What the No-Fault Auto Reform Means for Michigan Motorists

Understanding Michigan’s new auto reform.

Recently, the state of Michigan agreed to a historic deal that reformed the state’s no-fault auto insurance system.  Specifically, the deal allows drivers more freedom when choosing car insurance coverage, such as allowing them to choose their own level of personal injury protection coverage.  But how exactly does this reform affect drivers and their auto insurance in Michigan?  Here’s what you need to know.

Changes in PIP Coverage Requirements

Currently, Michigan drivers are required to secure unlimited personal injury protection (PIP) coverage.  This unlimited coverage ensures that drivers can cover all the medical costs associated with an auto accident.  However, these high coverage limits come at a high price.  To offer drivers some financial relief, the reform deal offers drivers new options when it comes to their PIP coverage.  Starting on July 1, 2020, drivers will be able to select one of five levels of PIP coverage.

  • Unlimited PIP coverage (the same coverage as now)
  • Insurance companies will cover up to $500,000
  • Insurance companies will cover up to $250,000
  • Insurance companies will cover up to $50,000 — the lowest-price option available to people on Medicaid, who cannot opt-out entirely.
  • Opt-out of PIP coverage entirely, if you have separate health insurance that covers collision injuries.

The deal also states that, if a driver opts out of unlimited PIP coverage and is injured in an accident that they are not at-fault for, then they can sue that at-fault driver for medical expenses that exceed their coverage.

Cheaper Auto Insurance Rates

The new plan also requires insurance companies to lower PIP coverage rates across all levels of coverage.  Starting on July 1, 2020, insurance companies much offer the following discounts:

  • Those who keep unlimited PIP coverage would receive a 10 percent rollback of PIP coverage costs on average.
  • Those who choose the $500,000 get a 20 percent rollback on average.
  • Those who choose the $250,000 plan, get a 35 percent rollback on average.
  • Those who choose the $50,000 plan, get a 45 percent rollback on average.

These discounts must remain for 8 years (ending on July 1, 2028).  After the 8-year mark, insurance companies will still be bound by rules that require them to have their rates approved by the state Department of Insurance and Financial Services.

Insurance Companies Cannot Use “Non-Driving” Factors to Determine Rates

The plan will also prohibit insurance companies from setting auto insurance premiums based on “non-driving” factors such as gender, marital status, homeownership, education level, occupation, credit score, or zip code.

Lower Medical Care Costs

Starting on July 1, 2021, healthcare providers will be required to keep charges for medical services up to 240% of what they charge for Medicare for the same services.  This requirement will last through June 2022, when charges must be kept at 235% and 230% over the next two years.  This portion of the bill will prevent hospitals from charging more for medical services just because an insurance company is covering the costs.

For drivers, compliance with the coverage requirements laid out by the reform deal is easy.  All they need to do is make sure that they fall into one of the five PIP coverage levels by July 1, 2020.  Drivers concerned with changing their coverage limits can choose to remain with unlimited PIP coverage.

This is what you need to know about Michigan’s new auto reform deal.  Do you have additional questions regarding your auto insurance in Michigan?  If so, then contact the experts at CIA Insurance and Risk Management for assistance today.

Post written by Sam Crudo, Chief Executive Officer

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