For years, Michigan has had some of the highest auto insurance rates in the country. The state legislature passed Senate Bill 1 last year to reduce the cost of auto insurance. Although this is welcome financial relief for many drivers, those changing their insurance coverage should take note: Michigan drivers who opt out or reduce Personal Injury Protection (PIP) may foot the bill elsewhere.
Most Michigan motorists welcome the overhaul to their costly premiums, and just a few days ago Gov. Gretchen Whitmer and the Michigan Department of Insurance and Financial Services announced that the average statewide PIP medical savings under the state’s new auto insurance law will exceed the law’s requirements.
Under the new auto insurance law, Michigan drivers will have a choice in the amount of PIP medical coverage they purchase on policies issued or renewed after July 1, 2020. PIP medical coverage pays allowable expenses for medical care, recovery, rehabilitation, and some funeral expenses, and typically represents almost half of an individual driver’s premium. Michigan is the only state where unlimited PIP medical continues to be an option.
The new law allows motorists the option of opting out of unlimited PIP medical coverage in their auto insurance plans. 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? The Senate Fiscal Agency estimates the cost-shift to the Medicaid Insurance program, for example, would increase more than $65 million over ten years.
However tempting the saving on auto insurance, drivers who are considering eliminating PIP need to make sure their health insurance will cover the costs associated with an auto accident. Although they may see savings upfront, in the end, drivers without proper coverage may end up with large co-pays on their health insurance, and significant unpaid medical bills due to these changes.
The attorneys at O’Reilly Rancilio are available to answer questions business owners and drivers may have regarding the PIP and other changes to the law. To speak with an attorney visit our website or call 586-726-1000.