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What You Need to Know About Michigan No-Fault Law Changes Coming July 1


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Michigan is a no-fault state and has some of the most expensive car insurance rates. In an attempt to reduce the financial burden on policy-holders, lawmakers in Michigan have been enacting reforms to the no-fault car insurance policy over the last few years, and new changes are coming down the pike starting July 1, 2021. It's crucial to understand these new laws to choose the best coverage for your needs. It might be wise to consult a comprehensive guide, such as Michigan's guide to Auto Insurance. It's complex, but exploring some of the most critical aspects of these changes gives you a head start in your decision-making.

No-Fault Laws and Unlimited Personal Injury Protection

Michigan No-Fault Law Changes
Image via Flickr by Tobyotter | Licensed by CC BY 2.0

In theory, no-fault laws are there to protect you and ensure you receive proper medical attention if you're injured in a car accident, regardless of who was at fault. However, in practice, this meant that Michigan drivers were mandated to pay for unlimited personal injury protection (PIP) medical benefits, which were intended to cover all the injured person's reasonably necessary medical care, treatment, recovery, rehabilitation, home health care aides, etc., for an indefinite period. The first change to this policy took effect on July 1, 2020. It allowed Michigan motorists to choose different levels of PIP coverage.

New PIP Level Options

Michigan Residents are now allowed to select PIP coverage of $50,000 (if you're enrolled in Medicaid.) Non-Medicaid holders can choose $250,000 or $500,000 in PIP coverage. The reduction in cost for Medicaid recipients is based on the rationale that if you're injured in a car accident, your health insurance will be responsible for covering your treatment rather than your car insurance policy. Medicare insurance recipients are allowed to opt-out of PIP coverage entirely. However, anyone can still opt for unlimited PIP.

A Note of Caution on Limited PIP Options

However, there may be some drawbacks to selecting a limited PIP option. Those who are seriously injured in a car accident and not already on Medicare or Medicaid could face a situation where their health insurance caps. If they have health conditions that require continued care indefinitely, they may be forced onto Medicaid to cover their care. While this won't cost them more, their resources will have to be limited to qualify and continue to receive these medical benefits. This could be problematic if they have financial resources over Medicaid limits.

Changes to Home Health Care

The most significant change occurring on July 1, 2021, has to do with coverage for home health care. The new law stipulates coverage of only 56 hours per week of home care is allowable if provided by a relative, friend, business associate, or anyone living in the same household as the injured party. The prior law allowed for the coverage of 24-hour care for those catastrophically injured in a car accident. However, the new law doesn't apply to attendant care provided by commercial agencies.

The other exception to this rule is if the victim's family or an attorney for the victim challenges this limitation of coverage. In some cases, insurance companies will agree to cover home care beyond 56 hours, if shown to be medically necessary, because the care provided by family or friends is considerably less costly than professional nursing care.

Shifting to a Medicare-based Fee Schedule

Another change that will take effect concerns how health care providers will be allowed to charge for their services. Medical charges will now have to adhere to the new Medicare-based fee schedule, a percentage of what is payable under Medicare. This change will affect all doctors, hospitals, clinics, and other medical providers. This will curtail the practice of inflating bills for private health insurance holders and a positive change that will protect consumers, especially those who will need long-term care after catastrophic injuries sustained in a car accident.

Hospitals will be prevented from charging far more for the same services because a private insurance company is footing the bill. Health care providers will be required to keep charges for medical services up to 240% of what they charge Medicare for the same services until June 2022. After that, this will be set up to 235%, and then up to 230% over the next two years. This helps consumers who otherwise face the risk of insurers capping their benefits or raising their premiums.

Other Options for those Needing Excess Medical Care

If a driver has accident-related medical bills above the PIP medical benefits coverage level they have through their auto insurance under Michigan no-fault insurance law, they're permitted to sue the at-fault driver in a third-party tort lawsuit. This will hold the at-fault driver responsible for covering the payments for their present and future excess medical bills and any health care bills that go above and beyond their PIP coverage.

Suing for Damages not Covered by Insurance

There's another instance where a driver can sue for additional funds, which is a mini-tort lawsuit. As of July 1, 2020, the amount covered by a mini tort lawsuit increased from $1,000 to $3,000. However, particular conditions must be met to pursue this type of lawsuit.

  • Your car must be insured.

  • You must have costs your insurance won't cover.

  • Your car must have sustained physical damage.

  • The at-fault driver must be known.

  • This claim doesn't include coverage for injuries (which are covered by PIP.)

  • Comparative fault is applied to the assessment of damages. For example, if you sue the other driver for $1,000, and the case finds that the at-fault driver was only 75% at fault, you would only receive $750.

It's important to note that if you're hit as a pedestrian and don't carry auto insurance, for any reason, you'll be limited to $250,000 in benefits.

An Exception Regarding Uninsured Drivers

The $3,000 limit does not apply to uninsured, at-fault drivers, who can be sued for the total amount of damage done to another vehicle in the collision. Since there's no insurance to cover the damages, the uninsured at-fault driver is held personally liable. However, if you were injured or your car was damaged in a collision and you weren't at fault but were driving without insurance, you can't recover any damages or file a lawsuit against the at-fault driver.

These new changes can be confusing, so it's important to educate yourself as no-fault law continues to evolve and face ongoing reforms. If you or a family member have been injured in a car accident, you may want to contact the knowledgeable team at Goodman Acker. With over 150 years of combined experience, the attorneys can help you understand your rights.