A. Vince Colella
Moss & Colella P.C.
On July 2, 2020, the consumer driven amendments to Michigan’s Automobile No Fault Act will take effect. I am talking, of course, about the elimination of mandatory lifetime benefit coverage for “allowable expenses” — defined as “reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery, or rehabilitation,” and commonly referred to as medical (and attendant care) benefits. Correspondent with this change, Michigan residents will have a choice to purchase automobile insurance policies that carry medical coverage limits designed to lower premiums. Under the new law, there are mandatory reduction rates associated with each tier of coverage, intended to guarantee a decrease in premiums from 10 to 45 percent.
Motorists will be given the option of 5 plans: (1) unlimited medical coverage; (2) medical coverage up to $500,000; (3) medical coverage up to $250,000; (4) medical coverage up to $50,000 (Medicaid option); (5) and an ability to “opt out” of the no fault system all together (Medicare option). Presumably while most people will opt for the coverage limits capped between $250,000 and unlimited, the industry anticipates a significant ratio of drivers who are enrolled in Medicaid will choose the $50,000 minimum coverage limit.
However, for Medicaid enrollees, the selection of this option may become a source of frustration, as the statute is fraught with legislative caveats. Due to the comprehensive nature of the no fault statute in terms of coverage beyond the policy holders themselves, the Act is replete with references to spouses and residential family members. The amendments are no different. Under MCL 500.3107c the Medicaid option requires that not only the applicant be enrolled, but also requires that the person’s spouse and resident relatives carry other health or automobile insurance that provides for payment of medical expenses and does not exclude auto related injuries. Alternatively, the spouse or relative must be Medicare A or B members or Medicaid members. Moreover, the applicant or named insured will be required to sign an acknowledgment with his/her automobile insurance carrier affirming that they have acknowledged the risks associated with the coverage options and presumably be required to demonstrate that their spouse and resident relatives qualify.
For those who wish to opt out of the medical benefits of their auto policy entirely, they would be permitted to do so if they are “qualified” (covered under Medicare). However, similar to the minimal coverage election available to Medicaid enrollees, to opt out of coverage all together, in addition to the applicant or named insured being “qualified,” so too must the person’s spouse and resident relatives. Meaning that all blood relatives within the home must be covered under Medicare or a health (or auto) policy that does not exclude auto accident injuries. Further, those who choose to opt out will be required to certify that all persons in the home are “qualified.” They will also be required to sign a waiver with their auto insurance carrier acknowledging that PIP coverage is available for purchase and acknowledge the risks associated with waiving PIP coverage under the policy. It sounds like an administrative nightmare at best; in the least, very difficult to ensure that policy holders will fully understand the significance of what they are signing away.
Other less significant changes that take effect on July 2 include a bump up in mini-tort coverage and the imposition of “utilization review.” In terms of the mini-tort, maximum coverage limits will increase from $1,000 per accident to $3,000. This will allow drivers, who have been involved in an accident and not determined to be at fault, to recover up to $3,000 from the at fault driver’s insurance carrier for reimbursement of property damage deductibles.
Additionally, physicians (and hospitals) who render treatment for accidental bodily injury covered under the No Fault Act are required to submit medical and billing records to the patient’s auto insurer or Catastrophic Claims Association (for claims in excess of $580,000) for “utilization review.” In theory, this will allow auto insurance companies to slash medical bills based upon a unilateral evaluation of the “appropriateness” of both the “level and quality” of treatment provided based upon “medically acceptable standards.” The standards for utilization review will be set by the Department of Insurance and Financial Services (“DIFS”). The fear from the medical provider perspective, of course, is that the new legislation will make it easier for auto insurance companies to place limitations on the frequency of visits, novel treatment, and flexibility of necessary accommodations. As of July 2, it is likely that medical billing for auto related injuries will be annexed to the lowest level of expense reimbursement authorized under other health care plans, eventually, giving way to fee schedules that take effect in 2021.
If all of this seems confusing to us as attorneys, imagine how consumers will feel. It seems it’s time for Michigan’s auto insurers to embark on a major public education initiative on the seemingly innocuous phrase, “auto reform.”
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A. Vince Colella is a founding partner of Moss & Colella P.C., a Southfield, Michigan based law firm specializing in personal injury and civil rights. He can be reached at vcolella@mosscolella.com.
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