Workplace Law Lowdown | Q&A: Important Information for Employers Regarding Upcoming Changes to Michigan No-Fault Law
Michigan enacted legislation significantly changing the No-Fault Act. For Michigan employers and residents the changes will have an impact on their premiums, benefits, and selection of policies. Some of the most important changes are addressed below.
Q: What is the No-Fault Act?
A: Under the No-Fault Act, your automobile insurer is required to pay allowable expenses, work loss benefits,replacement services, and survivor’s loss benefits. Together these categories of benefits are often referred to as personal injury protection benefits or simply Personal Injury Protection (“PIP”) benefits.
Q: What Changes Have Been Made to the Michigan No-Fault Law and When Are They Effective?
- PIP Limits: Prior to July 1, 2020, all PIP coverage for all insured individuals in Michigan was unlimited coverage. Effective July 1, 2020, insureds have the opportunity to choose their PIP coverage.
- PIP Opt-Out: Effective July 1, 2020, insureds have the opportunity to opt out of no-fault medical benefit coverage if they have Qualified Health Insurance, or if the insured is covered by Medicare.
- Michigan Mini-Tort: Effective July 1, 2020, the amount an individual can recover for vehicle damages increases from $1,000 to $3,000.
- Michigan one-year back rule tolling: Effective July 1, 2020, the one year tolling rule is now tolled from the date that an insureds claim for benefits is formally denied by the insurer, rather than the date of the accident.
- Residual bodily change: Effective July, 2020, the new law increases the minimum bodily injury coverage an insurance company is required to offer. The intent is to protect insured from claims by other injured people.
Q: What is Personal Injury Protection (PIP)?
A. PIP covers an individual’s allowable expenses resulting from auto accidents. Allowable expenses include medical care, attendant care, pharmaceutical, vocational, rehabilitation, and long-term institutional care expenses. Work loss benefits are wage replacement payments, available for up to three years after an accident. Replacement services are expenses incurred for receiving assistance with day-to-day living, including such things as laundry, housekeeping, lawn work, and snow removal. When an automobile accident results in a death, a dependent may be entitled to funeral and burial expenses, as well income that the decedent would have otherwise earned.
Q: What are the New PIP Options Under Michigan’s New Auto Insurance Law?
A: Instead of mandatory, lifetime coverage for allowable expenses, Michigan residents now have five potential options:
- No coverage. This option is only available if the insured has qualified health insurance, and the spouse, and any resident relative have qualified health coverage or a no-fault policy with coverage for allowable expenses. Insureds can also opt out if they are covered through Medicare as discussed below.
- $50,000 per individual and per loss occurrence. This option is only available if the insured is enrolled in Medicaid and any spouse and all resident relatives have qualifying health insurance or a no-fault policy with coverage for allowable expenses.
- $250,000 per individual and per loss occurrence.
- $500,000 per individual and per loss occurrence.
- Unlimited per individual and per loss occurrence.
Q: What is Qualified Health Coverage?
A: Qualifying health insurance includes Medicare coverages, or health and accident coverage that “does not exclude or limit coverage for injuries related to motor vehicle accidents” and for which the individual deductible is $6,000.00 or less per individual. Many individuals may have qualifying health insurance from their employer insurance programs.
Q: As An Employer, What are My Obligations to Employees In Connection With this Change in the Law?
A: The Michigan Department of Insurance and Financial Services (DFIS) has required health care insurers to develop plan participant communications regarding whether a person’s health coverage is “qualified health coverage.” If your plan is insured, your carrier will provide this information to enrolled employees. If your plan is self-funded, your carrier will likely provide you with a template which you can use or revise. Self-funded plans will be expected to provide such communications to inquiring employees.
Q: How Could This Change in the Law Affect My Employee Health Care Costs?
A: If your employee health care plan qualifies as Qualified Health Coverage, and employees elect reduced PIP coverage, your auto claims experience could increase. It is very difficult to say by how much because of the unpredictability and volatility of auto claims. As a high level illustration, one large Michigan insurance carrier indicated that less than 1% of total health care claims that it processes are for auto claims. If your employee health care benefits are fully insured or experience rated, you are already paying auto claims as primary under Michigan law and this will represent no change. If your employee health care benefits are self-funded and your plan document provides that you pay auto claims secondary to any auto insurance coverage, you will bear the expense of any increased auto claims resulting from an employee election to reduce PIP coverage below the claims associated with a particular auto accident.
Q: If My Company Self-Funds Employee Health Benefits, What Can We Do To Limit Our Exposure?
A: First, you should talk to your claims administrator about your Company’s auto claims experience to assess whether this change in law is likely (or not) to result in any meaningful increase in costs for you. Many employers are making no plan changes in the short term and waiting to see if employee PIP coverage elections actually result in any meaningful change to auto claims experience. It is possible for an employer to amend its secondary auto coverage to include a dollar threshold, such as $250,000. Such an amendment would mean that an employee with less PIP coverage than that threshold would be personally liable for the gap amount before employee health coverage kicks in. Adopting such an amendment should be accompanied by an effective employee communication/education campaign to make sure individuals understand the consequences of electing PIP below your secondary auto coverage threshold. Alternatively, your Company could amend its employee health care plan to cause it not to qualify as Qualified Health Coverage, in which case your employees will not be able to elect PIP options 1 and 2 listed above.
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