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What Do We Know About No-Fault Reform?

A bipartisan agreement has been sent back to the Chambers for a vote after Governor Gretchen Whitmer, Speaker Lee Chatfield, and Senate Majority Leader Mike Shirkey announced they have reached a compromise on reforming Michigan’s auto no-fault law this morning. Keep in mind that even though an agreement is expected to be in place, we are not for certain yet when everything will take effect. We will keep you updated throughout the process and informed on how all these upcoming changes will affect you. Our overview of the bill is as we currently understand it and may change as further details emerge in the coming weeks!

We will keep you updated as to how exactly the reform is going to affect your policies and coverage as we have more information. For now, we know some basic details of what is included in the bill. Highlights include:

  • Allows an insured person to select an Unlimited, $500,000 or $250,000 Personal Injury Protection (PIP) option. 
  • Allows seniors on Medicare to opt out of purchasing PIP coverage entirely, and allows Medicaid recipients to purchase a PIP policy of $50,000. 
  • Permits enhanced coordination with health insurance. For insureds who select the $250,000 PIP option, the bill will allow for 100% PIP reduction with health coverage that covers injuries related to an auto accident.
  • Includes a mandatory rate rollback on the PIP line of the auto policy. The rollbacks are: 10% for Unlimited coverage, 20% for $500,000, 35% for $250,000, 45% for $50,000, and 100% PIP reduction for Medicare or Enhanced opt-outs.
  • Increases current minimum coverage of residual liability insurance from $20,000/$40,000 to $50,000/$100,000.
  • Places a fee schedule in place, starting July 1st, 2021, at:
    • 200% of Medicare base, decreasing to 190% in year 3
    • 230% of Medicare for providers rendering treatment that 20% or more of total treatment is provided to individuals under Medicaid, the provider does not receive compensation for 20% or more of the total treatment, or is a freestanding rehabilitation facility. Decreasing to 200% in year 3.
    • 240% of Medicare for Level 1 & 2 Trauma Centers until stabilized and transferred. Decreasing to 230% in year 3.
    • 250% for providers that provide 30% or more of total treatment to individuals under Medicaid or do not receive any compensation for 30% of more of the total treatment.
  • Increases the mini-tort provision from $1,000 to $3,000.
  • Prohibits the use of most non-driving rating factors.
  • Requires a statutory form be created by the Department of Insurance and Financial Services (DIFS) that requires the insured's signature acknowledging coverage level. This is a consumer protection issue since the current no-fault system has been in place for over 40 years.
  • Insurers must file their rate for approval before use as opposed to the old file and use procedure for rate approval.
  • Prohibit insurer from charging a re-entry penalty, limiting coverage available, refusing to provide or continue coverage, or increase premiums for auto insurance for an individual solely because the individual failed to maintain mandatory auto insurance coverage.
  • Puts in statute the current auto insurance fraud task force within DIFS to investigate insurers, health providers, drivers or anyone who is defrauding the system for personal benefit.

As currently written, prohibiting the use of non-driving factors prohibits insurers from using sex, marital status, home ownership, credit score, educational level attained, occupation, or postal code when establishing rates on any type of auto insurance policy. There are a few important things to note in regards to non-driving factors:

  1. While credit scores themselves cannot be used, this does not prevent an insurer from still using credit information, a credit report, or an insurance score. 
  2. While the use of zip codes is prohibited, insurers will still be able to use territory as a rating factor. This is an important difference that may limit price spikes occurring between adjacent zip codes, but not prohibit the overall use of territory by an insurer when establishing rates.
  3. There will be exceptions for educational level and occupation, so long as they are used solely for a common enterprise, economic, or social affinity or relation. This is to allow groups like alumni associations and professional organizations to still obtain discounts for their members. 

We will keep you informed as we know more about how no-fault reform will be affecting you!