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Michigan Auto Law Changes: What You and Your Employer Need to Know Now

Marc Lasceski and Sue Penn April 29, 2020
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Most people know that Michigan’s long-held no-fault auto insurance law is changing on July 2, 2020. At the heart of this change is the PIP (Personal Injury Protection) level that Michigan drivers will now be able to choose.

PIP is the part of your auto insurance policy that pays claims when someone is injured in a car accident.

It covers the costs of medical and recovery care, rehabilitation, wage loss, replacement services, and the cost of a caregiver when injuries prevent the insured from performing daily functions. It also provides for some funeral expenses and survivor benefits if injuries result in death. Currently, there is no end date or cap on costs covered. Coverage for the injured motorist applies for life.

Under the new law, Michigan drivers can now choose the PIP coverage level that is right for them.

The option to continue with unlimited PIP is still available in Michigan, the only state to offer this. Alongside this change, insurance carriers must lower their statewide average PIP medical premiums for eight years. Medical providers will also be required to operate under a fee schedule that limits how much they can charge auto insurers. Non-driving factors like sex, marital status, homeownership, credit score, education level, occupation, and zip code will no longer impact auto insurance rates. (Michigan Government Brochure 679974-7)

Another factor affecting premium costs under the new auto insurance law is the amount of the MCCA (Michigan Catastrophic Claims Association) assessment per vehicle. The MCCA is an association of auto insurers that reimburses insurance carriers once they have paid out an excess amount (presently $580,000) related to medically necessary costs. This assessment per vehicle will now be at least $120 lower.

Finally, if you’ve heard nothing else, you’re probably aware that this new law was put into effect to create significant savings off our inarguably high auto insurance premiums. The truth—which isn’t fully known at the moment—is considerably more complicated. Check out the table for a before and after comparison of Michigan’s auto insurance coverage and choices.

After reading this far, you might think the changes on the horizon don’t seem all that complex. As often happens, though, this is when you realize there’s a bit more to consider. Before you choose which PIP level is right for you, you need to know if you have qualified health coverage through your medical provider.

Qualified Health coverage must not exclude or limit auto accident injuries and must have an individual deductible of no more than $6,000.  Coverage under both Medicare Parts A and B also constitutes qualified health coverage. Coverage under Medicaid, however, is not considered qualified health coverage. (Michigan Government DIFS Bulletin 2020-03-INS)

If you’re like a lot of people, you never even thought about this. You might have just assumed your medical coverage would kick in if you were injured in a car accident. However, some employer-sponsored health insurance excludes medical costs resulting from an auto accident. Because this is important information that you may not readily know, your employer is required to share a document that tells you if your group health plan meets this definition. (Michigan Government DIFS Bulletin 2020-01-INS)

The Difference Between PIP and Qualified Health Coverage

You should also know that PIP coverage is broader than your qualified health insurance. While your qualified health benefit plan covers medical expenses and some rehabilitation costs, it doesn’t cover loss of wages, replacement services, home, and vehicle modifications, etc. like PIP does.

What Additional Factors Should Employers Consider?

  1. As already noted, employers are required to let their employees know whether or not they’re covered under a qualified health plan. (Michigan Government DIFS Bulletin 2020-01-INS)
  2. If a health plan is self-funded and pays secondary to auto insurance, it could be impacted by the new auto insurance options. As employees choose a lower PIP level, medical costs resulting from an auto accident could shift from coverage under an auto policy to coverage under health insurance.  However, health insurance industry experts anticipate a limited effect on costs because fewer post-injury services are covered under health insurance. Health insurance costs could also be mitigated by higher deductibles and the eventual loss of employer-sponsored health insurance in the event of a catastrophic accident. (Insurance News, October 2019)
  3. No matter what PIP level is selected, Worker’s Compensation benefits will kick in first to pay for an insured worker’s auto accident-related injuries. Worker’s Comp benefits paid will be subtracted from the worker’s PIP benefits.

Still Confused?

With the PIP level choice now resting with the motorist, you need to become educated enough to weigh the premium savings against the reduced coverage level. Although carrier rates have not yet been approved by the state—leaving much still unknown—your Oswald Personal Client Management and Employee Benefits teams are ready to answer any questions you may have to help guide your choice.

If you have any questions, please contact us here to further discuss.

Marc Lasceski
Client Executive, Employee Benefits
248-433-7684
Email

Sue Penn
Vice President, Personal Client Management
248-433-7606
Email

 

(Sources: Michigan Government Brochure 679974-7, Michigan Government DIFS Bulletin 2020-03-INS, Michigan Government DIFS Bulletin 2020-01-INS, Insurance News)

Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy.