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No-Fault Insurance Reform

Last month, Michigan’s Legislature passed and Governor Whitmer signed a landmark deal that dramatically changes our state’s no-fault auto insurance system. Here are details of what we’ve learned so far on this reform. Please note that this continues to be a work-in-progress and they haven’t even begun to address the question of how this is going to impact your commercial vehicle policy—especially as it relates to your worker’s compensation policy. We’ll provide you with information as it becomes available.

No-Fault Reform (from the Michigan Farm Bureau)
On May 24th, the Legislature passed Senate Bill 1, making major reforms to Michigan’s no-fault automobile insurance system. The House vote was 94-15 and the Senate vote was 34-4. The Governor signed the legislation on May 30th. There will be no changes in effect until July 1, 2020. Following are highlights of what we’ve learned so far:

PIP Benefit Coverage Levels:

  • Unlimited
  • $500,000
  • $250,000
  • $50,000 for individuals on Medicaid only
  • Opt-Out for qualified persons with Medicare or other qualified health coverage

Rate Reduction:

  • 10% for unlimited PIP coverage plans
  • 20% for $500k PIP coverage plans
  • 35% for $250k PIP coverage plans
  • 45% for $50k Medicaid PIP coverage plans
  • 100% for Medicare Opt-Out and qualified health coverage
  • The above reductions only apply to PIP coverage.
  • The above reductions begin July 1, 2020 and are “locked” for 8 years.

-Provides for a mandatory rebate of the MCCA assessment if its assets exceed 120% of its liabilities.
-Codifies the DIFS Anti-Fraud unit per Governor Snyder’s 2018 Executive Order.
-Provides for attorney and lawsuit reforms.
-Provides for greater consumer protections, including a public website to advise the public of important rights and that DIFS can assist individuals who believe their insurer is not paying benefits as required under their insurance policy.
-Provides for much needed reforms to the Michigan Assigned Claims Plan.
-Limited property damage or “mini-tort” increases from $1,000 to $3,000.

Fee Schedule & Attendant Care:
The bill adopts a fee schedule of 190% of Medicare for all medical treatments and allowable expenses with the following exceptions:

  • 220% for high volume Medicaid providers (20-30% indigent population)
  • 230% for Trauma 1 & 2 providers (initial care)
  • 250% for indigent outlier providers (30% indigent population)

The fee schedule will be fully implemented after four years and does not commence until July 1, 2021

Residual Liability Insurance (Bodily Injury or BI Coverage):

  • Increased current minimum coverage from $20k/$40k to $50k/$100k;
  • Sets the default quote level at $250k/$500k;
  • An individual can select a BI level below the default level, as long as they affirmatively assert on a form approved by DIFS that they do so.
  • Effective date is currently stated as July 1, 2019 – the Insurance Industry is working diligently to correct this to July 1, 2020.

18-Month Safe Harbor for Previously Uninsured:

  • Prohibits an insurer from charging a re-entry penalty, limiting coverage available, refusing to provide or continue coverage, or increase premiums for auto insurance for an individual solely because the individual failed to maintain mandatory auto insurance coverage.
  • This provision applies for 18 months after the PIP cap levels are available to consumers.