08 Jul July 2019 HL Quarterly Update
Michigan’s Auto Insurance Changes: Things to Know
Governor Gretchen Whitmer signed historic no-fault auto insurance reform legislation on May 30, 2019. After decades of debate over the 1973 auto insurance law, both the Senate and House approved a bill to lower Michigan’s highest-in-the-nation auto insurance rates. The law ends Michigan’s unique requirement that motorists purchase policies that guarantee unlimited lifetime medical benefits in the event of catastrophic crash injuries. Instead, insurers will now be able to sell reduced coverage policies and will simultaneously be required to reduce medical premiums for eight years. All changes within the bill will be phased in over time, beginning in July 2020.
One of the lesser-known provisions of the law could have a significant impact on worker’s compensation cases. Previously, if an employee was involved in a motor vehicle accident that was allegedly work-related, and the employer’s worker’s compensation carrier denied the employee’s claim for benefits, the employee’s auto carrier would begin paying benefits. Thereafter, the auto carrier would almost certainly attempt to have the accident deemed work-related and seek reimbursement of medical expenses paid from the worker’s compensation carrier. In the past, when auto carriers were successful in having an injury classified as work-related, worker’s compensation carriers had to repay the auto carrier in full for all medical expenses incurred. However, if the worker’s compensation carrier had initially agreed to pay benefits, they could have satisfied the outstanding medical bills under the cost-containment rules, which is much less expensive than reimbursing an auto carrier in full.
The new law states that in 2021, auto carriers will begin paying health care providers under a fee schedule tied to the Medicare fee schedule that is already in place. This is expected to cause a significant decrease in the overall expense incurred by the auto insurance carriers, and by associating would decrease the exposure of worker’s compensation carriers if they are forced to reimburse the auto carriers.
Here are a few other commonly asked questions about the new law:
Q: How much will rates go down?
A: It will depend on the level of coverage you choose. Drivers will have five options for personal injury protection (PIP) coverage that carry savings from 10% (those who want to remain covered for unlimited lifetime benefits) to 100% (senior citizens and drivers with qualifying health care benefits, such as Medicare or private insurance, who can totally opt out of PIP coverage). The PIP portion is responsible for roughly 40% to 50% of an insurance bill.
Q: How long will the savings last?
A: The rate reductions in PIP coverage begin in July 2020 and are be guaranteed for eight years.
Q: Will there be any other savings?
A: Additional savings will come from the annual Michigan Catastrophic Claims Association fee, which is paid by all drivers, and funds unlimited benefits for people severely injured in a car crash. This fee was scheduled to go up to $220 in July 2019, but for people who choose other levels of coverage or totally opt out of PIP coverage, the fee will drop to $43 per year.
Q: What if I keep unlimited benefits?
A: The associated fee for this level of coverage will likely go up because there will be fewer people in the pool to cover the risk.
Q: What about reimbursement rates for home care?
A: For people still receiving unlimited medical benefits, home attendant care reimbursement will be capped at 56 hours per week for family members.
Governor Whitmer Creates Department of Labor and Economic Opportunity
On June 6, 2019, Governor Gretchen Whitmer signed an executive order consolidating the State’s workforce and economic development functions under the umbrella of the newly-created Department of Labor and Economic Opportunity (LEO). “This new department will make Michigan a home for opportunity by improving how our state approaches workforce and economic development to ensure that everyone has a path to a high-paying job,” Whitmer said. LEO is broadly charged with building a strong state economy by developing and implementing policies that enable greater opportunity for workforce and economic development, including a focus on closing the skills gap and boosting economic potential for businesses.
Governor Whitmer’s order also creates new commissions within LEO, including the Workers’ Disability Compensation Appeals Commission (WDCAC) and the Unemployment Insurance Appeals Commission. Previously, all Workers’ Compensation and Unemployment appeals were heard by the same commission, but these proceedings have now been separated. The WDCAC will have three sitting commissioners, appointed by the Governor, who will preside solely over Workers’ Compensation Appeal cases.
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