Michigan’s No-Fault Auto Law: What You Need to Know About Medical Expense Coverage Options

Since its enactment in 1973, the Michigan No-Fault Insurance Act has become one of the most comprehensive and expensive no-fault motor vehicle insurance systems in the country. The law has remained mostly unchanged since then. Over the years, however, rising auto insurance rates placed pressure on our elected officials to reform the law and provide financial relief to consumers. In June 2019, the Michigan legislature and Governor Gretchen Whitmer agreed on amendments that drastically alter the automobile insurance laws in our state.

No-Fault Coverage Benefits and Requirements

Michigan’s no-fault insurance system is just that – under the law, an injured motorist can file a personal injury protection (PIP) claim regardless of who caused the accident. It provides three types of economic benefits to people injured in motor vehicle accidents: allowable medical expenses, work loss, and household replacement services.

Allowable medical expenses include a broad array of medical-related benefits. Before the recent amendment, state law required motorists to purchase policies that provided unlimited, lifetime PIP coverage. Now, however, insurance companies may sell automobile policies with limited medical benefits coverage.

As of July 1, 2020, motorists must select from among five PIP coverage options: 

• $50,000 per individual for each loss occurrence, but only if applicants or named insureds are enrolled in Medicaid. A spouse and relatives living with an applicant or named insured may have qualifying health insurance or a no-fault policy with coverage for allowable expenses.
• $250,000 per individual for each loss occurrence.
• $500,000 per individual for each loss occurrence.
• Unlimited coverage per individual for each loss occurrence.
• No coverage. Applicants or named insureds may opt-out of coverage if they and their spouses and all relatives residing with them have qualified health coverage (or no-fault policies with coverage for allowable expenses).

Michigan Insurance Company Offerings and Obligations

Every insurance company and its agents must provide prospective insureds with a form that explains the benefits and burdens of each coverage option. The default option is unlimited medical coverage if the applicant or named insured does not make a selection.

Michigan’s new no-fault law requires all insurers, with few exceptions, to reduce premiums by a certain percentage at each level of coverage that imposes limits on allowable medical expenses. In theory, this means that lower coverage amounts will equate to lower insurance rates.

Insurance companies may now offer a managed care option for allowable medical expenses. This managed care option will operate like an HMO, with monitoring and adjudication of the injured person’s care and the use of a preferred provider program. It will include deductibles and co-pays in exchange for a reduced premium.

Also, insurers may offer reduced rates, deductibles, and exclusions reasonably related to other health and accident coverage an insured may have. This is commonly referred to as a “coordination of benefits provision” that creates a scenario where health or disability insurance pays medical or wage loss benefits first, restricting the automobile insurer’s potential exposure to excess benefits.

Under the new law, an insurance company can offer to exclude an applicant or named insured (if they select the $250,000 allowable medical expenses option) if the person has “qualified health coverage.” This applies to policies issued or renewed after July 1, 2020.

Speak With Your Insurance Agent or an Experienced Insurance Coverage Attorney

The information above is intended to provide a brief overview of the changes in medical coverage under the Michigan No-Fault Insurance Act. We encourage every driver in Michigan to discuss the recent amendments and new options with their insurance agent. Alternatively, you can contact Kreis, Enderle, Hudgins & Borsos – we would be happy to help you understand these important changes.