Hello Friends. We hope you are staying safe during these extraordinary times. While many of us are working remotely and businesses have slowed down, this is a good time to reflect upon the status of our new no-fault law. Yes, the no-fault law has been changed, but that does not mean that it is a "done deal." There are many poorly drafted and poorly conceived policies that ought to receive legislative attention. Here are a few:
PART I: THINGS THAT ARE ALREADY IN EFFECT
One of the things that was to go into effect immediately on the passage of the new law was the $250,000 cap for uninsured (but not disqualified) persons. See EndNote. That is, many uninsured people become injured as occupants of vehicles owned by others, or as pedestrians. Under the old law, these people were just as entitled to unlimited no-fault benefits as anyone else.
The new law changes this. Uninsured occupants and non-occupants will now claim directly from the Michigan Auto Insurance Placement Facility/Michigan Assigned Claims Plan (MAIPF/MACP) with a cap of $250,000. This was supposed to be immediately effective. However, and fortunately, the Department of Insurance and Financial Services (DIFS) issued an extremely important order (DIFS Order #49, September 24, 2019):
"...this order notifies the MAIPF that any attempt to rely on the amendments made by [the new law] to cap benefits at $250,000 prior to July 2, 2020, is prohibited."
Therefore, the old rules remain in effect for now and only until July 1, 2020. While the MAIPF/MACP has filed a lawsuit seeking an injunction against the DIFS Order, the no-fault insurers appear to be complying with it. This is terrific news for so many who were uninsured and suddenly without the excellent benefits available to everyone else.
The problem remains however for those uninsured persons who will be injured after July 1, 2020. There is some hope that the legislature will recognize the injustice of restricting no-fault coverages to those who are the named insureds, and excluding those who are passengers of the named insureds or those who are struck by named insureds. This injustice is particularly poignant for children who had no ability to choose and pay for no-fault coverages. This remains an area for legislative attention.
PART II: THINGS THAT GO INTO EFFECT ON JULY 1, 2020
The biggest thing that goes into effect on July 1, 2020, indeed one of the centerpieces of the new law, is the so-called "PIP Choice." As of July 1st, people will be permitted to choose no-fault allowable expense coverage of less than the unlimited coverage that has been mandated since 1973. People will still be permitted to buy unlimited coverage, but will now be allowed to buy limits of $500,000 and $250,000. In some cases, people will be able to buy $50,000 limits or even opt out of PIP allowable expense coverage entirely. Those who get this newsletter are well aware of the need for unlimited coverage in the event of a catastrophic motor vehicle accident. Please help educate your friends and family of the dangerous "choice" that will soon be available. Urge everyone to get unlimited coverage.
While PIP Choice is an obvious danger, there are hidden dangers even for those of us who will choose unlimited coverage. The general rule of no-fault auto insurance coverage is that, if we are injured in a car crash, our own insurance covers us. That is the general rule. However, there are exceptions to the general rule. In certain situations, injured people claim from the insurer of the vehicle involved in the crash, and not your own personal policies. These situations include:
- Passengers of vehicles in the business of transport such as ambulances and limousines;
- Passengers of employer owned vehicles; and
- Motorcyclists who are hit by cars.
In each of these situations, the injured person claims from the insurer of the vehicle in which they are an occupant (vehicles for hire or employer owned vehicles) or, in the case of motorcyclists, from the insurer of the car involved in the crash. These priority rules have not changed with the new law. However, the consequences of these rules have changed. Starting July 1, 2020, any of these vehicle owners may take the option to buy less than unlimited coverages. If they do, anyone who will be covered by them will be forced, by operation of law, to take those coverages. This is so even if the passenger or motorcyclist has chosen unlimited coverages for themselves!!
To restate this problem: these unchanged priority rules may actually take away choices that people have made. Injured persons in the above situations will not make their own choices as to PIP coverage; rather, they will be prisoners of the choices made by the vehicle owners. In some situations, this could work out to the advantage of the injured person (e.g., if they purchase a low limit and the vehicle owner has purchased a high limit). However, we are most concerned about those who choose higher coverages and are denied that choice by operation of these priority rules.
We are convinced that this was unintentional, and rather simply yet another consequence of the poor process that resulted in this law. We therefore are optimistic that this too can be fixed. Perhaps the solution is to keep the priority rule in place, but allow personal insurance to serve as excess coverage for any person who has chosen higher limits than those chosen by the vehicle owner.
PART III: THINGS THAT GO INTO EFFECT ON JULY 1, 2021
Another centerpiece of the new law is the imposition of fee schedules, effective July 1 2021. The basic scheme is to use a multiplier of the Medicare fee schedule. The basic multiplier is 200% of the approved charge for the corresponding CPT code. The law recognizes that not all services have a corresponding CPT code. For these charges, the new law imposes a discount on the charge based on what the provider previously charged for the same service as of January 2019. That discount is 45%. I.e., the provider will only be allowed to charge 55% of what that provider charged for the same service as of January 2019.
This 55% figure will apply to those whose services are not reflected by a CPT code, for example:
- TBI residential services;
- Guardian/conservator services;
- Transportation services;
- Various services related to barrier free home accommodation; and
- Case Management services.
We are not certain as to how the legislature came up with this figure. Some say that this was negotiated with this hospitals in mind; i.e., the hospitals felt that they could live with a 55% cap on non-Medicare charges. Whatever the rationale, a 55% charge cap will utterly destroy the service providers mentioned above.
Yet again, we do not believe that the legislature intended this horrific result. So again, we are optimistic that this can fixed in the year plus that we have before these draconian rules go into effect.
SUMMARY
We will continue to report on developments as the new no-fault law continues to roll out. Call or email with any questions. Be safe!
ENDNOTE: These new rules have caused confusion between and among different categories of uninsured persons. This should help. Under the new rules, there are the following categories of uninsured people:
- Uninsured owners of motor vehicles/motorcycles involved in the crash: DISQUALIFIED (under both the old rules and the new rules).
- Uninsured occupants of other vehicles: Previously eligible for unlimited coverage; now eligible through the MACP with a $250,000 cap.
- Uninsured non-occupants (e.g., pedestrians): Previously eligible for unlimited coverage; now eligible through the MACP with a $250,000 cap.
- Uninsured occupant of a vehicle for hire: Previously eligible for unlimited coverage; eligible through the vehicle owner and limited to the vehicle owner's choice of coverage.
- Uninsured occupant of an employer owned vehicle: Previously eligible for unlimited coverage; eligible through the vehicle owner and limited to the vehicle owner's choice of coverage.
