Hello everyone. The next big changes of the new no-fault law are upon us. This edition of the newsletter will focus on those big changes. We'll address the commonly asked questions related to these changes.
I. PIP CHOICE
A. THE CHANGES
Effective July 1, 2020, Michiganders will no longer be required to purchase unlimited catastrophic no-fault coverages. Readers of this newsletter are no doubt aware of the importance of maintaining unlimited no-fault coverage. Insurance coverage exists to protect, particularly against catastrophic events. No-fault insurance has been unique in providing long term residential rehabilitation services, custodial care, barrier free home accommodations, and vehicle modifications. This is the stark lifeline between being able to adequately and with dignity manage the ravages of catastrophic brain and spinal cord injury. No other commercially available insurance or governmental benefits (e.g., Medicare, Medicaid) provide this type of protection. No one should give this up.
However, the law permits consumers to purchase less. These are the other options:
3. $50,000 (for Medicaid recipients).
4. Zero. Those with Medicare or qualifying health insurance plans may opt out entirely from no-fault coverage. They may ask the question: I have medical coverage, why do I also need no-fault? The answer, as stated above, is that none of these other coverage's provide
coverage. That's what no-fault is for, why it is unique.
It is natural to be concerned about ever rising insurance premiums. We would have preferred a solution that requires insurers to offer significant no-fault deductibles. The law was previously changed in December 2012 to allow no-fault insurers to offer any level of deductible they want. Talk to your insurer about having significant no-fault deductibles ($5,000, $10,000 or even beyond). But maintain your unlimited no-fault.
Nevertheless, starting July 1, 2020, we can expect to see claims with injured people who have purchased coverage's of $500,000 or less. This will result in huge changes in the way things have been done since the advent of no-fault in 1973.
B. FREQUENTLY ASKED QUESTIONS
One commonly asked question is whether the new PIP choice will affect coverage for injuries existing prior to the new changes. The simple answer is NO. If you were injured prior to the changes, your coverage remains as it was. Of note, the coverage remains lifetime coverage, but the services you receive from medical providers will be subject to fee schedules as of July 1, 2021. In other words, your medical providers will, in most cases, receive less in payment than they received prior to the change.
What about the change for uninsured occupants and non-occupants?
When the new law was passed effective June 11, 2019, uninsured persons who were entitled to coverage (i.e., those who were not disqualified for operating their own uninsured vehicles) were required to claim through the Michigan Assigned Claims Plan (MACP) with a $250,000 cap on benefits. This was immediately effective. However, on September 24, 2019, the Department of Insurance and Financial Services (DIFS) issued an order suspending the effective date of this new law until July 1, 2020. Although the insurance industry is pursuing litigation against the suspension, insurance companies largely appear to be complying with the DIFS order. This means that all persons who are injured prior to July 1, 2020, and who are otherwise eligible for no-fault benefits, will continue to receive full coverage (again, subject to the outcome of the insurance litigation on the DIFS order).
Determining what choice has been made.
In the past, there have always been a myriad of questions as to whether there exists valid/viable coverage for services rendered. Now there will be some additional questions: will the insured/patient have no-fault coverage sufficient for services rendered? I.e., what "choice" did the injured person make (the patient's declaration sheet should be requested)? If less than unlimited, what other claimants are there to the limited fund? What other resources does the patient have? In addition to private funds, does the patient have a viable third party claim against which a lien may be asserted? Providers will be well advised to carefully consider these questions before taking the patient on.
Who gets paid first?
For those who choose less than unlimited coverage, we will have a new concern that we've never previously faced under the no-fault law. Consider the case of a person who becomes catastrophically injured, but who has chosen limited coverage (e.g., $50,000; $250,000; $500,000). That person will have lifetime bills that will quickly exceed the coverage limits chosen. But medical and other bills will very quickly accumulate: EMS charges; acute hospital care charges; in-patient rehabilitation; out-patient rehabilitation. There will likely be a battle over which of these providers will be entitled to the limited available insurance resources. How will those resources be allocated? First in time of service? First in line to make a claim? We urge providers to now contemplate additional protective language in their initial financial responsibility forms. Here is a suggestion:
"As consideration for treatment rendered by PROVIDER, Patient agrees that PROVIDER has a lien on any financial recoveries obtained by Patient. As further consideration, Patient agrees that PROVIDER is entitled to be paid out of first money received or available from any other source, on a primary basis over any other competing claims to such proceeds."
II. IMPLICATIONS OF THE NEW LAW ON PRIORITY RULES
Interestingly, the new law maintains the old priority rules without change. HOWEVER, the implications of the new law on those priority rules are significant. While a virtue touted by the new law is that of consumer choice, there are several priority rules where the patient's insurance will be determined as a matter of law and without choice.
The biggest example of this is in the case of motorcycle versus motor vehicle accidents. The priority rule remains that the owner/occupant of the motor vehicle involved is the highest priority for motorcyclists injured in motor vehicle accidents. The new law of course permits that motor vehicle owner/occupant a wide range of coverage choices. The motorcycle rider will be bound by that choice, even if the motorcyclist would choose much higher limits on their personal policy.
This is one of the many examples of poor drafting and conception of the new law. It is hoped that this will be changed. But as we approach July 1, 2020, this is still the law.
III. INCREASED RESIDUAL BODILY INJURY (RBI) LIABILITY COVERAGE LIMITS
Since 1967, the minimum RBI coverage required under law was $20,000 (per individual) and $40,000 (per occurrence). Effective July 1, 2020, drivers will be required to have $250,000/$500,000 (with the option to buy down to $50,000/$100,000).
What has not been well publicized is that we have all lost the "tort immunity" against medical expenses from motor vehicle accident that we have had since the advent of no-fault in 1973. That is, because no-fault medical expense coverage was unlimited, there was practically no medical expense that wasn't covered by no-fault. We therefore all had immunity from being sued for medical expenses.
That has now been changed. Effective July 1, 2020, if we should injure a person who has chosen less than the unlimited coverage of the past, we will no longer have immunity from suit for medical expenses beyond the coverage that our victim has chosen. In other words, we are now about to become exposed to tort liability for primary medical expenses beyond the coverage chosen by our potential victims.
Therefore, it behooves all of us to buy liability coverages far higher than what we've been accustomed to in the past. Unfortunately, this will also offset any savings wrought by lower no-fault limits.
IV. FEE SCHEDULES
A word on fee schedules. These do not go into effect until July 1, 2021. Therefore, we will continue to comment about these developments in the year to come. One quick correction, however. On page 9 of the Miller & Tischler no-fault brochure (since corrected) there appears an error in the effective date of the attendant care changes that are part of the new law. The brochure states that the changes are effective on July 1, 2020. That is incorrect. The attendant care changes are not effective until July 1, 2021. Profuse apologies for any confusion.
MILLER & TISCHLER NEWS
Miller & Tischler is proud to announce that our associate Martin Hogg has been appointed to the Michigan Automobile Insurance Placement Board of Governors. MAIPF is the agency that oversees the operation of the Michigan Assigned Claims Plan (MACP). Congratulations Martin!