Michigan Auto Insurance Reform
Updated: Jul 24, 2020
When will auto insurance reform happen?
The new policy changes went into effect on July 2, 2020. You don’t have to do anything until your policy renews, but in order to make the transition easy for you and your family, you can make new selections in advance of your renewal date.
How will the new law impact my auto insurance?
The short answer - the new law gives you more choices. When you renew your policy after July 2, 2020, you can keep your unlimited Personal Injury Projection (PIP) Allowable Expenses coverage or you can choose a lower option. If you choose a PIP AE option with lower than unlimited coverage you will want to factor in your own personal risk tolerance and financial situation into that decision.
The question on everyone’s mind – what will my savings be when the new law goes into effect?
Depending on the specific coverage level that you choose for your PIP AE coverage you could see savings starting around 10% (on the PIP AE coverage), and up to 100% (on PIP AE coverage) if you are on Medicare and able to opt out of allowable expenses. Please note if you decide to reduce your PIP AE coverage, you may want to weigh the other coverage levels on your policy to ensure those limits meet your needs.
Understanding the Law Changes
What is Personal Injury Protection (PIP)? What are Allowable Expenses?
Personal Injury Protection (PIP) helps to cover the expenses that result from injuries in an auto accident. In Michigan PIP covers the expenses regardless of who was at fault or caused the accident. Allowable Expenses (PIP AE), are the main coverages provided by PIP. They are “reasonable charges incurred for reasonably necessary products, services, and accommodations for an injured person’s care, recovery or rehabilitation.” This includes things like medical expenses, nursing and attendant care.
What are my Personal Injury Protection Allowable Expenses (PIP AE) coverage options?
Options available to everyone
o Unlimited (The coverage level everyone has now/prior to reform)
Options available if you have qualified health coverage, Medicaid or Medicare
o $250,000 limit with PIP exclusion
o $50,000 limit (Medicaid only)
o Allowable Expenses Opt-out (Medicare only)
What risks are associated with new, lower coverage options?
The lower Personal Injury Protection Allowable Expense coverage options do some with additional risks. The coverage for auto accident injuries with most healthcare insurance plans is not the same as PIP benefits which could result in:
o Not having enough coverage, especially in the event of a catastrophic auto injury
o Unlike auto insurance, health insurance may stop paying when the policy ends or is cancelled.
To have a better idea of what your level of risk is, it is best to talk over your coverage with your healthcare insurance provider, and then discuss your auto insurance options with your agent.
What does my health insurance have to do with my auto insurance?
Traditionally, your healthcare insurance coverage helps to pay for medical expenses like hospital stays or doctor visits. Previously in Michigan, auto insurance policies were required to carry unlimited PIP coverage so if a driver was injured as a result of an auto accident, their cost of care, rehabilitation and recovery was covered under PIP Allowable expenses and was essentially unlimited. Since the auto insurance reform no longer requires the unlimited coverage drivers may need to rely more on their personal healthcare insurance coverage if injured in an auto accident if they choose lower levels of PIP Allowable Expense coverage.
What is Qualified Health Coverage and what does it mean for auto reform?
Qualified health coverage is an individual or employee-sponsored plan that fully covers auto-related injuries and has a deductible of $6,000 or less per person. If you have qualified health coverage, verified through your health insurance provided you may be eligible to select an exclusion for PIP Allowable Expense coverage.
What questions do I need to ask my health insurance provider?
When determining what your options are as well as what the best choice for you and your family for PIP AE coverage limits, it is important to find out the following from your healthcare insurance provider:
o Do I have qualified health coverage?
o Does my health plan limit or restrict my coverage if I am injured in an auto accident?
o What is my individual deductible?
o How much coverage does my health insurance provider offer for injuries sustained in an auto- related accident?
o If I am catastrophically injured in an auto accident, does my health insurance cover attendant care?
Information from: https://michigan.aaa.com/insurance/auto-insurance-reform-faqs.aspx#pip