The Michigan No-Fault law and Michigan automobile law changed dramatically this month with the sale of new Michigan auto policies to policyholders. For the first time since the no-fault law was introduced in the early 1970s, motorists throughout the state can now buy policies with limited PIP (personal injury protection) options.
PIP coverage acts as medical coverage for individuals injured in a car accident. For the past 47 years, all Michigan policies sold had unlimited PIP or unlimited medical coverage. This meant the auto insurance carrier had to pay for all medical expenses related to a crash that private health insurance did not cover.
But now motorists can purchase plans that only have $500,000 in PIP coverage, $250,000 PIP coverage, and $50,000 for certain individuals on Medicaid. Some folks who are eligible can opt out entirely.
The changes have caused an uproar in the state which has reverberated throughout hospital systems, insurance industry buildings, lawyer offices and courtrooms. Some of the changes are positive (higher liability minimums), but some of the changes are outright wrong and will only cause more problems for Michigan drivers and passengers in the coming years.
And some of these changes are problems that are getting little attention right now. The following is a list of some of the problems with the new Michigan no-fault law, in particular problems nobody is talking about.
Medicare Beneficiaries Should Not Have Been Eligible to Opt-Out:
Under the new law, Medicare beneficiaries who meet certain requirements are now able to completely opt-out of maintaining PIP medical coverage when they purchase car insurance in Michigan. This is a complete change from before, when all drivers had unlimited PIP benefits, which paid for all hospital and doctor bills related to a Michigan car accident, with no dollar limitation or time limit.
Under the new system, there are two groups of people who can completely opt-out of purchasing PIP coverage: (1) Persons with private insurance that pay all auto accident claims without exclusions, and (2) Medicare beneficiaries meeting certain requirements.
Although I don’t agree with the policy change, I can understand the ability for people covered by certain private plans to opt-out of PIP coverage under the new system. For example, Blue Cross Blue Shield of Michigan may have certain broad plans that will cover many of the large expenses that result from horrible car crashes, such as hospitalizations, surgeries, physical therapy, and occupational therapy.
But Medicare is not one of those health plans. Medicare does not cover many of the treatment protocols and options available to individuals with private plans. It most certainly does not cover the same products and services an unlimited PIP plan covers, especially if the injuries are severe.
Instead, Medicare beneficiaries, which include vulnerable senior citizens as well as individuals disabled by Social Security, are going to find themselves in a very frustrating bind following a car accident. They will not be able to get the same level of care they enjoyed previously.
Many doctors won’t see them. The treatment they do get will often be cursory. This is due to the limitations and caps Medicare has for such services as physical therapy, doctor visits, post-surgical care, in-home care, home modifications, and durable medical equipment.
In addition, Medicare will want reimbursement for 100% of what it pays out to a beneficiary following a car crash. When a beneficiary files a negligence claim against the at-fault parties for causing the wreck, Medicare will have a lien on any settlement money the injured person receives from the negligent party’s insurance company. This lien can often take away a huge portion of the settlement money from the injured person.
Medicare beneficiaries should not be put in this position. Because insurance is complicated, and the Michigan no-fault law and what it entails is super complicated, most folks on Medicare will have no clue what they are giving up when opting out of PIP coverage.
It is wrong and should have never been permitted by our state leaders.
Car Owners Involved in Accident Must Have Auto Insurance to Get Compensation:
The new law, unfortunately, maintains the status quo when it comes to the requirement that car owners involved in a Michigan car accident must maintain car insurance on the vehicle involved in the accident to be eligible for compensation.
For example, if you are driving your own car, and that vehicle is not insured because the auto policy lapsed, you cannot make a claim for PIP benefits or pain and suffering. This is true even if you did not cause the accident! So if you are hit by a drunk driver while operating your uninsured vehicle, you are out of luck for everything even though you were completely innocent in causing the crash.
This requirement should have been removed as we move to a tort-based auto system. Yes, a car owner should not be eligible for PIP benefits if he or she failed to maintain PIP benefits on the vehicle involved in the crash. But to prevent a person from obtaining pain and suffering compensation from a negligent driver simply because of a lack of insurance is cruel and unnecessary in a quasi-no-fault world.
I am not aware of any other state that requires its drivers to maintain liability insurance on a car to be eligible for compensation for damages caused by a negligent driver. Michigan should join the rest of the country and abandon this outdated model.
The Threshold Injury Requirement:
Another major problem with the new Michigan no-fault law is that individuals who opt out of PIP must still show a “threshold injury” to get money for pain and suffering.
The fact people who totally opt out of PIP coverage must still show a threshold injury to get even one nickel in compensation for their pain and suffering is ridiculous. And more to the point, it goes against the entire “grand bargain” that is the basis of the Michigan no-fault law.
A brief review to understand the unfairness is needed. When the Michigan no-fault law was passed in the early 1970s, there was a general understanding or compromise. In return for the prompt payment of medical expenses, lost wages, nursing care and other benefits following a Michigan auto accident, an injured individual would have to meet certain criteria to get pain and suffering compensation from the at-fault driver and owner.
This criterion involved demonstrating a “threshold injury.” Under the law, there are three threshold injuries: (1) death, (2) permanent and serious disfigurement, and (3) serious impairment of body function.
Most claims for compensation following a car crash in Michigan involve a serious impairment of body function (SIBF). Although the rules for how and what an injured person needs to show to prove a SIBF have changed over the years, the gist is just because you are involved in a car crash in Detroit, Grand Rapids, or Lansing does not mean you are entitled to compensation. Instead, a person must demonstrate the car accident changed his or her general ability to lead a normal life.
Under Michigan law, a hospital visit with a few follow-ups typically is not sufficient. Instead, an injured person must incur a somewhat prolonged amount of medical treatment, coupled with a meaningful reduction in an individual’s ability to do hobbies and activities to demonstrate a serious impairment of body function.
A person who has opted out of PIP coverage should not have to show this to be eligible for compensation. They are already giving up medical benefits and saving the insurance industry lots of money. Again, if we are moving to a tort-based system, we should follow what the other 49 states do and allow compensation for all folks injured in a crash.
Utilization Reviews:
Under the new auto insurance policies that are being sold across the state, insurance carriers for the first time will be able to force medical providers (doctors and hospitals) that treat car accident victims to utilization reviews.
Basically, much like a managed care plan – such as an HMO – State Farm and Allstate will now be able to influence the type of treatments, products, and services they will permit and pay for. They can do this by requesting a written explanation from the doctor as to the necessity of a given treatment. The provider will then have to submit patient treatment and billing records to the auto carrier, explaining why the service or product is necessary.
These utilization reviews serve to do a number of things. First, they will scare off a lot of good doctors from wanting to ever treat auto accident victims. The paperwork and big brother aspect of the utilization review process just won’t be worth the time and effort.
Second, it prevents auto accident victims from receiving the care they so desperately need. Instead of completing the second course of physical therapy that is beneficial to an injured person, the insurance carrier can use the utilization review to cease treatment altogether. This will lead to substandard care and sub-optimal results.
These are just a few of the problems with the new Michigan no-fault law. If you have any questions about the new rules or the Michigan no-fault law in general, please contact our office at 1-800-LEE-FREE (1-800-533-3733). We have a dedicated team of professional Michigan car accident attorneys ready to answer your questions.
Video Transcript
So the Michigan No-Fault law, the new policies are getting sold this month and they’re getting sold as we speak. They are completely different. We have a huge change in the law. For the first time in 45 years, you can choose a policy that does not have unlimited PIP or PIP, personal injury protection coverage forever.
If you got in a car accident, your PIP coverage would cover all medical bills related to the accident that health insurance didn’t cover for life. There was no limitation. Well, now in return for supposedly cheaper insurance, although we’ll see if that actually happens, you can choose policies for unlimited, $500,000 in PIP coverage, $250,000 in PIP coverage, or even less if you’re eligible.
There are a few folks that can even opt out in total, meaning they get no PIP coverage. Those folks are people on Medicare or people who have a private health insurance plan that pays all auto accident claims. You know, there’s not going to be too many folks that fit into that group, but there will be a few.
I urge people to be careful, especially the folks who can opt-out. Medicare isn’t going to cover a whole lot if you’re in an auto accident. The rehab, the doctors’ bills, prescriptions, physical therapy, even surgery. Some of the things that you would easily be able to get if you have PIP coverage, aren’t going to happen if you’re on Medicare.
And even if you have Blue Cross that covers auto and you opt-out of a PIP, Blue Cross doesn’t cover that much stuff either. I mean, they limit your chiropractic treatment, your PT. You’re going to have to get referrals to see certain doctors that you wouldn’t need to. Just you need to be careful and think about what you’re giving up.
I urge people to purchase at least a minimum of $250,000. I think that’s what most people are going to get in PIP coverage. That way you’re at least protected.
On the other hand, you’re also able to purchase more bodily injury coverage. This is the coverage that protects you if you cause an accident or someone is driving your car and causes an accident.
For the first time ever, people are going to be able to sue you if you cause an accident, not only for the pain and suffering but medical bills, lost wages, and other items that go above and beyond the other person’s PIP coverage.
So if you have assets, if you own a house, any type of assets, you need to protect yourself in case something happens because you’re going to see cases that are going to be worth millions of dollars because of the medical bills that didn’t even exist before this change in the law.
So I urge everybody to purchase at least the $250,000 default bodily injury now. And frankly, if you’ve got a job and you own a house, you should purchase way more than that because one mistake can cause absolute catastrophic, real financial ruin.
Bodily injury insurance is not that expensive. You can talk to different insurance agents. I encourage you to talk to different insurance agents, get priced out, and these are just some helpful hints here as we move into a new world of Michigan automobile insurance.
