The Impact of Opt-Out Policies on Available Coverage

By May 12, 2020 Insurance Defense

On June 11, 2019, the landscape of Michigan no-fault insurance drastically changed. With lower rates comes more choice for insurance consumers. This choice comes in the form of policy limits and an election to opt-out of some coverages altogether. Currently, accident victims may claim all available benefits from one insurer or another. But that is no longer the case, and future accident victims may go without coverage for some benefits by simply making a more economical choice at renewal.

Background of the Changes to the No-Fault Act.

Before enactment of 2019 PAs 21 and 22, Michigan provided the most generous insurance benefits to persons injured in car accidents in the country. Michigan no-fault insurance provided unlimited lifetime benefits. Medical benefits, which fall under the statute’s umbrella benefits called “allowable expenses,” make up the bulk of the lifetime benefits. But, for policies issued and renewed after July 1, 2020, insurance consumers may choose from four tiers of coverage for allowable expenses: $50,000, $250,000, $500,000, and unlimited. In addition, the new law permits certain applicants and insureds who have other health coverage to opt out of coverage for allowable expenses.

Who can Opt Out?

While not a true opt-out selection, the election for lowest coverage possible ($50,000) is very similar. It is only available to Medicaid beneficiaries, and only if the applicant or name insured’s spouse and any relative of either also has Medicaid, Medicare, other uncoordinated health insurance, or other car insurance that pays allowable expenses. See MCL 500.3107c(1)(a).

Medicare beneficiaries whose spouse and resident relative may opt out of allowable expenses altogether. See MCL 500.3107d. The election applies to the applicant/named insured, his/her spouse, and any relative of either domiciled in the same household. In other words, no one in the household will be able claim allowable expense benefits (but they should have coverage for medical expenses from some other source).

Finally, anyone electing $250,000 in coverage for allowable expenses may opt out of coverage for allowable expenses. The election may extend to anyone in the insured’s household that has coverage for medical expenses from some other source. But, unlike the Medicare opt-out, this election does not automatically extend to all members of the household, and it is not dependent on all members of the household having coverage for medical expenses from some other source. See MCL 500.3109a(2).

What Benefits are Affected?

A person who opts out of coverage (or a member of his/her household that is also excluded) may not recover allowable expenses under the policy. These persons may nonetheless claim replacement services and work loss, and their dependents may claim survivor’s loss.

Allowable expenses are products, services, or accommodations for the care, recovery, or rehabilitation of a person’s accident-related injuries. This includes medical expenses, skilled nursing, attendant care, home modifications, and vehicle modifications. Thus, while an allowable expense opt-out is intended to provide a substitute for medical expenses, a person may unintentionally exclude him/herself from other benefits in exchange for a reduced premium.

¹ See MCL 500.3107c(1):
(1) Except as provided in sections 3107d and 3109a, and subject to subsection (5), for an insurance policy that provides the security required under section 3101(1) and is issued or renewed after July 1, 2020, the applicant or named insured shall, in a way required under section 3107e and on a form approved by the director, select 1 of the following coverage levels for personal protection insurance benefits under section 3107(1)(a):
(a) A limit of $50,000.00 per individual per loss occurrence for any personal protection insurance benefits under section 3107(1)(a). The selection of a limit under this subdivision is only available to an applicant or named insured if both of the following apply:
(i) The applicant or named insured is enrolled in Medicaid, as that term is defined in section 3157.
(ii) The applicant’s or named insured’s spouse and any relative of either who resides in the same household has qualified health coverage, as that term is defined in section 3107d, is enrolled in Medicaid, or has coverage for the payment of benefits under section 3107(1)(a) from an insurer that provides the security required by section 3101(1).
(b) A limit of $250,000.00 per individual per loss occurrence for any personal protection insurance benefits under section 3107(1)(a).
(c) A limit of $500,000.00 per individual per loss occurrence for any personal protection insurance benefits under section 3107(1)(a).
(d) No limit for personal protection insurance benefits under section 3107(1)(a).

² See MCL 500.3107d and 3109a(2).

HVH

About HVH

A boutique law firm that handles a wide spectrum of complex legal situations for companies and individuals. Focused on providing the best legal solutions for clients.