Michigan had the highest no-fault premiums in the country before the bill was signed May 30, and there are many changes outlined in the 120-page legislation. The changes will be phased in by July 2020.
Grand Haven Farmers Insurance agent Brian Knoper said he believes the fee schedule included in the bill will be the biggest factor in lowering premiums. In previous legislation, he said "whatever is reasonable" was the guideline for what medical facilities could bill an auto insurance company for an accident.
Now, the reform outlines a fee schedule that caps the amount medical providers can charge auto insurers at 200-250 percent of Medicare reimbursement, but it will not be phased in until July 2021.
“So, if an MRI average cost is $900 … it may be $1,500 that an auto insurer will pay," Knoper explained. "But now that cost is fixed and that will help stabilize the market so that the cost for auto accidents is more predictable. Instead of it being whatever they’re going to send us and us having to prove that that bill is reasonable, now we actually have a fee schedule and we can say, ‘Look, this is what we pay for these. This is it.’
“It’s going to be a lot like the physical damage to a vehicle," he added. "We know what it will cost to fix a fender. We never knew what it was going to cost to fix a broken arm. Now, we’re going to know.”
Insurance Alliance of Michigan Executive Director Tricia Kinley called the fee schedule “a long overdue and very welcome part of the reform.”
Another opportunity for drivers to save on their premiums is the choices now available for PIP (personal injury protection), which insurers are required to roll back for eight years beginning July 1, 2020. It also allows senior citizens and those with qualifying private health insurance to completely opt-out of PIP coverage.
There are three levels of coverage for those on Medicaid: $50,000, $250,000 and $500,000. The unlimited PIP coverage option that was previously required is still available, as well.
Insurers are required to cut average PIP portion premiums by 10 percent on unlimited plans, 20 percent on $500,000 plans, 35 percent on $250,000 plans, 45 percent on $500,000 plans, and 100 percent for senior drivers on Medicare and drivers with qualifying private health insurance.
In Kinley's eyes, giving drivers the choice in PIP coverage is one of the most significant changes.
“After 40-plus years of having a mandated, unlimited benefit that many consumers didn’t want or need, drivers finally have a choice in what type of PIP coverage best suits their needs,” she said.
Thomas Baker, an attorney with Michigan Auto Law, said he’s concerned the PIP coverage aspect will be a cost shift, as many health care plans in Michigan exclude auto accident coverage since it was previously covered by no-fault insurance.
“The health care plan you have through your employer most likely has an auto exclusion, meaning there’s no coverage under that policy if you’re in a car accident — because, historically in Michigan, no-fault insurance would pick that up,” Baker said. “Health care insurers are now not going to be able to exclude for auto quite as easily. I think maybe we’ll see deductibles go up for employer health care plans as they struggle with an influx of claims that aren’t being paid by no-fault for employees who aren’t Medicare or Medicaid eligible.”
Baker also expressed concern that the cost shift could be to government programs, such as Medicaid or Medicare, and taxpayers will be footing the bill.
As for the barring of use of non-driving factors to set rates, factors such as sex, marital status, credit score and ZIP code rating are no longer legal for insurers to use. However, insurers can use related factors, such as insurance scores and territory ratings, according to Knoper. Despite the fact that insurers can still use related factors to set rates, Knoper believes it will be beneficial overall.
“I think it’s going to help the overall state," he said. "It may have some adverse impact on some of our rural counties. Urban areas are going to see benefits and rural areas may see some negatives because of us going away from those rating factors.”
Kinley does not believe the elimination of the non-driving factors will necessarily reduce premiums, but instead shift around costs.
Catastrophic care coverage
One of the biggest decisions drivers will have to make is whether or not to keep the unlimited PIP coverage in their insurance policies. Some may have auto coverage in their health care plans — but for those who do not, is it necessary?
Traumatic brain injuries (TBI) and spinal cord injuries are the main injuries that would require unlimited coverage. According to Baker, funds will quickly run dry in the lower level plans for those who suffer TBIs.
“That first six months for a closed head injury is crucial. That first six months for a spinal injury is crucial," Baker said. "If you’re on a $50,000 plan or a $250,000 plan, you’re going to burn through that in a couple of weeks with those types of injuries."
According to the Centers for Disease Control and Prevention, TBI-related hospitalizations that were caused by motor vehicle crashes have decreased since 2006 by 34 percent. In 2006, motor vehicle crashes caused 27.6 percent of those hospitalizations. That number dropped to 18.1 percent in 2014.
“Nobody thinks they’re going to be the one that bounces their head off their steering wheel at 80 mph, right?" Baker said. "Nobody thinks it’s going to be their daughter that is in a side-impact collision and breaks her back and severs her spinal cord. Nobody thinks something like that is going to happen.
“The biggest concern that I would have is to make sure you’ve got a health care plan in place that is going to pick up any care and treatment that no-fault would have prior to you electing a lower premium.”
Knoper echoed the statement, saying that each person will have to decide how much risk they want to expose themselves to depending on if their health insurance covers auto accidents.