Auto No Fault Insurance Changes

In May of 2019, the Legislature passed and Governor Whitmer signed sweeping and significant changes to Michigan’s no-fault insurance law.  These changes included not only limitations on personal injury protection benefits but also changes to other aspects of Michigan’s auto insurance law.  As a result, Munson Healthcare expects to see a significant negative impact to both our reimbursements as well as our ability to continue providing trauma care in Northern Michigan.

With the bulk of the law not taking effect until 2020 and 2021, there is an opportunity to advocate with the Legislature and the Whitmer Administration for changes, clarifications, or additional laws that could alleviate some of the adverse impacts of this legislation.

Therefore, Munson Healthcare has identified the following as our Top Three Key Policy Change Priorities.

1. Trauma Care Budget Allocation Request

  • Ask: Create a statewide dedicated general fund allocation to pay for trauma care services in Michigan.
  • Audience: Legislature/Governor
  • Timing: FY21 (Calendar year 2020)

2. Clarification of Medicare as Primary Payer

  • Ask: CMS- Please clarify whether or not you will assume first payer position for those opting out of carrying Personal Injury Protection coverage.
  • Audience: State/Federal Legislature/Governor
  • Timing: Now

3. Re-Defining “Medicare” Rate

  • Ask: Medicare Rate should be defined as the amount a hospital is paid on a per-claim basis and include essential Medicare payments such as Sole Community Hospital or Disproportionate Share Hospital status, etc.
  • Audience: Legislature/Governor
  • Timing: Now

We have also identified five additional key policy changes that we will also be advocating with the Michigan Legislature and Whitmer Administration on. These include:

1. Change Reimbursement Prioritization

2. Eliminate Ambiguity/Dichotomy Regarding Reimbursement at Trauma Centers

3. Exclude Ambulance Costs from Personal Injury Protection (PIP) Benefits

4. Remove Hospitals from Utilization Review

5. Restrict Ability for Consumers to Opt Out of Purchasing PIP Coverage

The Impact of Sweeping Auto Insurance Reforms

Let's look at this new law and how it will impact Munson Healthcare patients and providers. 

The Impact on Patients:  Options for Personal Injury Protection (PIP) Coverage

Effective July 2020, Michigan drivers will be provided with the following personal injury protection (PIP) coverage options:

  • PIP Option 1: Opt-out of PIP coverage entirely, if you have separate health insurance that covers collision injuries.
  • PIP Option 2: Insurance companies will cover up to $50,000 — the lowest-price option available to people on Medicaid, who cannot opt out entirely.
  • PIP Options 3: Insurance companies will cover up to $250,000
  • PIP Option 4: Insurance companies will cover up to $500,000
  • PIP Option 5: Unlimited PIP coverage (the same coverage as now)

Our concern is that drivers will choose the lowest cost and least amount of coverage, meaning that a vast majority of drivers may opt out of purchasing Personal Injury Protection coverage all together.

The Impact on Patients: Lower PIP Rates for 8 Years

In exchange for loosing the mandatory lifetime PIP coverage for all auto insurance policies, drivers will now see a lower PIP rate (a portion of a drivers overall bill) in 2020 if they choose a capped PIP level. However, these legislated rate rollbacks only last for 8 years. 

  • PIP Option 1: 100% rate rollback of PIP portion only
  • PIP Option 2: 45% rate rollback of PIP portion only
  • PIP Option 3: 35% rate rollback of PIP portion only
  • PIP Option 4: 20% rate rollback of PIP portion only
  • PIP Option 4: 10% rate rollback of PIP portion only

Our concern is that drivers will choose to opt out of PIP to receive the largest rate reduction, not fully understanding that this rate reduction is temporary but their loss of insurance coverage is for a lifetime. 

The Impact on Providers and Hospitals

Effective July 2021, providers will face a two-year phase-in of a government-mandated fee schedule for services provided to auto accident victims

  • 190% of Medicare for medical and rehabilitation treatment not covered in any of the categories below.
  • 230% for Level I and Level II trauma centers (only for care before initial discharge).
  • Attendant care will be reimbursed according to the workers’ compensation fee schedule.

Once fully implemented, Munson Healthcare will see a minimum of a $6 million cut to reimbursements annually.  This will increase dramatically depending on the number of people who opt out of purchasing Personal Injury Protection insurance altogether. Further, from a billing and collection perspective, the new auto insurance system will drastically drive up costs and administrative burden due to the complexity and ambiguity of the new law. 

It is far from clear if the lifetime shift from unlimited coverage to a choice system will be worth the temporary reduction in a portion of your overall auto insurance bill.  That means Munson Healthcare along with the Michigan Hospital Association, will be working closely with the Legislature, Governor and state agencies to closely monitor the implementation of the law.  This includes working closely with legislators and those in the regulatory and legal realms to hold insurers accountable, help drivers understand the benefits of maintaining adequate PIP in their insurance policies, and ultimately protect access to high-quality, affordable care for drivers and all Michiganders.