The Hard Truths About Michigan's New Revised No-Fault Law.

THE HARD CORE TRUTH 

AND 

FACTS ABOUT MICHIGAN'S NEW 

AUTO INSURANCE LAW

Press conference fighting against the new auto reform bill that will
not save Michigan Consumers much but take away much needed coverage

The Legislators in Lansing are trying to put their own spin on an absolutely horrific bill that they passed.  This bill may go down in history as one of the worst bills ever passed by the Michigan Legislature.  Your premium rates are likely to go up not down!  You will likely now need to purchase additional insurance out of your own pocket to protect your financial interests such as your home, auto and other savings.

Right now, drivers are required to purchase unlimited personal injury protection (PIP) coverage, which guarantees insurance companies will cover all of the medical costs associated with car accident injuries. That also means auto insurance companies pay regardless of who’s responsible for the accident.

Under the new plan, drivers can choose between five tiers of PIP coverage beginning July 1 2020:

• 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.

If a driver doesn’t have unlimited PIP coverage under the new system and gets in a car accident that’s not their fault, and medical costs exceed the amount of coverage they have purchased, they can sue the at-fault driver for charges beyond their coverage.

Under the new plan, insurance companies are required to lower PIP (personal injury protection) coverage rates depending on the level of coverage purchased:

• Those who keep unlimited PIP coverage would receive a 10 percent roll back 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.

Those rate rollbacks must say in place until July 1, 2028. After 8 years, insurance companies no longer will have to hit exact rate rollback targets,. but they’ll still be bound by new rules that require them to get rates approved by the state Department of Insurance and Financial Services before offering them to consumers.

These savings only apply to the PIP and many have been mislead into thinking that they could save 50% or more on their total insurance premiums.  This is not the case.  The savings is only on the PIP!

Currently under the PIP the insurance companies are currently only required to cover medical expenses up to $580,000 after that amount is exhausted, then you go to the MCCA (Michigan Catastrophic Claims Association) fund. 

Other portions of the Auto Insurance policy such as liability and physical damage coverages (collision and other than collision/comprehensive) will not be impacted by this law.   In fact it is quite possible these rates will go up!

The MCCA is the fund that provided unlimited medical benefits but in addition to those medical benefits you also received reimbursement for expenses that help you with care including rehabilitation and at home including household chores that you were unable to do.  The most important factor in the MCCA was the long term care it provided!  Health Insurance coverages are limited (and varies by insurer) and if your care requires long term care, those expenses come out of your pocket.

On my travels meeting with people and legislators to get a real plan, I met many who would not be here today if they didn't have our current auto coverage.  One young man spent 1 year and 4 months in a coma from an auto accident, that he did not cause!  With the new plan he surely would have been deceased today! Mostly likely, as will most drivers (historically most people do not properly pick the higher limits when offered), he would have chosen a lower medical plan to save money on his auto premium not realizing what he was giving up.

The young man who spent 1 year and 4 months in a coma and
was saved by Michigan's Current No-Fault Law

The MCCA premium is set to jump to $220 this month per vehicle, which equates to about $18.33 a month for unlimited coverage!  Yes the MCCA needs to be audited annually with the information being made public and the MCCA board should force an annual public audit annually.  The board should consist of at least 2 non-Insurance but public members that should help with the oversight. 

The primary reasons why we have such high premium rates with PIP and the MCCA are:

• Currently no true fee scheduling for medical services rendered (new law still allows insurance companies to be overcharged by as much as 240% above market price for medical services)
• Tort Law passed in 1995 that allowed a Tort System to parallel the No-Fault system
• No true or open auditing of the MCCA financial records

To help with oversight on these expenses and fraud, a strong state fraud unit would help deter those that want to use the insurance companies and people's premiums as their ATM.

With no true fee scheduling one could currently pay $500 for an MRI but if paid by the Auto Insurance carrier it could be $4,000 or more!  Health insurers, Medicare and Medicaid have limits to what they will pay, why don't auto insurance companies have the same limits?  Under the new law set to take effect on July 1, 2020, auto insurers could still be charged more than 240% above market price for medical services rendered.

In 1995, the Michigan Legislature weakened the no-fault law by redefining how hurt a person injured in a car accident must be to be able to recover money damages for his or her pain and suffering. This has allowed for numerous claims to hit the insurance companies.  Many of the trial attorneys that file these claims have toned their cases to make the insurance companies settle out of court.  It is much more expensive to try a case in court, especially if you lose, than to try to settle out of court.  Speaking with my insurance companies, they have advised that 99% of the cases don't even make it to court.  This tort claims, considered nuisance claims have been the #1 reason for the PIP premium increases. Fixing this loophole will help reduce premiums.

The Michigan Catastrophic Claims Association fund is another reason why our rates are going up.  In reality though it is a small portion.  With the rates increasing to $220 annually per vehicle, it amounts to only $18.33 a month as I stated above.  If you put in place a stronger fraud unit, proper auditing / public reporting and using other means of income to fund the association - including its own interest earned, and using fee scheduling that matches the market value of healthcare,  this will help reduce the premium fee and allow us to keep out unlimited health care.  

Instead of passing real reform that was suggested in this article, our legislators decided to put a bill forward that really looks like it caters to the lobbyists.  

Since medical coverage limits are now going to be limited for many, once they are injured and can not pay for their medical bills, the burden will fall on the driver that caused the accident. This is why, in my opinion, the Trial Lawyers have remained quite on these reforms.  Injured drivers will be suing those that caused the accident to collect medical payments after their limits are exhausted! Current auto limits of liability will not cover most people.  The new state limits of liability that will be required are going to be $50,000 per person and $100,000 for all injured persons per accident.  Most people in Michigan today carry limits of $100,000 per person and $300,000 for all injured persons per accident.  This still will not be enough coverage should you injure someone that needs long term care.  

As an independent agent, who doesn't work for the insurance companies but only sells their products, I  will be recommending to all my clients that they will need to increase their liability limits on their auto policies to the maximum (most cases $1,000,000) and to purchase extra liability in at least another $1,000,000 to maybe $2,000,000 to protect themselves from this new exposure created by our legislators in Lansing.  Whom in my opinion seem to be more worried about their next job with lobbying firms once their term limits are up.  

In addition to destroying our medical coversgrs, insurance companies can now designate new territories because they can no longer use zip codes.  They could possibly micro target neighborhoods or further down to city blocks using the same formula as the US Cencus does.

All of these factors make this new revision in our auto insurance one of the most, if not the most, horrific bills to come from our legislators in Lansing.