Michigan’s No-Fault Auto Insurance Reform’s Impact on Employee Benefits
Michigan’s auto insurance reform law was signed into law on May 30, 2019 as Public Act 21. The Act introduces several changes to Michigan’s auto insurance policies beginning July 1, 2020. Employees will need to make decisions on new coverage levels and will be looking to their human resources and benefits department to guide them through the new options.
Employees will no longer be required to purchase unlimited No-Fault Michigan Personal Injury Protection (PIP) benefits. For auto insurance policies issued or renewed after July 1, 2020, drivers now will have the choice of the four different capped lifetime no-fault medical benefit coverage levels: $50,000 (if a driver is enrolled in Medicaid); $50,000 with $200,000 for emergency medical care; $250,000; $500,000. The lifetime caps apply not only to medical expenses, but to all PIP benefits, including benefits for loss of income. Employees with Medicare may choose to opt-out and not carry PIP medical benefits. Michigan is the only state with unlimited PIP. This option will still be available.
The new law includes mandatory premium reductions for PIP coverage. The reductions are required to eight years and are based on the PIP coverage limit selected.
- $50,000 PIP cap – 45% reduction
- $250,000 PIP cap – 35% reduction
- $500,000 PIP cap – 20% reduction
- Unlimited PIP coverage – 10% reduction
Under the new law, a person injured in a car accident can sue for excess medical costs and expenses that exceed the amount of the no-fault PIP cap amount they have selected. Michigan now becomes like most other states in this regard. Employees should consider increasing liability coverage (over the minimums of $50,000 per person and $100,000 per accident) to protect assets in the event of a lawsuit.
Health plans do not provide coverage for custodial care or modifications need to home or vehicles that result from a disability. Employees that purchase a lower level of PIP coverage under the new policy options may find that are paying much of these types of expenses out of their own pocket or wrapped up in a lawsuit to get the things they need for mobility and long term care that exceed a coverage level less than unlimited benefits.
Beginning July 2021, doctors, hospitals and rehabilitation facilities who provide care for accident victims will be capped at 200% of the Medicare fee schedule. This will drop to 190% in 2023.
Benefits will continue to cover lost wages and household services. These benefits are not subject to the new caps on coverage but are subject to maximums with lost wages limited to three years of benefit.
Fully insured health plans cannot exclude or limit coverage for auto accidents. Further, the deductible cannot exceed $6,000 per family member. This will be adjusted based on CPI annually.
Employers with fully insured health plans will be the primary payer for expenses due to an accident. Employers with self-insured health plans have the option of determining if they will be the primary payer, secondary payer, limit liability or even exclude coverage for expenses due to an accident. Plan documents should be updated to reflect not only how the plan will be pay for claims but also how the plan will handle subrogation of recovered funds through litigation.