Does all this talk of Michigan Auto Reform, MCCA Fees, Personal Injury Protection (PIP), and Resident Relative have you confused?

We’ve got answers to some of the most common questions we are hearing from our clients and want to pass this information along to you!

How does the new No-Fault Auto Reform Law affect me? My family? My auto policy?

First, fewer people will get PIP from your auto policy.

Prior to no-fault reform, if a Michigan resident (who isn’t living with you) didn’t have auto insurance and was injured in/by your auto they could get unlimited PIP benefits from your auto policy because they were injured in/by your auto (the coverage followed the auto and the driver).  And 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.

Since no-fault reform, PIP coverage is limited to the named insureds on the auto policy and their resident relatives (coverage no longer follows the auto and the driver).  Your policy won’t provide PIP to the injured person anymore.  Now, if a Michigan resident (who isn’t living with you) 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 personal health insurance.

Watch out – named insureds are documented on the auto policy while resident relatives are not.  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.

We recommend

  • Contacting your insurance agent to make sure your resident relatives would be considered as resident relatives to the insurance company.
  • Keeping unlimited PIP because 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 going broke.

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 – not your overall policy costs. 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. Also, other parts of your auto policy might go up 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 MCCA Fee:

You’ll save $120 per auto if you take our recommendation and keep unlimited PIP, or $220 per vehicle if you select one of the new PIP options.  What is the Michigan Catastrophic Claims Association (MCCA for short) 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 charges the insurance companies $220 per auto per year.  The insurance companies pass these charges on to us.  With no-fault reform, the MCCA fee is changing.  For the period starting July 1 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.  Look for the MCCA to 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 TONS of information to calculate the costs 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, and sometimes big changes happen.  Some factors the insurance companies look at:  where you live, past claims experience, type of auto, age of drivers, and insurance score (a proprietary combination of payment history, available credit, outstanding debt, etc.).  Ideally, if your insurance costs go up by an “above average amount”, 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 really rolling some 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 2nd 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 you won’t have to wait a full year to start seeing savings.

Most insurance companies will create a way to change your policy in a way that gets you into the new MCCA fees without waiting until your next renewal.  The change will vary depending on the software your insurance company uses.  It will require some important decisions from you on your Personal Injury Protection (PIP) and your liability coverage limits that will likely require some signatures from you and some back-n-forth with your agent due to the complexity of the forms you’ll need to navigate.  It will most likely NOT be an automatic change initiated by the insurance companies.  You’ll need to request your insurance agent to make the change for you.  Some insurance agencies will attempt to be proactive and reach out to you to discuss this change.  Be patient!  Insurance agents in Michigan are going to have a very busy summer in 2020!  If you don’t reach out to your agent, or if they don’t reach out to you, you won’t start paying the lower MCCA fees until you policy renews after July 2, 2020.

**If you are not sure what MCCA Fees are, see question above – “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?

We don’t recommend it and here’s why:

Personal health policies don’t cover as many types of medical expenses as PIP does.  PIP covers medical and related expenses that a personal health plan won’t cover, such as attendant care at home or in a facility, and needed modifications to your home and auto to help you better live with disabilities from the accident.  If someone were seriously injured in an auto accident, PIP would pay WAY more expenses than a personal health policy would. This means lower out-of-pocket expenses for you.

If you choose one of the new PIP options that reduces unlimited PIP coverage and go with a coordinated program between PIP and your personal health plan, the best scenario 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 your personal health plan won’t cover.  This way your PIP limit lasts longer.  The less of your PIP you use up on procedures, medications, etc. the more likely you’ll have some PIP left over for attendant care, modifications to your home and auto, etc. that personal health plans won’t cover.

In the event your personal health plan requires PIP to “go first” (like Medicare does), your 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.

The more you plan to rely on you personal health plan to cover your expenses from auto accident injuries, the more expenses you’ll be paying for yourself.  In a serious accident, your personal health plan could leave you with hundreds of thousands to pay that would have been covered with unlimited PIP!

We recommend keeping unlimited PIP coverage because it significantly reduces the risk that you’ll have out of pocket expenses to handle on your own.

How can I prepare for these changes at my renewal?

Educate yourself.

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.  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.  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.  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 are not.  Make sure your resident relatives truly fit the insurance company’s definition of “resident relative”.

Why is the state changing minimum liability limits and enforcing a “recommended” limit?

Liability coverage is your “lawsuit coverage” from auto accidents. Prior to No-Fault Reform, there was no need to sue someone for medical costs. The auto policy of the vehicle owner or the State of Michigan would cover the costs. After No-Fault Reform there will be 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.  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.

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.  If they get mail prior to their renewal, they figure its junk mail or someone trying to sell them something.  The insurance company will be sending you a seven page form to complete that documents 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.  A bad assumption on how these forms work could cost you big if you’re 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, when so many of us had access to unlimited Personal Injury Protection (PIP) benefits, the need to sue someone 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 won’t all have unlimited PIP.  If you choose 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 auto policy’s PIP or your personal health policy.  In this situation, you might need to find yourself an attorney and sue the owners of the vehicles involved in the accident.  If the other drivers involved in the accident have no insurance or insurance with low liability limits, your un/underinsured motorists coverage could help you out and pay you on their behalf.

If you give up unlimited PIP, make sure you purchase all the un/underinsured motorists coverage you can get.  Although this coverage is technically “optional” on the auto policy, it’s relatively inexpensive and could come in very handy some day!

Does Personal Injury Protection (PIP) cover the same things as a typical health insurance plan?

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!

What do I need to know to opt out of Personal Injury Protection (PIP) coverage?

If you plan to opt out of PIP, to best protect yourself you’ll need documentation from your health insurance provider showing:

  • The company name and policy number
  • A statement that the plan covers medical costs from auto accident injuries
  • The per-person deductible (that needs to be $6,000 or lower)
  • All individuals covered on the policy

Then you’ll need to find out how your co-pays work, all annual deductibles, out of network charges and other limitations. Consider creating a “rainy day fund” to pay for the out-of-pocket expenses you’ll be taking on that unlimited PIP would have covered for you.

Are fewer people covered by my Auto Policy now?

It used to be that your PIP coverage “followed the car and driver” – not any more.

For someone to receive PIP benefits from your auto policy (on which you appear as a “named insured”), they need to be your spouse or your “resident relative” on the day of the accident. Resident relatives don’t appear on the auto policy or on your insurance application. You need to make sure your resident relatives would pass the insurance company’s “test” for resident relative status. Stop making assumptions and call your agent about this!

Why are the State Minimums for Auto Liability going up?

When we all had mandatory unlimited PIP coverage, our own policies paid our medical expenses from auto accidents.

People who choose to give up unlimited PIP will be relying on health insurance plans that will leave them with uncovered medical expenses – forcing them to hire an attorney and sue at-fault parties (assuming there are any to sue). The legal system can’t get people’s bills paid unless the people being sued can defend themselves in court and pay awarded damages. Our auto policy’s liability coverage provides legal defense and pays awarded damages up to the limit of liability we purchased. The odds of being sued from an auto accident are going up, and the state wants us to be prepared!

What do I do with this "Auto Policy Renewal Packet" I just got in the mail?

The State of Michigan has created requirements for your insurance company to follow in creating a multi-page document you’ll need to complete where you make your new PIP selection and re-visit your liability limit. If you don’t complete the form and return it 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.

**If your liability limits are already at these amounts or higher nothing with change, this increase only applies to policies that were not already at this minimum.