May 23 marked the first time in nearly 10 years that both chambers of the Michigan Legislature met for session on a Friday. Sessions are typically held only on Tuesday, Wednesday, and Thursday, but an additional day of session was called for 8 am last Friday to pass auto no-fault reform legislation.
Leading up to that session, Governor Gretchen Whitmer met with House Speaker Lee Chatfield and Senate Majority Leader Mike Shirkey to iron out differences between each chamber's bills. They ultimately agreed to a bipartisan compromise that resulted in passage of Senate Bill 1.
Signed into law by Governor Whitmer on May 30 on the big porch of the Grand Hotel during the Mackinac Policy Conference, Senate Bill 1 provides drivers with tiered options for personal injury protection (PIP) coverage:
- Unlimited coverage (which is currently required)
- $500,000 coverage
- $250,000 coverage
- $50,000 coverage
- No PIP coverage through an opt-out, which is eligible for drivers whose health insurance covers auto injuries and for Medicare-eligible senior citizens
In addition, the law requires insurance carriers to reduce the tiered PIP premiums for eight years by 10%, 20%, 35%, 45%, and 100%, respectively.
Senate Bill 1, which goes into effect July 1, 2020, also prohibits insurers from using of non-driving factors (e.g., education level, ZIP code, gender, credit score, marital status, occupation, homeownership) when setting rates. However, opponents of the bill don't feel this prohibition language goes far enough in protecting consumers and reducing rates.
To prevent overcharging for auto-related injuries, the bill implements a first-ever fee schedule for hospitals, doctors, and rehabilitation clinics that treat injured drivers. Beginning July 1, 2021, the variable fee schedule will start at 200% - 240% of Medicare rates, phasing down to 195% - 230% of Medicare rates in 2023. The rate will be higher for hospitals whose patient population is at least 20% indigent, rehabilitation facilities, and those with level I or II trauma centers, maxing out at 250% of Medicare rates.
Senate Bill 1 also mandates transparency by the Michigan Catastrophic Claims Association (MCCA) through publication of an annual report to the legislature. At the point where MCCA's assets are greater than 120% of its liabilities, it would be required to refund that amount greater than 120%.
“By signing this legislation, we are providing relief to millions of drivers across the state and guaranteeing a better auto insurance system for everyone,” Governor Whitmer said in a media release. “This historic deal shows that, when we put party aside, we can find common ground on our state’s toughest issues to provide realistic and affordable coverage options for drivers across Michigan.”