Employers Will Pay For Michigan's Auto Insurance Overhaul

For years, Michigan has had some of the highest auto insurance rates in the country. The state legislature passed Senate Bill 1 last spring to reduce the cost of auto insurance. Most Michigan motorists welcome this overall to their costly premiums.

The new law allows motorists the option of opting out of unlimited Personal Injury Protection (PIP) medical coverage in their auto insurance plans on July 1, 2020. This option is expected to save drivers hundreds on their auto insurance premiums. Motorists will instead have PIP choices that require insurers to reduce premiums, or if they have a healthcare plan that covers auto injuries, the option to drop PIP altogether.

This change poses new challenges for employers as exposure to medical bills from auto accidents shifts to health insurance plans. What could this cost employers if a large number of employees ditch PIP and opt for their work-based plans instead? Although the answer is still unknown, the Senate Fiscal Agency estimates the cost-shift to the Medicaid Insurance program, for example, would increase more than $65 million over ten years.

The impact of Senate Bill 1 isn’t limited to drivers and employers. Healthcare providers are uncertain if private insurance plans will reimburse for the expenses they incur treating patients who opted out of PIP. As a result, Metro Detroit healthcare providers are expecting to lose millions in revenue under the new bill.

On the backend, the auto insurance reform may hurt motorists’ wallets as well, but in a different way; drivers may end up with large co-pays on their health insurance, and significant unpaid medical bills due to these changes.