Michigan Insurance Reform of 2019

On June 11, 2019, Governor Gretchen Whitmer signed Public Act 21 of 2019 into law, fundamentally transforming Michigan's auto insurance system. This was the most sweeping reform to Michigan's no-fault insurance law since its inception in 1973. While the reform promised lower premiums and more consumer choice, it also introduced significant changes that directly affect how accident victims receive care and compensation. Understanding these changes is critical for anyone involved in a Michigan car accident.

Why Reform Happened

For decades, Michigan had the highest auto insurance rates in the nation. Detroit drivers routinely paid $5,000 or more per year for basic coverage. The primary driver of these costs was Michigan's unique guarantee of unlimited, lifetime Personal Injury Protection (PIP) medical benefits. While this provided extraordinary protection for accident victims, it also created a system with no cost controls, making insurance unaffordable for many residents.

PA 21 of 2019 attempted to address affordability while preserving some level of protection for injured people. The law took effect on July 1, 2020 for new policies and renewals after that date.

PIP Coverage Choices

The most visible change was giving Michigan drivers a choice in their PIP medical coverage level. Before the reform, everyone was required to carry unlimited lifetime PIP coverage. Now, drivers can choose from several tiers:

• Unlimited coverage: The traditional option, covering all reasonable and necessary medical expenses for life with no dollar cap
• $500,000 limit: Covers up to $500,000 in accident-related medical expenses
• $250,000 limit: Covers up to $250,000 in accident-related medical expenses
• $50,000 limit: Available only to individuals who have qualified health coverage (such as employer-sponsored insurance or a Marketplace plan) that covers auto accident injuries
• Opt-out (no PIP medical): Available only to individuals covered by Medicare (Parts A and B)

Each lower tier comes with a corresponding premium reduction. However, choosing a lower coverage level means that if your medical expenses exceed your cap, you may be personally responsible for the excess, or you must rely on your health insurance, which may have its own limitations.

The Medical Fee Schedule

Perhaps the most impactful change for accident victims is the introduction of a medical provider fee schedule. Before the reform, medical providers treating auto accident patients could charge their "usual and customary" rates with no regulatory cap. The new law imposed fee schedules that limit what providers can charge for treating auto accident injuries:

• For policies issued or renewed after July 1, 2021: Medical providers are limited to 200% of the Medicare fee schedule for the first two years, then capped at 190% thereafter (with annual adjustments)
• In practice, the long-term cap settles at approximately 195% of Medicare for most services after the phase-in period
• Attendant care (in-home help from family members): Capped at 56% of the charge that would apply to a similarly credentialed provider, which in effect means family caregivers are reimbursed at roughly 56% of what a professional home health aide would charge

The attendant care reduction has been particularly devastating for families who provided round-the-clock care to catastrophically injured loved ones. Before the reform, family members could be fairly compensated for leaving their jobs to provide nursing-level care. Now, that compensation is drastically reduced.

Impact on Medical Providers and Access to Care

The fee schedule has had a chilling effect on medical providers' willingness to treat auto accident patients. Many providers, particularly specialists and rehabilitation facilities, have reduced or eliminated their acceptance of no-fault patients because the reimbursement rates do not cover their costs. This has created access-to-care problems for accident victims, especially those with catastrophic injuries requiring specialized treatment.

Providers who previously maintained dedicated auto accident injury programs have closed them. Some traumatic brain injury rehabilitation facilities have shut down entirely. Accident victims in some parts of the state now face longer wait times and fewer options for treatment.

Rate Rollbacks

The reform mandated insurance premium reductions tied to the coverage level chosen:

• Unlimited PIP: Guaranteed minimum reduction of 10% of the PIP portion of the premium
• $500,000 PIP: Minimum reduction of 20%
• $250,000 PIP: Minimum reduction of 35%
• $50,000 PIP: Minimum reduction of 45%
• PIP opt-out (Medicare): Minimum reduction of 45% on the PIP portion

These reductions apply only to the PIP portion of the premium, not the entire policy. Additional reforms also prohibited the use of non-driving factors like zip code, credit score, sex, marital status, home ownership, and education level in setting rates, though implementation and enforcement of these prohibitions have varied.

The Michigan Catastrophic Claims Association (MCCA)

Before the reform, all Michigan policies included an MCCA assessment, a per-vehicle surcharge that funded a state pool for catastrophic claims exceeding $580,000. The reform made this assessment optional for those who choose coverage levels below unlimited. If you select $500,000 or lower PIP coverage, you do not pay into the MCCA pool, but you also lose its protection if your expenses exceed your chosen limit.

Fraud Authority

PA 21 created the Michigan Department of Insurance and Financial Services (DIFS) Automobile Insurance Fraud Authority, tasked with investigating and prosecuting auto insurance fraud. The fraud authority has the power to investigate claims of fraud by both claimants and providers. While combating fraud is a worthy goal, some advocates worry that fraud investigations can be used to deny or delay legitimate claims.

How the Reform Affects Your Claim Today

If you are involved in an accident today, the reform affects you in several important ways:

1. Know your coverage level: Your PIP medical benefits are limited to whatever tier you selected. If you chose $250,000 and your treatment approaches that limit, you need immediate legal guidance about coordinating with health insurance and other options.
2. Provider availability may be limited: Not all providers accept no-fault patients. Your attorney can help connect you with qualified providers who still treat auto accident injuries.
3. Your health insurance matters more: If your PIP is exhausted, your health insurance becomes the next line of defense. Understanding how these coverages interact is more important than ever.
4. Third-party claims are critical: With reduced PIP benefits, pursuing a third-party claim against the at-fault driver becomes even more important to recover adequate compensation.
5. Attendant care families are harmed: If a family member is providing in-home care, the compensation they receive is drastically reduced under the new fee schedule.

Pre-Reform vs. Post-Reform Policies

A critical distinction exists between policies that were in effect before July 1, 2020 and those issued or renewed after that date. If your accident occurred while you were covered under a pre-reform policy, the old rules (unlimited PIP, no fee schedule) may still apply to your claim. The determination depends on when your policy was last issued or renewed relative to the reform effective date.

This distinction is legally complex and has been the subject of ongoing litigation. If you were in an accident and are unsure which rules apply to your coverage, consult with an attorney who understands the PIP claim process under both the old and new systems.

Protecting Yourself Under the New Law

Given the reduced protections under the reformed system, Michigan drivers should carefully evaluate their auto insurance coverage. Consider maintaining unlimited PIP if you can afford it, especially if you have family members who depend on you or if you have limited health insurance. Additionally, carrying robust uninsured and underinsured motorist coverage provides an essential safety net when the at-fault driver cannot fully compensate you for your losses.