What You Need to Know About Michigan’s New No-Fault Auto Insurance Law

Governor Gretchen Whitmer made highly-contested automobile insurance history in May last year when she signed Senate Bill 1 into state law. The bill – which took effect on July 1 – introduces sweeping changes to Michigan’s once-unique auto insurance system and ends years of bitter fighting and back-and-forth lobbying between insurance companies and patient advocates.

The wording of the bill is complex, but in a nutshell, it lets certain drivers (emphasis on certain) opt out of unlimited lifetime personal injury protection or PIP benefits and choose different coverage packages. Previously, Michigan was the only state to demand unlimited PIP. That made it easier to provide quality of life for accident victims, but the tradeoff was sky-high rates and premiums. 

According to The Zebra’s 2019 State of Auto Insurance Report, Michigan had the highest insurance rates in the country, the average annual cost $300 more than in Louisiana, the next most expensive state. And Detroit, specifically, had the country’s most expensive annual car insurance rate at $5,464 per year, $2,000 higher than New Orleans, the second-highest city. Those prices put policies out of reach for many Michigan drivers and led to a lot being punished for driving without papers. 

“Consumers having the best choices to increase their access to affordable health care is key to a family’s economic security,” says Anita Fox, director of the Michigan Department of Insurance and Financial Services. “This bill definitely tries to address the issue of lowering rates in Detroit and addressing uninsured drivers. Private companies are more restricted in how they analyze coverage risk. They can’t use credit scores, zip code, home ownership status, etcetera. It pushes for additional restraints while also providing customization.”

State Rep. Sherry Gay-Dagnogo, a fiery combatant of the bill who now identifies as an Independent following Whitmer’s decision, says the bill represents “broken promises and sneaky terminology.” She says, “It doesn’t help the people that it was promised to – those of us who are most vulnerable, out of work, or who’ve been criminalized. If you keep your insurance at the highest levels, you’re penalized, and the savings only come when you sacrifice coverage for cost. At that point – and aside from the fine print for people who, for instance, might be on Medicaid – we’re putting cost before quality of human life.” 

The bill is also supposed to impose tighter restrictions to cut down on rate discrimination, better check instances of fraud and force lower rate from providers, but Gay-Dagnogo says it’s not all that it seems. “They can’t use zip codes, but they can use census tracking and that’s worse. Insurers are exploiting another system to dodge lowering fees. The thing is full of loopholes, and Detroiters suffer. The people know they’ve been hoodwinked,” she says. 

How are you affected by this new policy? Here’s a quick rundown of the basics:

1. What are the new coverage plans? According to the Department of Insurance and Financial Services, there are a number of coverage options available to motorists that can be tailored to individual budgets and health insurance restrictions. Some of them include: 

• Up to $500,000 in coverage per person per accident
• Up to $250,000 in coverage per person per accident
• Up to $50,000 in coverage per person per accident (Medicaid only)
• PIP opt-out (only for those on Medicare Part A & B, or with a coordinated health plan)

2. Do I have to lose my unlimited coverage? No, you don’t. Unlimited PIP benefits are still an option under the new law.  And if you don’t make any selection, your coverage defaults to unlimited regardless. 

3. What happens if I have Medicaid? Claimants under Medicaid are limited to the $50,000 coverage package and will most likely be unable to coordinate health and auto insurance under a lowered premium because Medicaid is a secondary payment outlet. According to Michigan Auto Law’s Steve Gursten, “Medicaid won’t cover unlimited PIP and remains a secondary payer with the ability to seek reimbursement for funds exceeding PIP coverage.”

4. Does this affect any specific insurance-covered service? Certain services provided by insurance providers have also been changed. Regarding attendant care, for example, according to Michigan Auto Law, “new Michigan no-fault law auto insurers are not required to pay for more than 56 hours per week of no-fault in-home, family-provided attendant care.” Liability coverage also increased to $50,000 per person and $100,000 for all injured/single accidents.

5. How can I get the lowest rates for my coverage? If you have what’s called “coordinated coverage,” or accident-specific coverage from a medical insurance provider like Blue Cross Blue Shield or HAP, you can opt out of PIP entirely.