Compliance News | February 26, 2020

MI’s New Auto Insurance Law May Affect Group Health Plans

In an effort to reduce auto insurance premiums, effective July 1, 2020, Michigan will no longer require residents to carry unlimited personal injury protection (PIP) on their auto policies.

Michigan Auto Insurance Health Plans

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PIP covers medical expenses, lost wages, in-home care and other items related an auto accident. PIP coverage is required in states that have “no-fault” auto insurance laws. No-fault coverage pays for the insured’s medical and injury-related expenses, regardless of which driver was at fault.

Under Michigan’s new law, residents can opt out of PIP coverage entirely if they have qualified health coverage that meets specific requirements or are enrolled in Medicare Parts A and B. Health insurers and health plans will be required to provide a document that indicates whether a person’s coverage is “qualified health coverage.” (See Bulletin 2020-01-INS from the Department of Insurance and Financial Services.)

In anticipation of this change, sponsors of group health plans should consider reviewing their plans’ coordination of benefits (COB) provisions and communicating with participants about how their group health coverage coordinates with PIP coverage.

Michigan’s new auto insurance law

The definition of “qualified health coverage” for purposes of the new PIP coverage rules includes employer-sponsored coverage that has an annual deductible of $6,000 or less per individual (annually adjusted for inflation) and that does not exclude or limit coverage for injuries relating to motor vehicle accidents.

This change in the law does not affect coverage for motorcycle accidents that do not involve another motor vehicle because motorcycle coverage is not subject to Michigan’s no-fault insurance coverage law.

Many Michigan drivers with group health coverage will select a lower level of PIP coverage, or opt out of PIP coverage entirely. However, some drivers may still want comprehensive PIP coverage because PIP pays for items that health coverage does not, such as attendant care, lost wages and vehicle or housing modifications.

The Michigan Department of Insurance and Financial Service has posted “quick facts” about the new law.

Impact on group health coverage in Michigan

Plan sponsors may choose to coordinate PIP coverage with group health coverage. If a plan sponsor coordinates coverage with PIP coverage, its health coverage pays first for medical expenses. If a plan sponsor opts not to coordinate with PIP coverage, the auto policy pays first for medical expenses.

Some plan sponsors completely exclude auto-related accident medical coverage from their health coverage. In those cases, PIP coverage is the only payer of accident-related medical expenses.

Some insurers require employers wishing to pay secondary or to exclude coverage to do so through a rider.

In anticipation of the new law coming into effect this summer, Michigan employers should:

  • Review their plans’ COB provisions, as well as subrogation and right of recovery provisions, and consider whether any changes are desired in light of the new law
  • Communicate with participants about how their group health plan coverage coordinates with PIP coverage to help them make an informed decision about the level of PIP coverage that they wish to purchase
  • Be prepared to respond to employee questions in connection with the new law

On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for legal advice.

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