Gov. Gretchen Whitmer recently signed bipartisan legislation enacting sweeping changes to Michigan’s 45-year-old no-fault act. The legislation would “guarantee lower rates for every Michigan driver, protect insurance coverage options and strengthen consumer protections,” according to the governor’s office. Which begs the question, does the new law deliver?
The answer is: not so much.
No-fault law 1973
The Michigan no-fault law in 1973 was an “innovative social and legal response to the long payment delays, inequitable payment structure and high legal costs inherent in the tort (fault) system. The goal was to provide victims of motor vehicle accidents with assured, adequate and prompt reparation for economic losses.” It achieved this goal when it ended tort liability arising out of motor vehicle accidents, except in limited circumstances, and created a system of first party no-fault benefits. In exchange, the law insulated the at-fault driver from liability for the victim’s economic losses. Accident victims were eligible to receive no-fault benefits for the life of their injury, so long as the treatment was reasonable and necessary and related to the accident. It was significantly better coverage for an injury at the time than anything available under private health insurance, Medicare or Medicaid.
Changes ahead for PIP
The recently passed reforms guarantee lower rates for drivers for eight years beginning in July 2020. Consumers can then choose different levels of Personal Injury Protection (PIP) coverage. They can continue unlimited coverage, reduce the coverage or opt out of coverage altogether if they are seniors or have qualified private health insurance. All three options have coinciding PIP rate reductions. What happens when drivers choose the new options?
Commercial health insurance
In the past, drivers with commercial health insurance could elect to coordinate their employer-provided health insurance with no fault. Meaning, health insurance would pay for accident-related treatment first, but the accident victim’s no-fault insurer would cover co-insurance, deductibles or treatment expenses that were outside the scope of that victim’s health insurance contract. Under the new law, drivers may now elect to exclude PIP coverage from their auto insurance altogether if they certify that they and all members of their household have health insurance that covers auto accident related injuries. Health insurance then becomes the only source of medical expense indemnity for that person, as well as every member of their household. Unfortunately, job loss is common after a serious injury and is often accompanied by the loss of employment-related benefits, like health insurance. In a not-at-fault setting, the injured person can now sue the other driver to try to bridge the coverage gap, assuming that person has adequate liability limits. But resolving a tort lawsuit is just not a quick or inexpensive process. And the health-insured person who excludes no fault is just plain exposed, if the accident is their fault, and their injuries prevent them from continuing employment.
Medicare and Medicaid
The new law also shifts accident costs to Medicare. Now seniors may now “opt out” of the no-fault system altogether. However, benefits available under Medicare are more limited than what was previously available under no fault. For example, Medicare Part A hospital coverage is not all inclusive and enrollees often have co-pays and deductibles that can be expensive. Also, there are certain treatments, and treatment settings, that Medicare does not cover or limits.
The new law does not allow Medicaid beneficiaries to opt out, but they can elect to cap their no fault benefits at $50,000. If the beneficiary was at fault for the accident, Medicaid is all that is left after the $50,000 cap is exhausted. And in a not-at-fault setting, now the Medicaid beneficiary’s only remedy is to sue the at-fault driver. That’s hardly a cost savings for the taxpayers or the courts.
Not much savings
The economic exposure and coverage uncertainty that will result from this landmark legislation’s reduced options and opt outs simply did not exist before. Sadly, consumers will face less coverage and more cost.