Michigan leg­is­la­tures have ful­filled their January 2019 promise to provide better insurance options and reduce fraud and costs for Michigan motorists. | Flickr

After years of mandatory and expensive per­sonal injury pro­tection (PIP), Michigan Cat­a­strophic Claims Asso­ci­ation reduced its claim fee from $220 to $100 for motorists who choose unlimited medical ben­efits. For motorists who do not choose unlimited medical care, the fee is com­pletely waived. Changes will take effect July 2020. 

Michigan leg­is­la­tures have ful­filled their January 2019 promise to provide better insurance options and reduce fraud and costs for Michigan motorists. 

Gov. Gretchen Whitmer said in a press release that she is proud to have gar­nered bipar­tisan support “to solve a problem that has been hurting Michigan fam­ilies for far too long.” 

“We still have more important work ahead of us, and I have no doubt that we can seize on this momentum to pass a strong, bipar­tisan budget that fixes the damn roads,” Whitmer said. 

This claim fee, which pre­vi­ously made Michigan the only state in the country to require PIP, dropped in response to changes in the January 2019 bill, according to Rep. Eric Leutheuser. 

“The main takeaway from this last announcement is it is a val­i­dation of the fact that the reforms we put in place will bring down costs,” Leutheuser said. “The reduction isn’t some­thing we spec­ified in law, but it is some­thing totally inde­pendent in the MCCA. This is what their actu­aries deter­mined would be the new fee starting when the law is implemented.” 

The cat­a­strophic claims fee is reg­u­lated by the MCCA, an inde­pendent, non-profit orga­ni­zation created by state leg­is­lature. The fee covers PIP medical claims that exceeds $580,000. That means, for every PIP claim, an individual’s insurance company pays up to $580,000, but the MCCA covers any expenses beyond that. 

When the law takes effect in July, Michigan will no longer be the only state in which motorists are required to pur­chase PIP.

Hillsdale State Farm insurance agent Jason Adcock, though he doesn’t speak on behalf of State Farm, raised fears that cuts to the claim fee will ulti­mately be offset by increased Med­icaid tax cov­erage. Leutheuser allayed those fears. 

“I think one of the argu­ments against the reform is that ulti­mately all tax­payers would end up footing the bill for all those under­in­sured. Right now we have the best cov­erage in the world, if you take that away, the people who need help will even­tually exhaust their savings and fall into the Med­icaid system,” Leutheuser said. “The answer to that Cat­a­strophic Claims Fund only takes over after someone has had over half a million dollars worth of care. The vast majority of claims don’t hit that level.” 

One of the most impactful parts of the bill is that it will fund a new department, purely ded­i­cated to dis­cov­ering fraud. 

“Once you reduce fraud, the amount in claims decreases, which means pre­miums can come down,” Adock said. 

The bill will also nor­malize medical rates for insurance com­panies. Cur­rently, com­panies pay approx­i­mately two to two and a half times more than Med­icaid for the same medical procedures. 

“Once you bring down the amount insurance com­panies are paying, then all insurance can come down,” Adock said. “From an insurance stand­point, if we can bring this down, then all insurance will come down nat­u­rally in the state of Michigan.” 

Law­makers antic­ipate that this deman­di­torzation of PIP, coupled with a variety of new options for levels of cov­erage, will attract big name insurance com­panies back to Michigan that cur­rently don’t offer plans in the state because of its com­pli­cated insurance laws.