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Auto Insurance Reform Bill Drastically Changes Landscape of Michigan Insurance

Originally posted in Lansing State Journal:

Last Wednesday morning, Gov. Gretchen Whitmer signed an auto insurance reform bill that drastically changes the landscape of the Michigan insurance industry. The new law will alter many facets of the insurance code, from allowing consumers to pick their choice of medical benefits to implementing a fee schedule for medical providers.

Drivers have already begun to ask questions about the process; here's what we know so far:

When does the new law take effect? July 1st, 2020, with the new medical fee schedule taking effect July 1st, 2021.

What if I want to keep my unlimited Personal Injury Protection (PIP) coverage? Consumers will have the ability to keep unlimited medical coverage if they so choose. Policyholders will be able to select from unlimited coverage, $500,000 and $250,000. Seniors and those permanently disabled on Medicare will be allowed to opt out of purchasing PIP entirely, and Medicaid recipients will be able to purchase a PIP policy with $50,000 in coverage.

Can I opt out of PIP if I have health insurance that covers automobile accidents? Yes. If you have a coordinating plan, you will be able to waive PIP on your auto policy. However, keep in mind that your health insurance may not reimburse you for all expenses related to an auto accident so it may be beneficial to keep medical coverage on your auto policy. Your health insurance may cap the number of visits or place limitations on the coverage network you can utilize.

Are auto insurance premiums going to decrease? The law includes mandatory rate rollbacks, but they only apply to the PIP line of your policy. It is possible that the cost of other coverages, such as bodily injury liability and uninsured motorist’s liability coverage may increase as claimants will be able to sue the at-fault party for damages above their PIP limits.

How will non-driving factors affect coverage? The new law will prohibit the use of non-driving factors, including sex, marital status, home ownership, credit score, educational level attained, occupation or postal code. While credit scores themselves cannot be used, insurers can still use credit information, a credit report, or an insurance score. While the use of zip codes is prohibited, insurers will still be able to use territory as a rating factor. There will be exceptions for educational level and occupation to allow groups like alumni associations and professional organizations to still obtain discounts for their members.

What are the mandatory rate rollbacks? 10% for unlimited coverage, 20% for $500,000, 35% for $250,000, 45% for $50,000, and 100% PIP premium reduction for Medicare or enhanced opt-outs.

What is the new fee schedule? Medical providers will only be allowed to bill insurance companies 200% of the Medicare base, decreasing to 190% in year three. Certain facilities will have slightly higher reimbursement rates, depending on the percentage of Medicaid patients they treat and if they are trauma centers.

What is the revised mini-tort provision? If an insured has liability only on their policy and are not at-fault in an accident, they can collect up to $3,000 from the at-fault party. The current limit is $1,000.

What is happening to the state minimum required liability limits? They are increasing from $20,000 per person, $40,000 per occurrence to $50,000 per person, $100,000 per occurrence.

How will the Michigan Catastrophic Claims Authority (MCCA) be affected? The MCCA will have to provide more detailed information on how the fee is developed.

Will the law affect those who are new to buying coverage? Insurance companies will no longer be able to charge re-entry penalties, limit available coverage, refuse to provide or continue coverage or increase premiums for an individual solely because they failed to maintain mandatory auto insurance coverage.