No-Fault Reform and Your Employees
With the upcoming changes to Michigan’s no-fault auto insurance, drivers will have the option to select lower coverage limits, which will result in a greater reliance on their employer-sponsored health coverage. There are certain considerations that both employees and employers should keep in mind.
What is Happening?
In May 2019, Governor Whitmer signed historical no-fault legislation, the first update to the original no-fault law from 1973. The new law intends to provide more affordable auto insurance to Michigan drivers, while giving more coverage options. This reform is a complete overhaul of how auto accident related medical claims are paid. Under the current Michigan No-Fault Law drivers are provided unlimited PIP (personal injury protection) coverage. This covers all claims relating to the medical costs, necessary changes, services, and accommodations for an injured person. With the upcoming change, drivers have the option to select limit less than unlimited, putting a greater reliance on their employer-sponsored health coverage.
The no-fault reform allows drivers the ability to choose their level of protection relating to medical coverage for catastrophic claims. It also mandates a reduction in PIP (personal injury protection) rates, an increase in state minimum bodily injury limits, and prohibits rating based on gender, marital status, education, occupation, credit score, or zip code. All changes are expected to take place following July 2, 2020. The most significant change, the PIP options include:
- Unlimited PIP Coverage
- $500,000 limit
- $250,000 limit
- $50,000 limit – This is the lowest limit available and is only for drivers who are on Medicaid. (Your spouse and other relatives who live with you may be on Medicaid or have other qualified health coverage.)
- PIP Exclusion/Opt out – Either a qualified health plan or Medicare A&B is required for all household members (your spouse and other relatives who live with you) in order to be eligible for opting out of PIP coverage.
Additionally, the Michigan Catastrophic Claims Association (MCCA) fee will reduce to $100 per vehicle for unlimited PIP coverage. For all other PIP selections, the MCCA Fee is not applicable at this time.
For more information read our No-Fault Fact Sheet
While each individual has unique needs and choosing their coverages isn’t a one size fits all approach; Kapnick Insurance Group advises all clients to select the broadest options available to best protect themselves and their assets. Relating to the personal auto policy, Kapnick recommends the following minimum coverages:
- Unlimited PIP (personal injury protection) Coverage
- Bodily Injury Limits of $500,000 per accident/ $500,000 per occurrence
- Uninsured Motorists Limits of $500,000 per accident/ $500,000 per occurrence
- Underinsured Motorists Limits of $500,000 per accident/ $500,000 per occurrence
- Property Damage Coverage of $500,000
- Personal Umbrella Minimum Limit of $1,000,000
It’s important for employers to understand the impact of employees choosing a lower PIP option and thus, a lower level of medical coverage. Relying more on their employer-sponsored health coverage will increase the health plan’s cost exposure.
No matter what type of health insurance you offer, we advise that you encourage your employees to continue to purchase the highest level of Personal Injury Protection (PIP) coverage they can afford. This recommendation is for several reasons:
- If your employee waives or limits the PIP coverage on their auto policy, they are also waiving or limiting several coverages that a health insurance plan does not cover such as:
- In home attendant care
- Door-to-door medical appointment transportation
- Lost wages replacement
- Home & vehicle modifications
- Long term cognitive and speech therapy
- Health plans typically have a limit to how many they will pay for each year
- For those plans with high deductibles the employee would be responsible for paying the deductible out of pocket before their health insurance would kick in and pay.
- In catastrophic claims where the person is injured and unable to return to work, they would eventually lose their employer-sponsored health insurance.
In order to select a lower PIP option–or exclude PIP altogether—drivers must have qualified health coverage. “Qualified health coverage” is health insurance with no limit or exclusion for injuries resulting from an auto accident and has an annual deductible of $6,000 or less per individual. Those choosing a lower PIP option can coordinate benefits with their employer-sponsored health plan.
With Fully Insured Plans:
- The employer pays primary on most auto-related medical claims, whenever they occur—on personal time, or while at work; in a personal or a company-owned vehicle.
- There is not an option on your plan to exclude auto-related medical claims.
- Many of the top health insurance providers are anticipating minimal rate increases.
- For more information read our Fully Insured White Paper
With Self-Funded Plans:
- For ERISA Self-Funded Groups: You can pay primary, secondary, or exclude auto accident-related claims.
- For Non-ERISA Self-Funded Groups: You can pay primary or exclude auto accident-related claims.
- For more information read our Self Funded White Paper