Michigan auto reform notable changes and provisions
Senate Bill 1 was signed into law by Michigan Governor Gretchen Whitmer on May 30, 2019, taking effect as of June 11, 2019. The new law was designed to provide more affordable auto insurance in the state by allowing drivers to select more coverage options. Below summarizes the key legislative changes.
- July 26, 2019 (new business), August 25, 2019 (renewal) — Citizens/Hanover form changes removing non–family members and non–residents from definition of insured take effect.
- July 2020 — Statutorily required PIP medical coverage options, PIP average rate reductions, increased BI minimum limit and rating/underwriting limitations take effect.
- July 2021 — Statutory medical fee schedule and attendant care hourly limits take effect.
- July 2028 — Statutorily mandated average PIP rate reduction requirement ends
Personal injury protection (PIP) medical coverage options**
- $50,000*** — Medicaid required on at least one named insured1
- Opt out — Medicare A&B required on at least one named insured1
- Healthcare exclusion — available to individuals with a “qualified” health plan2
1 Any resident household member that is not on Medicaid ($50K option) or Medicare (opt-out option) must maintain a qualifying health plan or a no-fault policy from another carrier to qualify for this coverage option
2 A qualified health plan must not exclude or limit coverage for auto-accident related injuries and must not contain a deductible higher than $6,000
** All carriers are statutorily required to offer all options
*** Limit applies to medical portion of loss and applies per individual, per claim
Statutorily mandated PIP average rate reductions
- Unlimited: 10%
- $500,000: 20%
- $250,000: 35%
- $50,000: 45%
- Opt out: 100% medical
- Healthcare exclusion — 100% off medical (for household members that qualify and elect to exclude)
(Reductions based on rates in effect on May 1, 2019)
- Gender, marital status, home ownership, education, occupation, credit score and postal zone
Insurers are prohibited from declining, cancelling, non–renewing, limiting coverage, charging, reinstatement fees, or increasing premiums to eligible persons solely based on failure to maintain insurance before January 1, 2022.
Bodily injury (BI) minimum limits
- Minimum BI limit is increased from $20K/$40K (per person/per accident) to $50K/$100K.
- Default minimum is $250K/$500K, policyholder must sign election form to select lower limit.
Medical fee schedule
- 200−250% of Medicare fee schedule, based on statutorily created criteria.
- Statutorily created reimbursement rates for services not included in Medicare fee schedule
(Phased in over 2 years beginning July 2021)
Other claims highlights
- “Order of priority” changes transfer most uninsured occupants and non-occupants (e.g. pedestrians) to the MACP and exclude some non-Michigan residents.
- Tort language broadened to allow lawsuits for economic damages in excess of PIP coverage.
- Family attendant care limited to 56 hours per week. Carriers are permitted to negotiate additional hours.
- Additional requirements for independent medical examinations.
- Automobile Insurance Fraud Unit created within the Department of Insurance and Financial Services (DIFS) to investigate and refer cases for prosecution. Allows fines and criminal penalties for fraudulent insurance acts.
- Michigan Assigned Claims Plan (MACP): Most medical losses limited to $250K coverage. Mandatory procedural changes designed to improve claimant cooperation.
- Carriers allowed to offer a “managed care” option.
Note: The above summary includes some of the key items that were contained within the bills that comprise the 2019 no-fault reform. For all of the specifics, please refer to S.B. 1 and H.B. 4397. Please also be aware that H.B. 4397 makes certain changes to S.B. 1 – the two bills together comprise the 2019 no-fault reform, and to the extent that the two conflict, H.B. 4397 replaces the conflicting language in S.B. 1.