How does the new No-Fault Auto Reform Law affect me? My family? My auto policy?
First, fewer people will get Personal Injury Protection (PIP) from your auto policy.
Prior to No-Fault Auto Reform, there was a very broad Order of Priority – if a Michigan resident didn’t have their own auto insurance and was injured in/by your auto they could collect from someone in their household, or come to your auto policy for their unlimited PIP benefits because the coverage followed the auto and the driver. If for some reason you didn’t have an active auto policy the injured person could get unlimited PIP benefits from the State of Michigan. Prior to reform – coverage was coming from somewhere and it unlimited for as long as you needed it.
Since No-Fault Reform, PIP coverage is now limited to the named insured(s) on the auto policy, a spouse (if in the household) and resident relatives. Your policy won’t provide PIP to ‘any’ injured person anymore. If a Michigan resident without an auto policy is injured in/by your auto, they’ll need to rely on the state provided $250,000 in PIP coverage and their own personal health insurance.
Watch out – named insureds are documented on the auto policy while resident relatives may not be. The status of “resident relative” is determined at the time of the accident by the insurance company, and the insurance company’s definition may not align with yours. With coverage no longer following the auto and the driver, it’s more important than ever to know you’ve got the resident relatives properly identified in your world!
Second, you’ll have options for Personal Injury Protection (PIP) coverage that you didn’t have before.
This is the change that’s getting all the press because it’s the change that is designed to lower your auto insurance costs. For most of us, the savings won’t justify giving up an unlimited benefit.
In reality, PIP is a real gem in the insurance world, but it’s not well understood since it doesn’t get talked about. Why? Because PIP has been mandatory with no options available for limits other than “unlimited”. What’s there to talk about, right? Sometimes PIP is often referred to as the “medical part” of your auto policy and is considered to be “like Blue Cross Blue Shield for auto accidents”. However, PIP provides so many more benefits than a personal health plan does. PIP is tailored to the real-life expenses people incur when they’re injured in an auto accident. Before you sign away your unlimited PIP, take some time to understand what you’re giving up.
Watch out – the more you rely on your personal health plan to cover your costs when you are injured in an auto accident, the more out of pocket expenses you will have.
- Contacting your insurance agent to make sure you have properly listed named insureds, spouses and to discuss any and all household members that are in your residence – whether it be full-time or on occasion.
- Keeping unlimited PIP – it’s still an incredible value and the best way to make sure you and your family get the medical care you need after an auto accident without disrupting your financial security.
How much money am I going to save?
That depends on the decision you make concerning your Personal Injury Protection (PIP)
The No-Fault Reform “PIP Premium Reduction” table below shows reductions in cost for PIP coverage ONLY – not your overall policy costs. This is something to understand. These reductions are averaged out across the state for each insurance company. You aren’t guaranteed the exact PIP premium reductions in the below table. There are several other portions of the policy that have premium associated with them – that may increase in price.
The reduction in what you pay for PIP will be calculated using two line items from your auto policy declarations page: Personal Injury Protection and MCCA Fees.
The Michigan Catastrophic Claims Association – MCCA Fee:
You’ll save approximately $120 per auto if you take our recommendation and keep unlimited PIP. You may save on that fee altogether (approx. $220 per vehicle) if you select PIP options 2-6. What IS the Michigan Catastrophic Claims Association fee? If someone is injured badly enough in an auto accident that their medical costs exceed $580,000, the State of Michigan takes over paying the expenses from the insurance company. To cover these expenses, the State of Michigan forecasts the costs of claims and chooses how much to charge the insurance companies. Currently, that fee is around $220 per auto/per year. The insurance companies pass these charges onto us. With No-Fault reform, the MCCA fee is changing. For the period starting July 2, 2020, through June 30, 2021, the MCCA fee will be $100 per auto if you keep unlimited PIP, and zero if you pick one of the new PIP options. However, as the State gets more information in on loss severity – we plan to see the MCCA increase on July 1, 2021!
The Usual Factors for Calculating your Insurance Costs Still Appy:
It’s possible your changes in insurance costs won’t match the above PIP table. The insurance companies use multiple pieces of information to calculate the cost for each line item on your auto policy (with the exception of the MCCA fee that is calculated by the State of Michigan). In a given year, sometimes an auto policy won’t change much in terms of how much it costs, other times big changes occur. Some factors the insurance companies look at are:
- Where you live
- Past claims experience
- Type of auto and age of drivers
- Insurance score (a proprietary combination of payment history, available credit, outstanding debt, etc.)
Ideally, if your insurance costs go up by an “above average” threshold, your insurance agent is contacting you for a good discussion on your options.
NOW, ask yourself the most important question: “What do I risk by giving up unlimited PIP?” If you can’t answer this question, you’re rolling dice with the medical care you’ll receive after an auto accident and your financial future.
How long do I have to wait before I start paying lower MCCA fees?
If your auto policy renews on or after July 2, 2020, you’ll be charged the new MCCA fee, which is noticeably lower than it is today.
If your auto policy renews prior to July 2nd, you’ll be charged the current MCCA fees… but don’t worry! You don’t have to wait a full year to start seeing savings.
Insurance companies have created a ‘short-term/pro-rated’ change option available to all policyholders effective July 2, 2020. This will allow you to gets the new MCCA rate without waiting until your next renewal. However, there will be additional paperwork for you to fill out (that would have come prior to your next auto policy renewal) prior to approval. It will require important decisions to be made in regard to your Personal Injury Protection (PIP) and your liability (lawsuit) coverage limits. This paperwork will require signatures. After you sign the mandatory forms, your insurance agent will send those to your insurance company. This will be required prior to your MCCA fee reduction request to be processed. All these new changes will make the lives of Michigan Insurance agents very busy in 2020! We ask for your patience – as this is a new process for everyone involved! If you choose to wait until your normal renewal, you won’t start paying the lower MCCA fees until your renewal paperwork is completed and your policy renews.
**The MCCA Fees are explained more in-depth in Question 2: “How much money am I going to save?”
Can I choose a lower Personal Injury Protection (PIP) limit, and let my health insurance cover the rest?
You can. However, we don’t recommend it, and here’s why:
Personal health policies don’t cover as many types of medical expenses as PIP does. If someone were seriously injured in an auto accident – personal health plans also have high deductibles and limitations on certain coverages. This means more out-of-pocket expenses for you. PIP covers medical and related expenses that a personal health plan won’t cover such as:
- Attendant care at home or in a facility
- Modifications to your home and auto to help you better live with disabilities from the accident.
If you have another medical plan such as Blue Cross/Blue Shield, the best scenario is to ask your agent to quote “Coordinated Medical”. This is where your personal health plan agrees to cover medical costs from auto accident injuries and is willing to be “primary” and pay claims “first”. With your personal health plan being first in line to pay expenses, your auto policy’s PIP coverage will pick up co-pays, deductibles, out-of-network fees, etc.- as well as procedures and medications that your personal health plan may not cover. With proof of coordination, you will see a premium savings.
The above option “makes your PIP last longer.” For example, the less of your PIP limit you use up on procedures, medications, etc. the more likely you’ll have more of that limit leftover for things such as attendant care, modifications to your home and auto, etc. that personal health plans won’t cover (as stated above).
In the event, your personal health plan requires PIP to “go first/be primary” (like Medicare does), your chosen PIP limit has to be used up before the personal health plan starts paying bills. This is the worst scenario because it will most likely require plenty of out-of-pocket payments on your part. (More info on that in our PIP vs. Medicare blog)
In short, we recommend keeping Unlimited PIP coverage, as this option significantly reduces the risk that you’ll have out of pocket expenses to handle on your own. In the event of a serious accident, your personal health plan could leave you with hundreds of thousands to pay that would have been covered, had you kept your Unlimited PIP.
How can I prepare for these changes at my renewal?
It’s easy to find out what you’ll save in insurance costs by giving up unlimited Personal Injury Protection (PIP); it’s harder to understand what coverage you’re giving up to generate these savings and the potential impact on your financial future. Below are a few questions you need to answer to make a good decision on your PIP coverage and your liability limits.
What’s it like to not have unlimited PIP? And can you really afford to live without it?
Most of us Michiganders have never lived through a situation where we’ve been seriously injured in an auto accident and our personal health plan was relied upon to cover the expenses. Since most of us have had unlimited PIP, there was no reason for our personal health plans to deal with this! To make a good decision here, you’ll need to understand how your personal health plan works in terms of how it pays for expenses you incur from auto accident injuries. Some people’s personal health plan won’t cover auto accident injuries. Other personal health plans have big deductibles, co-pays, out of network costs, etc. You need to know about all of this if you plan to use your personal health plan to cover expenses from auto accident injuries. Even if a personal health plan covers injuries from an auto accident, it won’t cover some very big ticket expenses that PIP covers – you need to know what these expenses are. (See Question 4 to learn more about these items) In a serious auto accident, the difference in expenses you could personally be responsible for could be hundreds of thousands of dollars higher if you rely on your personal health policy to pay the bills instead of unlimited PIP.
Who do I expect my auto policy to provide PIP coverage to?
If someone is depending on your auto policy’s PIP to cover the expenses they incur in an auto accident, make sure they’re either a named insured on your policy, or a resident relative of a named insured on your policy. (Question 1 explains this in detail) Otherwise, your policy won’t provide PIP coverage for them. For example, if you have a fiancé with no auto policy move in with you, the fiancé won’t get PIP from your auto policy until you’re married. They need their own auto policy to pull PIP from in this case. It doesn’t matter how much in love you two are prior to the wedding! Remember: Named insureds are listed on your policy and resident relatives may not be. Make sure your resident relatives truly fit the insurance company’s definition – there would discrepancies in each other’s interpretation.
Why is the state changing minimum liability limits and enforcing a “recommended” limit?
Liability coverage is your “lawsuit protection” should an auto accident occur. Prior to No-Fault Reform, there was no need to sue someone for medical costs. The auto policy of the vehicle owner, another household member’s policy or the State of Michigan would cover the costs. After No-Fault Reform there will be many more people not covered by Unlimited PIP, and they could find themselves in a tough spot financially and need to sue you to get their medical expenses paid. The State of Michigan has made it easier to sue for these costs. You need to re-visit your liability limits to better protect yourself from lawsuits from people who chose to give up their Unlimited PIP coverage. An umbrella policy could be the best way to increase your liability coverage. We recommend getting the highest liability limits you can get on your auto policy and purchasing at least a $1,000,000 umbrella. (You can learn more about this by reading our blog on the importance of having an Umbrella policy)
Start paying attention to the MAIL coming from your INSURANCE company and your AGENT
Some people throw away mail from the insurance company – especially people who pay annually. Some skim over the emails from their Insurance Agents. Stop doing this. If you get mail prior to your renewal, you figure its junk mail or someone trying to sell you something. Not always! The insurance company will be sending you a ‘Pre-Renewal Packet’ which will contain information for you to complete that document your decisions on PIP and Liability. If you aren’t 100% sure you understand what’s on these forms, reach out to your insurance agent for a chat. (We have a blog post regarding your No-Fault Auto Renewal Paperwork that goes more in-depth about these options.) An uninformed decision on how these forms work could cost you your financial security should you or your family members be seriously injured in an auto accident!
I was hit by a uninsured/underinsured driver and I no longer have unlimited PIP.... Now what?
Uninsured and Underinsured Motorists coverage covers YOU when you’re injured in an auto accident by someone who has no insurance or has state minimum liability limits that aren’t high enough to cover your medical expenses.
Prior to No-Fault Reform, so many of us had access to Unlimited Personal Injury Protection (PIP) benefits, so the need to sue someone else for expenses from an auto accident was mostly focused on wage loss if someone was unable to work or do their job after the accident. If you needed to sue someone, the defending party’s auto policy’s liability coverage would be triggered and provide them with legal defense and awarded damages up to the liability limit on their auto policy.
After No-Fault Reform, we get to choose our medical limit. We may not all choose to keep Unlimited PIP. By choosing to give up Unlimited PIP coverage, you’ve increased the odds that you’ll have medical expenses from an auto accident that aren’t covered by your own auto policy’s PIP or your personal health policy. In this situation, you would find an attorney and sue the owner(s) of the vehicle(s) involved in the accident. If the other driver involved in the accident has no insurance *or* insurance with low liability limits, *your* Uninsured/Underinsured Motorists coverage could help pay *you* on their behalf.
If you choose to select any option besides Unlimited PIP, make sure you purchase all the Uninsured/Underinsured Motorists coverage your insurance company has to offer. Although this coverage is technically “optional” on the auto policy, it’s a very important coverage to purchase…as we could be relying on *others* policy limits to pay our expenses!
Does Personal Injury Protection (PIP) cover the same things as a typical health insurance plan?
No. PIP pays for so much more than “medical” costs!
PIP is part disability policy, part medical policy, and part long term care policy all rolled together. PIP doesn’t have co-pays, annual deductibles, out of network charges, etc. PIP even pays for modifications needed for your home and auto to allow you to function with the limitations a bad accident can leave you with. If you had PIP coverage on the day you were injured in an auto accident, your PIP coverage continues until you are no longer incurring medical-related expenses from the accident – even if your auto policy cancels the next day!
Can I opt out of Personal Injury Protection (PIP) coverage and if so, what do I need to know?
Unless you are on Medicare with parts A&B or can provide proof that you have a ‘Qualified Health Plan’ (QHP) you cannot fully opt-out of PIP. You will need documentation from your health insurance provider *prior to being approved* that shows:
- The health carrier’s company name and policy number
- A statement that the plan specifically covers medical costs from auto accident injuries
- A statement that shows the per-person deductible is $6,000 or lower
- A statement showing all individuals who are covered on the health insurance policy
If opting out, to assure proper protection, you will want to find out how your co-pays work, all annual deductibles, out of network charges and other limitations PRIOR to having an auto accident. To help offset any costs that *may* occur, we advise you to consider creating a “rainy day fund” to pay for the out-of-pocket expenses you may be responsible for. As stated in previous questions, Unlimited PIP would have covered all and any necessary expenses for the life of your injuries and needed care.
Are fewer people covered by my Auto Policy now?
Prior to No-Fault Auto Reform your PIP coverage “followed the car and driver”. Not anymore.
For someone to receive PIP benefits from your auto policy (on which you appear as a “named insured”), they need to be your spouse (who resides in your household) or your “resident relative” on the day of the accident. Resident relatives may not always appear on your auto policy or on your insurance application. We ask that you speak to one of our agents to discuss who is in your home (part-time or full-time) to assure proper coverage will extend at the time of the accident. Making assumptions could cost you and your family your financial security!
Why are the State Minimums for Auto Liability going up?
The decision was made due to the new medical options…when we all had mandatory Unlimited PIP coverage; our own policies paid our medical expenses from auto accidents.
People who choose to give up their Unlimited PIP (Personal Injury Protection) coverage will be relying on their own health insurance plans that *could* leave them with uncovered medical expenses. This may force more people to hire an attorney and sue the at-fault parties (assuming there are any to sue). The legal system can’t get your medical expenses paid unless the people being sued can defend themselves in court and pay awarded damages. Your auto policy’s liability coverage provides legal defense and pays awarded damages up to the limit of liability you purchased. The odds of being sued from an auto accident are going up, and the state wants us to be prepared. Our agency recommends purchasing the highest liability limits your insurance company has to offer – along with an added layer of lawsuit protection that comes from an Umbrella policy!
What do I do with this "Auto Policy Renewal Packet" I just got in the mail?
The State of Michigan has created new requirements for your insurance company and insurance agents to follow. They have approved 2 documents that need to be filled out, signed, and returned prior to your auto renewal.
The first is a Bodily Injury limit form that you *may* receive should your current limits of liability not be at the newly recommended limit of $250,000 per person/$500,000 per accident/$10,000 property damage or higher.
The second set of paperwork is a multi-page document that you’ll need to complete to make your PIP (Personal Injury Protection) selection. If you choose to exclude or opt-out of PIP coverage, you will also need to provide proof of your Qualified Health Plan *prior* to your change being processed. There are certain requirements of what qualifies you for these options – see our questions above: ‘What do I need to opt-out’.
*If you don’t complete the forms and return them in time, the insurance company will (by default) give you Unlimited PIP coverage and Liability limits of $250,000 per person, $500,000 per accident and $10,000 in property damage.*
You say I have “Unlimited Medical” – but I am hearing “my coverage is getting cut” – what does this mean?
Coverage is not getting “cut”, a claim that would’ve been paid prior to July 2021 would still be paid after July 2021.
What remains unchanged with Michigan’s No-Fault program is that “unlimited” still refers to the total amount of all auto accident medical expenses the insurance company would pay. Expenses for individual auto accident medical claims were never covered for an unlimited amount. Prior to No-Fault Reform, auto accident medical expenses were paid based on the criteria of “reasonable and customary.”
Starting July 1, 2021, auto accident medical expenses will be billed based on the No-Fault Auto Medical Claims Fee Schedule that sets dollar-amount limits on how auto individual medical expenses will be billed by medical services providers and paid by auto insurance companies. For medical services that don’t appear on this new fee schedule, such as expenses incurred from long term facilities that provide 24/7 care (for example, to provide specialized care for people with brain or spinal injuries), these will be paid at about half of what they used to be paid before under the old “reasonable and customary” guidelines.
What about my out-of-pocket expenses I “could” occur now, what do you suggest?
People who elect to keep their unlimited PIP are no more at risk for paying out of pocket for auto accident medical expenses than they were prior to No-Fault Auto Reform. People who picked a limit for their PIP could face a situation where they reach their PIP limit and will need to pay their own bills at that point.
A misconception here pertains to how the fee schedule works. The medical care providers will be limited to charging what the new fee schedule says they can charge. There should not be a scenario where a charge is only partially paid by an auto insurance company and the remainder gets billed to the injured party. Even for the scenario where a given charge can’t be found in the fee schedule, the medical care provider will only be able to charge 55% of what they charged in January 2019.
When they say “purchase more insurance to protect yourself from these uncovered expenses” – how do I do that?
If you didn’t keep unlimited PIP, it would good to have a:
- health insurance policy that pays claims for auto accident medical expenses
- long term care policy to help address the costs of a long-term care facility
- long discussion with your auto insurance agent and consider getting back your unlimited PIP coverage!
What is attendant care and how has it changed?
When an auto accident victim is injured so badly that he or she cannot take care of their most basic needs (or “activities of daily living”), such as eating, using the bathroom, bathing and getting dressed, the victim’s Michigan No-Fault insurance company will pay a nurse or someone in the family to help. That service is called attendant care, sometimes also refer to as nursing services. Examples of attendant care services include: assistance with eating, using the toilet, bathing and grooming, dressing and undressing, meal preparation, transportation, use of medical equipment, supervision and monitoring, being “on call” or “on stand-by” to provide assistance.
Someone seriously injured might require these services 24X7. It’s not uncommon for a family member to provide attendant care and for the insurance company to pay them for doing it – even up to 168 hours a week. Beginning July 2021, auto insurance companies will only be required to pay for up to 56 hours per week for in-home, family-provided attendant care. Beyond the 56 hours a week, outside resources (nurses and home-health aides) will need to be contracted. Having an outside party care for a seriously injured loved one can be quite a change for families who have grown accustomed to keeping attendant care “in the family.”