It’s been over seven months since the State of Michigan enacted significant reforms to auto insurance. The ensuing months have demonstrated many consumers still don’t understand the reforms and the options now available.
The primary reform provided consumers with the option to reduce their auto policy’s medical coverage.
Before July of 2020, all auto policies in Michigan provided unlimited, lifetime coverage for any medically necessary services if a covered individual suffered injuries in an auto accident. While this provided the most comprehensive medical coverage level in the country, it also meant Michigan auto insurance was expensive compared to auto policies in other states.
The reforms the State enacted provide consumers with a choice to maintain unlimited, lifetime medical coverage or reduce auto insurance costs by reducing their medical coverage. Consumers now have the option to:
- Reduce medical coverage to $500,000 per person, per accident
- Reduce medical coverage to $250,000 per person, per accident
- Opt-out of medical coverage providing they have other qualified health coverage (health insurance, Medicare Parts A & B, Medicaid*) that would cover medical expenses resulting from an auto accident
* Consumers with Medicaid have an option to reduce medical coverage to $50,000; they are not permitted to opt-out of medical coverage entirely.
The secondary reform that took effect is related to the change in medical coverage.
As consumers can reduce their medical coverage, there is a resulting possibility they could exhaust their coverage if they suffer injuries in an auto accident. Consequently, there is a higher probability someone could sue you for medical expenses if you were legally responsible for injuring that person in an auto accident.
Due to the increased likelihood of injury lawsuits, the State of Michigan also recommended consumers carry Bodily Injury liability on their auto policy with coverage limits of at least $250,000 per person, $500,000 per accident.
Consumers retain the right to purchase lower limits of Bodily Injury liability coverage. To do so, consumers have to sign a form indicating their desired coverage and acknowledging they understand their options.
Frequently Asked Questions
When can I change my coverage?
You can change your coverage at any time.
Insurance companies are currently sending paperwork to make changes before each policy renewal to make you aware of your options, but you can change coverage at any time.
What is the cost for the various medical coverage options?
Your agent should be able to provide you with quotes comparing the different levels of medical coverage and assist you with completing paperwork to enact any changes you select.
Do I need to fill out paperwork before each renewal?
The only policyholders required to complete and return coverage selection forms are those choosing to reduce or opt-out of medical coverage or opting to purchase less liability coverage than recommended by the State of Michigan.
Most insurance companies are currently requiring policyholders who elect to reduce their coverage to complete and return a form before each policy renewal. Individuals who elect to opt-out of medical coverage must also furnish other qualified health coverage documentation before renewal.
If I have other qualified health coverage, would it provide the same benefits as the unlimited, lifetime medical coverage option on my auto policy?
Most health insurance plans, including Medicare and Medicaid, have deductibles, copayments, cost-sharing, coverage limits, and exclusions that are markedly different from the comprehensive coverage provided by an auto policy providing unlimited, lifetime medical coverage.
If you elect to reduce or opt-out of medical coverage provided by your auto policy, you are taking on significant risks if you suffer severe injuries in an auto accident.