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No-Fault “Savings” Are an Illusion

Today, Michigan Governor Whitmer alerted us that the anticipated savings on auto No-Fault policies to be offered under the new No-Fault Act exceeded expectations. But the savings are not based on what was promised, and if you fall into the “savings” trap, it will not be worth the risk.

PIP Medical coverage pays allowable expenses for medical care, recovery, rehabilitation, and some funeral expenses, and under the new law, you will be able to choose various levels of coverage that will limit what was once an unlimited medical plan. The Governor reports the savings as if those costs have been reduced. In fact, the opposite is true.

Some drivers will see only minimal savings, and early regulatory filings by two large insurers show the companies are not lowering their own pricing, despite enjoying lower costs under the new system, and are relying entirely on cuts to the annual $220-per-vehicle catastrophic claims fee. This catastrophic claim fee — set by a state association — goes toward the lifetime medical care of the worst-injured accident victims. drivers who expect to see significant savings on their insurance bills come July will likely be disappointed, especially those in urban areas such as Detroit with the highest car insurance rates. Citizens Insurance intends to raise its rates by $17.3 million in July despite the cost-containment measures that are expected to lower insurers’ liabilities, so it essentially will charge you more while covering less. And rates for some Auto-Owners customers in Detroit will jump by more than 80% for those choosing the same unlimited no-fault coverage they have today at a lesser price.

Most importantly, everyone should consider the savings measured against the true costs each may confront in a severe collision. Remember, no one leaves home expecting to be involved in a motor vehicle collision. And while you may save as much as a thousand dollars per year under a limited medical coverage plan, more if you are Medicare eligible, these savings will disappear very quickly after a severe collision, and you will have taken on the possibility of massive and crippling debt for medical and rehabilitative care. If you need extended inpatient residential rehabilitation care, the limited coverage benefits you purchase will quickly exceed all of the savings you thought you purchased.

In over 37 years of legal practice, I have had the pleasure of representing countless individuals who have required long-term inpatient rehabilitation care following a collision, those severely injured, or elderly, or traumatic brain injury victims. For elders who think they can save by purchasing a limited policy, Medicare does not cover potential rehabilitation costs. And if you think you may be eligible for Medicaid because you no longer have an income, you will first have to “spend down” all of your assets before you become eligible for Medicaid. If you are a young person with a family, your health insurance may not cover these inpatient rehabilitation services. These new costs, combined with life challenges created by a severe injury, will be emotionally and financially devastating. You will have exchanged security for a small savings on your PIP coverage, exposing yourself and your family to endless debt and a poor recovery.

The new auto insurance law takes effect for policies that issue or renew after July 1, 2020. These savings” choices do NOT equal what your and your family’s exposure could be in the event of a collision.