift to other insurers, including their current primary insurer (whether that is commercial insurance, Medicare, or Medicaid). In many severe injury cases (in which the accident victim became dependent on long-term care) costs would shift to Medicaid as most people do not have long term care coverage beyond the limited coverage provided to Medicare recipients. … Based on the available data and the assumptions outlined below, the Senate Fiscal Agency (SFA) projects costs similar to those projected in the previous analysis of Senate Bill 1: that enactment of the legislation would cause Medicaid costs to increase gradually over a ten-year period by $70.0 million General Fund/General Purpose (GF/GP). In other words, Medicaid costs ten years after enactment would be $70.0 million GF/GP greater, which equates to about a 1.3% increase over a ten-year period, or a 0.13% per year increase in the State share of Medicaid spending. … While Medicare-eligible individuals who completely opted out would be fully covered for hospital, pharmaceutical, and physician services, they would have limited coverage for long-term care (up to 100 days under certain circumstances) and attendant care, so those costs would be shifted to Medicaid for those Medicare recipients who were injured in accidents, required long term or attendant care, and spent down to Medicaid eligibility. Similarly, Medicaid recipients who opted for the $50,000 coverage level and required extensive care after automobile accidents would see their medical costs shifted from automobile insurance and the MCCA to Medicaid. Over time, the largest component of this cost shift would be nursing home and attendant care.”
It is also believed that many Michigan drivers, when presented with PIP coverage options, will avoid choosing unlimited PIP coverage because of the cost. This means there will be an increasing number of auto accident victims without sufficient insurance to pay their medical bills. Unfortunately, this also means that catastrophically injured individuals who chose limited coverage (and not unlimited PIP) will likely be unable to afford the lifetime care they need. In turn, their medical bills will mount, thereby creating dire financial consequences and possibly forcing them into bankruptcy.
Non-Driving Rate Factors
For many years, auto insurance companies have been inappropriately using non-driving factors to set their rates. These factors include marital status, gender, ZIP code, credit score, occupation, education level and home ownership. Under the new no-fault plan, these non-driving factors can no longer be considered when setting rates.
At first, this provision may appear to be a great way to roll back the costly insurance premiums that Michigan drivers pay, especially in the Detroit area. Looks, however, can be deceiving. The new plan unfortunately still says that insurance companies can: (1) determine rates by “territory,” which may be an area as small as a census tract (i.e., roughly the size of a neighborhood) and (2) consider credit history or “insurance scores” (which are partly based on credit information) when setting rates.
Medical Provider Fee Schedule
The new no-fault plan implements a fee schedule for medical providers that is based on the Medicare fee schedule. It has been asserted this fee schedule will keep hospitals and other health-care providers from charging excessive prices just because an insurance company is paying the bill
However, much of Michigan’s best in the nation brain injury rehabilitation industry will be forced to reduce charges by over 50%, which will be unsustainable for most programs and lead to their closure.
Beginning July 1, 2021 (one year after PIP coverage choices go into effect), providers must keep their charges at certain levels, depending on the type of facility. The new fee schedule will be phased-in over a two-year period and will permit providers to charge 200 to 240 percent of the Medicare reimbursement rate.
The new plan also requires that any savings realized by insurance companies because of the fee schedule must be passed on to consumers in the form of lower rates. In addition, insurers must document the savings in their filings with the DIFS.
Other Important Provisions
In addition to the above changes, the new no-fault plan:
1. Provides that insurance companies do not have to pay for more than 56 hours per week of in-home, family/friend -provided attendant care.
2. Increases the maximum recovery limit of Michigan’s mini-tort law from $1,000 to $3,000.
3. Tolls the “one-year-back rule” in MCL 500.3145. Historically, when a person files a lawsuit to recover unpaid or overdue insurance benefits, payment cannot be recovered “for any portion of the loss incurred more than 1 year before the date on which the action was commenced.” Under the new no-fault plan, this limitation will be “tolled from the date the person claiming the benefits makes a specific claim for the benefits until the date the insurer formally denies the claim.” The new plan, however, also provides that tolling “does not apply if the person claiming the benefits fails to pursue the claim with reasonable diligence.”
4. Establishes higher limits for liability insurance, which is purchased in the event you cause an accident and injure someone. Historically, Michigan motorists have been required to carry a minimum of $20,000/$40,000. Under the new plan, the minimum will increase to $50,000/$100,000.
5. Creates an “Anti-Fraud Unit” to investigate criminal and fraudulent activities in the insurance industry.
6. Implements new rules for independent medical examinations (IMEs), which are conducted by doctors hired by insurance companies.
7. Establishes the threshold under which a person can sue for their pain and suffering due to a car accident (i.e., non-economic damages).
While the many changes that lie ahead under Michigan’s new no-fault plan are all significant, those discussed above are the most important. As you try to make sense of all the changes, do not hesitate to contact Christensen Law with any questions. Our experienced Michigan personal injury attorneys can help you understand the new law and its impact on you and your family.
*Used with her permission
Brace for impact, Michiganders. This one may bite us.
Cheers,
Allen Ray