It’s been in the news frequently over the last year but there has finally been a resolution to change car insurance for Michigan drivers. In case you somehow managed to miss it, Michigan Legislature recently voted to make significant changes to not only how our state’s auto insurance will work but the way policy premiums can be decided. What do all of these changes mean to the average Grand Rapids driver? Well, that’s still up for debate on how it will all shake out in the end but we’ll start with the changes to Michigan’s No-Fault auto insurance and leave it up to you to form an opinion.
New Options For PIP (Personal Injury Protection)
Michigan is the only state in the USA that mandates all drivers carry an unlimited amount of personal injury protection or PIP on their policy. But having this mandate also means Michigan drivers pay the highest premium in the entire country. In an attempt to curb the cost of insurance premiums, lawmakers have now required insurance providers to offer a variety of options ranging from a continued unlimited medical benefit policy, a $500,000 policy, a $250,000 policy, a $50,000 for Medicaid enrollees and the ability to opt out entirely if someone has other qualified health coverage. In doing so, the Michigan Catastrophic Claim Association Fee would be reduced by 80% for all options other than unlimited coverage.
Empowers Insurance Fraud Division
Auto Insurance Fraud entails someone deceiving an insurance company regarding a claim on their vehicle. This type of fraud can include submitting misleading information or false documentation to support their claim. Every year, insured drivers end up absorbing the cost of this fraud which can add an astonishing $200-$300 more to your insurance premium annually. Changes to Michigan’s No-Fault insurance aim to strengthen the insurance fraud division within the state Department of Insurance and Financial Services to empower law enforcement to crack down on auto insurance fraud.
Eliminates Non-Driving Rating Factors
Did you know that if you are a young male, you’ll pay more for insurance than a female? Or if you that having bad credit can mean your insurance premium will also be higher than someone that has excellent credit? In the past, insurance companies were legally able to base what rate you would pay for insuring the same make, model and year of a vehicle as someone else based on factors such as gender, marital status or the zip code you lived within. The accepted changes look to level the playing field by removing factors that are not driving related.
Implements Fee Schedule
The hope of this change is to end excessive and overinflated health care costs related to auto insurance claims by implementing a fee schedule to cap the amount providers can charge insurers which to date, have often been much higher than the same services charged for patients who have Medicaid or workers compensation. By creating a No-Fault fee schedule based on the Medicare fee schedule, this would govern what charges doctors, hospitals, clinics, rehabilitation facilities and any provider who cares for and treats car accident victims could charge for doing so. Depending on the type of facility involved, whether a substantial portion of its patients are incapable of paying out of pocket, whether it is a freestanding rehabilitation facility or various levels of trauma centers, reimbursement could range from 190% to 250% of the amount payable under Medicare.
While there may be tweaks and small changes moving forward, these changes have been approved and signed to go into effect on July 1, 2020, and remain for eight years. The variable fee schedule to cap medical costs would go into effect July 1, 2021, and start at 200% to 240% of Medicare rates and then be reduced to 195% to 235% of Medicare in 2022, and then followed by another reduction to 190% to 230% of Medicare rates in 2023. It’s still undecided if these new changes to the law will positively impact insurance rates with a reduction but in the end, that is the hope and objective. We’ll have to see how it all plays out.
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