How Much PIP Coverage Should I Get in Michigan?
With Michigan now offering different choices for no-fault coverage, people wonder how much car insurance they need to purchase. More specifically, how much PIP coverage do I need and what are my options?
The Michigan no-fault law changed dramatically in 2019 when Governor Whitmer signed sweeping changes to auto insurance law. Under the old rules, all car insurance policies in Michigan had unlimited medical PIP (personal injury protection) coverage. If you were injured in a car or truck crash, the car insurance would be responsible for paying all hospital and medical bills related to the crash that health insurance would not cover. There was no dollar or time limitation for medical benefits.
However, now auto insurance companies in Michigan offer limited PIP coverage choices for the first time. Therefore, people can choose a few different options when purchasing auto insurance. An explanation of the options is listed below. It is important to understand that PIP coverage only refers to medical coverage. Under the law, people can still obtain lost wages and replacement services separate from their listed PIP coverage.
Option 1: Unlimited PIP Coverage:
This is the same as the old policies. This coverage allows a policyholder, and persons covered under this policy (including resident relatives) to receive unlimited allowable expenses for their care, recovery, and rehabilitation following a motor vehicle accident.
The advantage of unlimited PIP coverage is it provides productions and services not covered by health insurance. This can include different types of rehabilitation, treatment, and attendant care. It provides the most medical coverage and the most benefits. There is a mandatory 10% rate reduction in the cost of PIP coverage per vehicle.
Option 2: $500,000 in PIP Coverage
This coverage allows a policyholder to purchase $500,000 worth of PIP coverage. It means your auto insurance company must pay up to $500,000 in medical bills related to an auto accident. Once that amount is exhausted, the at-fault driver or owner is on the hook for outstanding medical bills. There is a mandatory rate reduction of 20% or greater per vehicle.
Option 3: $250,000 in PIP Coverage
This coverage allows a policyholder to purchase $250,000 worth of PIP coverage. There is a mandatory 35% rate reduction on average per vehicle. This is usually the minimum amount of PIP coverage a person can purchase. As explained below, there are other additional options but you must meet eligibility requirements.
Option 4: $50,000 – Medicaid Beneficiary
This coverage allows a policyholder to purchase $50,000 worth of PIP coverage, but only if they qualify. Under this selection, there is a mandatory rate reduction of 45% per vehicle. To qualify for this option, the applicant or named insured must:
- Be enrolled in Medicaid; and
- The person’s spouse and all resident relatives must also be on Medicaid, have other “qualified health coverage”, or have PIP coverage through a different auto policy.
Under the law, qualified health coverage means either (1) health and accident coverage that does not exclude or limit coverages for injuries related to auto accidents and has an annual individual deductible of $6,000 or less, or (2) coverage under both Medicare Part A and Part B.
This option is appealing if you have limited income or limited financial resources. However, there are strict eligibility requirements. In addition, Medicaid does not pay for most car accident-related treatment. So individuals who choose this option are playing with fire. Once they run out of the $50,000 in coverage following a crash – which happens quickly given the crazy high cost of healthcare – they cannot rely on Medicaid as a backstop.
How much PIP Coverage Should I Get If I am on Medicaid?
I recommend that individuals on Medicaid who want limited PIP coverage select the $250,000 option. The cost difference is not much. And the amount of medical insurance you get from the $250,000 option is 500% greater than the Medicaid option. It will allow you to receive better, more comprehensive care. It can make the difference between getting a much-needed surgery or getting rejected.
Option 5: Medicare Opt-Out
A person may completely opt out of all PIP coverage if the person satisfies the following two conditions:
- The person is covered under both Part A and Part B of Medicare, and
- The person’s spouse and all resident relatives covered by the policy have “qualified health coverage” or are covered under another auto policy with PIP coverage.
A person choosing this option, and any other individuals covered by the same auto policy, will not have any PIP medical coverage. They will have to rely upon Medicare and any private health insurance for the payment of auto accident expenses. And like Medicaid, Medicare does not automatically pay for auto accident treatment.
Unless you have to, it is not advisable to select this opt-out option. Choosing to opt-out leaves you with a lot of unnecessary risks. Some doctors refuse to bill Medicare for auto accident treatment because they are fearful they won’t get paid. In addition, Medicare will only cover a certain amount of rehabilitation visits, and flat out does not cover many services, such as long-term care, residential treatment, transportation, and other products and services.
Further, Medicare and the federal government always want its pound of flesh. Medicare will assert a lien on any settlement the plaintiff receives for a pain and suffering claim. This doesn’t happen when PIP pays for medical bills because the auto carrier cannot assert a lien on the pain and suffering settlement. Again, I recommend selecting at least the $250,000 PIP option.
Option 6: $250,000 PIP Opt-Out
This is one of the more controversial options and it is complicated. A person can also opt out of PIP if they have “qualified health coverage” that covers car accident-related injuries, and if the named insured’s spouse and any resident relatives have qualified health coverage. This option is an exclusion of all PIP benefits. In fact, the statute describes this exclusion as follows: “a person subject to an exclusion under this subsection is not eligible for personal protection benefits under the insurance policy.”
This option is not available to most people because most individuals are not eligible. To be eligible, a person must have “qualified health coverage.” Under the rules, qualified health coverage is health and accident coverage that does not exclude or limit coverages for injuries related to auto accidents and has an annual individual deductible of $6,000 or less.
What does this mean? This means a person must have health insurance that covers auto accident-related treatment, with no limitations or exclusions. In reality, almost all health insurance policies, from HAP to Priority Heath to most Blue Cross Blue Shield of Michigan plans have limitations on auto accident treatment. With the rise of self-insured ERISA policies, almost all health insurance carriers have exclusions or limits on payments for auto accident-related medical treatment. Therefore, a person with such a plan can’t opt out of PIP coverage.
Other Problems with PIP Opt-Out
In addition, individuals should be aware that private health insurance plans are not as robust as PIP plans for the types of treatment available. Many health insurance plans limit the number of physical therapy and chiropractic sessions, out-of-pocket costs, prescription reimbursement, and other expenses.
Last, like Medicare and Medicare, if health insurance pays on a car accident claim, it will assert a lien on the negligence pain and suffering case. So if you recover $50,000 in a settlement resulting from a car accident, and Blue Cross asserts a $30,000 lien, almost your entire settlement gets washed away because most of the money goes back to Blue Cross. This does not happen if PIP pays the medical bills because a PIP carrier – like State Farm or Allstate – cannot assert a lien on a negligence settlement.
PIP Medical Options – Cheaper Does Not Equal Better
There is a lot to consider when purchasing car insurance in Michigan. The various PIP options provide choices, but it is important to be smart. Car insurance is not all the same. A cheaper policy does not equal a better policy.
It is important to slowly review the options with your insurance agent and to make an informed decision. Unfortunately, it is this author’s opinion that many car insurance agents don’t know the rules as well as they should, and try to sell the cheapest insurance possible to make a sale. In reality, taking into consideration the cost savings and benefits, most individuals should purchase no less than $250,000 in PIP coverage.
Michigan’s Best No-Fault Law Firm
If you have any questions about the PIP coverage options or the new Michigan no-fault in general, please call or email our Michigan car accident injury lawyers. Our team of car accident injury attorneys and staff are standing by ready to assist. The call is free and we don’t charge a penny until we win your case. Call us at 1-800-LEE-FREE (1-800-533-3733).
