On May 30, 2019, the Michigan Legislature passed, and Governor Whitmer signed, sweeping changes to the Michigan No-Fault law under the guise of substantial savings to purchasers of No-Fault insurance in the State of Michigan. The law provides for options in the amount of no-fault coverage that can be purchased, significantly caps certain benefits, precludes coverage for individuals previously covered and allows insurance companies to manipulate its own insured’s claims to their own benefit. While this is just the tip of the iceberg of what a horrible piece of legislation this is, below are some things you should know when renewing or purchasing a new policy of automobile insurance.
Choice of Personal Injury Protection (PIP) Coverage
Before this legislation was passed and signed, persons covered under a Michigan automobile policy of insurance had unlimited PIP coverage for all reasonable charges incurred for reasonably necessary products, services, and accommodations for an injured person’s care, recovery or rehabilitation. This coverage could last a lifetime depending on the severity of the injuries sustained in an accident and includes, among other things, medical care and treatment, home care, treatment in a long-term care facility, etc. With the enactment of this new legislation, you now have the following options effective July 1, 2020:
$50,000 Medicaid Option with 45% Premium Reduction: (This option is only available if you are a Medicaid recipient and your spouse or resident relative has their policy of automobile insurance or a health insurance policy that would cover automobile accident injuries.)
$250,000 Option with 35% Premium Reduction (For this option the PIP premium must be reduced 100% if the named insured has qualified health coverage that will cover auto accident injuries and the insured’s spouse and resident relatives have qualified health coverage that will cover auto accident injuries. However, if the health insurance lapses and is not reinstated or another policy is obtained within 30 days and an injury occurs, the injured party will be excluded from PIP benefits altogether.)
$500,000 Option with 20% Premium Reduction
Lifetime Option with 10% Premium Reduction
Medicare PIP Opt-Out: (Available when a person is covered under Medicare parts A & B and the person’s spouse and any resident relative has Medicare-qualified health coverage or no-fault coverage under a separate policy.)
While these reductions probably look pretty good to consumers who think they are paying too much for automobile insurance, they are not what they seem. For instance, if you chose the $250,000 option with a 35% premium reduction, you would not see your rates reduced by 35%. Instead, the reduction is based on the “average reduction per vehicle from the premium rates for PIP insurance coverages that were in effect for the insurer on May 1, 2019,” whatever that means. See MCL 500.2111f. What it most likely means is that whatever option you choose, you will not see anything remotely close to the reduction advertised in your premium. Moreover, an insurer can fight the rate reduction if the reduction reaches “company action level risk-based capital” or for constitutional challenges. The insurance companies were also able to get a loophole written into the legislature that allows them to raise rates despite the mandatory reductions. MCL 500.2111f(9). Finally, while you may see a reduction in your policy depending on the option you choose, you should know that the reductions are only in effect until 2028.
Reasons to Keep Unlimited Coverage
It is our opinion that everyone should maintain unlimited coverage for at least the following reasons:
1. PIP Covers Much More Than Most Health Insurance Policies
PIP insurance is much more comprehensive coverage than most health insurance policies. In addition to covering medical expenses, PIP also provides coverage for Attendant Care (assistance with activities of daily living, i.e. nursing type services), housing modifications, vehicle modifications and catastrophic loss coverages, including long term rehabilitation and custodial care. Moreover, some health insurance policies only pay for a limited number of appointments for things like physical therapy, chiropractic, etc. In fact, many health insurance policies do not cover automobile accidents at all. So, if you were thinking that you could reduce your premium by shifting everything to your health policy now, you may have limited accident coverage or no coverage at all for automobile accident injuries.
2. Financial Risks of Reduced Coverage
Anyone that has been hospitalized knows just how expensive that can be and how important insurance is in paying the bills. In our office alone, we have had many clients involved in serious crashes that have incurred expenses in the hundreds of thousands and even millions of dollars. Imagine reducing your coverage to only $250,000 and then being involved in a serious automobile accident. Lets say your medical expenses were to exceed $750,000. Your auto insurer will only pay the coverage you elected so guess who pays the remaining $500,000 balance? If you were at fault for the accident and had no other available insurance, you personally would be responsible to pay the additional $500,000. If you were not at fault, you can now try and sue the at-fault driver for the remainder, but the amount you could recover will depend on how much coverage that driver elected to purchase. If that driver elected the $50,000 option and you were able to recover the entire policy, you would still be stuck owing $450,000. This scenario is virtually impossible if you maintain unlimited coverage. In our opinion, the modest reduction in your medical premium does not justify the risk of financial ruin if you are unfortunate to suffer serious injuries in an automobile accident.
3. Savings in Reduced PIP Premiums Will Most Likely Be Offset by Increased Liability Coverage
While consumers may see modest decreases in the PIP portions of their policies, the new law raises the minimum bodily injury liability coverage from $20,000 to $250,000. While this was a much needed change, it is also an 1,250% increase in mandated coverage. Obviously, the insurance companies will charge more for this coverage, ostensibly setting off any decreases in the PIP portion of your policy should you choose lesser coverage.
4. Electing Reduced PIP Coverage May Decrease Your Bodily Injury Claim
Before these laws were enacted, you could only sue an at-fault driver for what is called pain and suffering, i.e. compensation for the harms suffered in the crash. All of your economic losses (out-of-pocket losses) were covered under your own PIP policy of insurance. Now, should you choose something other than unlimited coverage, you will need to sue the at-fault driver for the excess out-of-pocket expenses.
Lets say another driver blew through red light and t-boned your vehicle at 50 mph, causing you to suffer horrible injuries. Your medical bills following the accident totaled $300,000 but you had elected the $50,000 PIP option. Lets also say the at-fault driver elected the minimum $250,000 liability coverage. This means you would need to sue the at-fault driver to recover the remaining $250,000 you owe in medical bills. If you are successful, you would recover the whole $250,000 to pay off your bills, leaving no insurance available to compensate you for pain and suffering. If you kept unlimited coverage, all your bills, no matter how much, would be paid by your own insurance company and the entire $250,000 policy of the at-fault driver would be available to compensate you for the harms suffered in the accident.
The New Law Also Increases Your Liability Exposure
Another aspect of the new No-Fault law you need to be aware of is your increased liability exposure should you be at fault in an accident. Prior to enactment of this law, someone injured in an automobile accident could not recover PIP benefits from the at-fault driver as all these expenses were covered by the injured party’s own insurance company. As of July 1, 2020, this all changes. Now, if you are at fault in an accident and the injured victim exhausts his/her insurance coverage because he/she chose reduced coverage, you can be sued for the excess. Given the example above, if the injured party exhausts the $250,000 coverage he/she elected, you can be sued for the excess $500,000. While the minimum liability coverage will increase to $250,000 on July 1, 2020, you could still be financially at risk in the event you cause serious injury if you do not have sufficient liability coverage. For this reason, you may want to consider additional liability coverage.
Managed Care Option A/K/A Whatever You Do, Don’t Choose This
When it comes time to renew your automobile insurance policy or if you change insurance companies, your agent most likely will try to sell you a managed care option for a reduction in your premium. What is “Managed Care?” The option, defined in the statute, “includes, but is not limited to, the monitoring and adjudication of an injured person’s care, the use of a preferred provider program or other network, or other similar option.” MCL 500.3184. What this means is the insurance company can choose your doctors and dictate the treatment you receive and for how long. Since insurance companies are all about making a profit, we believe this is blatant conflict of interest that no insured should ever choose.
Before this ridiculous boon for the insurance industry was enacted, insurance companies routinely send their injured insureds for what they like to call, “Independent Medical Evaluations (IMEs).” These IME’s are anything but “independent” however. Almost all the doctors chosen by the insurance companies to do these examinations only perform the examinations at the request of insurance companies or employers. Moreover, they are paid hundreds of thousands of dollars a year by the insurance industry to obtain the reports they need to terminate benefits to an injured insured.
In our decades of fighting the insurance companies, 99% of these IMEs will say our injured accident victims had no injuries or if injuries existed, they were not caused by the accident. Almost every report ever received by any of these doctors will say something like, “I find no objective evidence of injury but if injury did occur, it should have resolved within 6 weeks to 3 months after the accident.”
This is a portion of an actual and typical insurance company IME report we routinely receive, no matter how severe the injury:
“Did the Claimant Sustain Any Permanent or Temporary Impairment as a Result of the Injury“
(IES) sustained on September 28, 2016 accident? If so, what are the nature and extent of that impairment and what are the dates during which the claimant was impaired?
Answer: The claimant did not sustain any permanent impairment as a result of the injury sustained in the September 28, 2016, accident. At most, she would have sustained a temporary impairment that would not be expected to last more than three months post-accident. This impairment would be due to soft tissue injuries and the resulting pain.
The point is, that you do not want doctors whose pockets are lined by the insurance industry dictating your medical care. They are beholden to the insurance industry and will prostitute themselves and shun their oaths as doctors to appease the insurance industry at the expense of your health. It is our advice that you decline any offer of managed care when obtaining or renewing y our automobile insurance policy.
It is our opinion that there is no upside whatsoever to choosing any option other than unlimited PIP coverage when purchasing or renewing your automobile insurance policy. Any option other than unlimited PIP has the potential of putting your health and financial future at great risk. In addition, and since you can now be sued for payment of medical expenses not covered by another driver’s insurance, it is also important to consider increasing your liability coverage as much as possible. You may also wish to consider an umbrella policy in case you cause catastrophic injuries in an automobile accident. Finally, if you are offered an option for “managed care,” ask yourself if you trust your doctors to have your best interests in mind or the insurance company. I think you all know the answer to that question.