Consumers and businesses alike have complained about the high costs of no-fault insurance required under Michigan’s no-fault auto insurance system. One of the features of Michigan’s no-fault law that critics claim is responsible for the higher cost is the unlimited lifetime medical and rehabilitative benefits for personal injury protection (PIP) that exist in the law. There is also debate over no-fault auto insurance medical payments being more generous than similar payments made under other insurance plans such as workers compensation and health insurance.
The Michigan Catastrophic Claims Association (MCCA) reimburses no-fault auto insurers for amounts paid in excess of $500,000 per claim under PIP and this is divided among all drivers with a per vehicle charge on their insurance policies every year. The 2012 assessment was $175 per vehicle.
In an effort to reduce the cost of no-fault insurance, proposals debated in the last legislative session would have changed Michigan’s no-fault auto law by eliminating the unlimited lifetime medical and rehabilitative benefits for personal injury protection (PIP) and replacing it with a single PIP limit of $1 million and placing limits on payments for lifetime medical care provided by a family member. The proposed changes also included requiring medical claims to conform to the “reasonable and customary” standard found in other insurance coverages such as workers compensation and health insurance.
Supporters of these changes point out that Michigan is the only state that offers unlimited medical treatment under its PIP coverage and that a million dollar limit would cover 99 percent of all medical claims under no-fault. After that, they say, other insurance – such as health insurance, Medicare, Medicaid etc. – would kick in to provide further coverage. Supporters also say that business owners subsidize the high cost of unlimited PIP coverage because they pay the per-vehicle charge, but most work related claims are covered under workers compensation and not no-fault. Supporters claim that if these changes are implemented the savings on the no-fault PIP charge would be $100 per vehicle.
Opponents of these changes say that Michigan’s big insurance companies are behind the efforts to cap PIP benefits and that these companies refuse to guarantee the cost savings they claim. They argue that drivers will have to purchase more insurance to protect themselves from underinsured drivers and that seriously injured drivers will end up on welfare programs to pay for their care after they exhaust their auto insurance limits. Opponents claim that the insurance companies refuse to publicly disclose how they calculate the PIP assessment on every vehicle because they want to hide their profits from public view.
So will small business support the proposed changes to Michigan’s no-fault auto insurance law when they resurface this session? NFIB/Michigan will be surveying our small business members with the arguments laid out in this post to find out.