What reimbursement limits are applicable to Michigan PIP benefits?

The 2019 legislative changes to the no‑fault law made dramatic changes to the monetary benefit levels applicable to motor vehicle bodily injury claims.  Prior to the 2019 changes, there were no monetary benefit caps applicable to the PIP allowable expense benefit under §3107(1)(a) of the Act.  That section provided that the allowable expense benefit required payment of “all reasonable charges for reasonably necessary products, services, and accommodations for an injured person’s care, recovery or rehabilitation.”  This meant that the allowable expense benefit was payable for the injured person’s entire lifetime and was not limited by any monetary ceiling or coverage level.

The 2019 legislative changes made a fundamental change in the allowable expense benefit.  Beginning on July 1, 2020, no longer will every auto no‑fault policy provide lifetime, uncapped allowable expense benefit coverage.  Consumers will now be required to choose the amount of allowable expense benefits coverage they desire.  In addition, in certain situations, consumers will be permitted to entirely “opt-out” from allowable expense PIP benefit coverage.  Set forth below is a brief description of the various options that consumers may purchase under the 2019 legislation and the dollar limitations applicable to those coverages.  Those options are as follows:

A. The Optional Dollar Caps on Allowable Expense PIP Coverage

1. Option #1: Lifetime, Uncapped PIP Allowable Expense Coverage.

Under the 2019 legislation, consumers can elect to purchase lifetime, uncapped PIP allowable expense coverage that was automatically available to them under the original no-fault law.

2. Option #2: The $500,000 Benefit Level.

Under the 2019 legislation, consumers can elect to purchase $500,000 of lifetime PIP allowable expense coverage.  This option is available to any person without limitation.

3. Option #3: The $250,000 Benefit Level.

Under the 2019 legislation, consumers can elect to purchase $250,000 of lifetime PIP allowable expense coverage.  This option is available to any person without limitation.

4. Option #4: The $50,000 Medicaid Option.

Under the 2019 legislation, a limited group of consumers will have a $50,000 allowable expense benefit option that will be available only when:  (1) the named insured is covered under Medicaid, and (2) the spouse and domiciled relatives of the named insured are also covered under Medicaid, or have other “qualified health insurance,” or have auto PIP coverage through a different policy.  This level of choice applies to the named insured, that person’s spouse, or any domiciled relative.

5. Option #5: The $250,000 Opt-Out PIP Exclusion.

Under the 2019 legislation, some consumers who have other health and accident insurance coverage available to them may be able to completely opt‑out of any PIP allowable expense benefit coverage, subject to the following conditions:  (1) the named insured, his/her spouse, and all domiciled relatives who desire such an opt‑out must have other health and accident coverage that extends to auto‑related injuries, and (2) the policy must provide for the payment of $250,000 of lifetime PIP benefits for all domiciled relatives of the named insured who do not have other qualifying health and accident coverage.

The significance of this opt‑out option is that any person who selects this option is not eligible for any PIP allowable expense benefit coverage for medical and rehabilitation expenses if those opt‑outers are injured while occupying a motor vehicle.  However, if such opt‑outers are injured as non‑occupants of a motor vehicle, they may be entitled to limited allowable expense benefits from the Assigned Claims Plan (ACP).  Moreover, anybody purchasing the $250,000 opt‑out exclusion and who subsequently experiences a lapse in his/her applicable health or accident coverage, has only 30 days following the lapse to select another level of PIP coverage.  Failure to act within that 30‑day period will result in no PIP coverage whatsoever, until PIP coverage is later selected and purchased.  Moreover, if the lapse in other health and accident coverage occurs after a person has been injured, there is a real question as to whether that person will be entitled to any no‑fault PIP allowable expense coverage.

6. Option #6: The Medicare No-Fault Opt-Out.

The 2019 legislation allows a complete opt-out from all no‑fault allowable expense benefits for those persons who are covered under both Parts A and B of Medicare, as well as the spouses and any resident‑relatives of those persons who have Medicare coverage, other “qualified health coverage,” or other no‑fault PIP coverage under a separate policy.  As is the case with the $250,000 opt‑outer, Medicare opt‑outers will have no allowable expense benefit coverage if they are injured while occupying a motor vehicle.  Rather, they must rely solely on the limited reimbursement provisions of the Medicare laws or other applicable qualified health coverages in the household.  However, if such opt‑outers are injured as non‑occupants of a motor vehicle, they may be entitled to limited allowable expense benefits from the Assigned Claims Plan (ACP).

7. Managed Care Option. 

The new 2019 no-fault legislation allows insurance companies to begin selling “managed care” no-fault policies beginning in July 2020. The specific details of these policies remain to be seen. But, generally speaking, a victim would be limited to a network of insurance company medical providers and be forced to abide by new rules and decisions promulgated by the insurance industry.

B. Medical Provider Fee Schedules

The 2019 legislation significantly changes prior law so as to subject medical providers to certain “fee schedules” that limit what provider charges are reimbursable by no-fault insurance companies.  Prior to the 2019 legislative changes, providers rendering care and services to auto accident patients were not limited or regulated by any type of fee schedule.  The only restriction was the provisions of §3107(1)(a) and §3157 which allowed a medical provider to be reimbursed for all “reasonable charges,” but prohibited the provider from charging any more than the provider’s reasonable and customary charges assessed in cases not involving auto insurance.  The 2019 legislation does away with this system and imposes a fee schedule mechanism on medical providers, the highlights of which are summarized below.

Beginning on July 1, 2021, all medical providers will be subjected to certain fee schedules that will limit the amount the provider is entitled to recover from the patient’s auto no‑fault insurer.  In essence, the fee schedules are based upon a certain percentage of what would be paid by Medicare if the service was Medicare compensable.  If the service rendered by a provider is not Medicare compensable, then under the 2019 legislation, the provider will only be able to recover certain percentages payable under the provider’s “charge description master,” or a certain percentage of the provider’s average charges as of January 1, 2019.  It is likely that these new fee schedule rules will significantly reduce reimbursements to medical providers who treat accident victims.  Some observers fear that these reduced reimbursements may adversely affect access to medical care.  It also appears that these new medical fee schedules will be applicable to auto accident victims injured prior to the effective date of the 2019 legislation.

In addition, there appears to be some uncertainty in the language of the legislation as to whether a provider can pursue a patient directly for payment of provider charges that exceed the new fee schedules. The fee schedule provisions of §3157(2), (3), (6), and (7), all state that the providers who are subject to each of these provisions are “not eligible for payment or reimbursement under this chapter,” for more than the fee schedule amount.  Does this language allow the provider to argue that a contractual relationship exists between the provider and the patient, permitting the provider to pursue the patient under contract law, rather than “under this chapter?”  If so, the question then becomes whether those provider charges in excess of the new fee schedules can be recovered by the patient in a tort case against the at-fault driver.  This question will probably require court interpretation.  See Section 7 for further information regarding that issue.

C. Utilization Review Limitations

1. CONCEPT—Prior to the 2019 legislative changes, the Michigan no‑fault law was not considered to be a “managed care” system. However, the 2019 legislative changes have altered that characteristic somewhat by imposing a mandatory utilization review process for any medical provider rendering services to an injured person covered by no‑fault PIP benefits.  This utilization review process is intended to establish parameters and limitations regarding the “appropriateness . . . of both the level and the quality of treatment, products, services, or accommodations . . . based on medically accepted standards.”  [§3157a(6)].  The Michigan Department of Insurance and Financial Services (DIFS) will establish rules and criteria governing the utilization process.  However, the utilization process itself will be implemented by insurance companies.

2. CONSEQUENCES—This new utilization review process will obligate medical providers to do many things and submit much information to the no‑fault insurer in order to justify continued treatment of the patient. Moreover, providers who do not comply with their obligations under the utilization review process are subject to significant penalties and sanctions.  The new utilization review provisions are intended to apply to treatment and services rendered after July 1, 2020. It also appears that these new utilization review rules will be applicable to auto accident victims injured prior to the effective date of the 2019 legislative changes.

D. Family-Provided Attendant Care Limitations

1. CONCEPT—Prior to the 2019 legislative changes, the no-fault law was clear that patients who required in-home attendant care could receive that care from family, friends, or commercial agencies. There was no specific limitation applicable to family‑provided attendant care, other than proof the service was reasonably necessary and that the charge was reasonable.  This important feature of the prior no‑fault law was significantly changed by the 2019 legislation.  Under this new law, attendant care rendered by the family and friends of the patient are limited to reimbursement not to exceed 56 hours per week.  This 56 hour per week limitation applies to attendant care that is provided in the patient’s home by any relative, any person living with the patient, or any person who had a “business or social relationship” with the patient before the injury.

2. OPTION TO CONTRACT—The 2019 legislation provides that, in spite of the 56‑hour per week limitation, an insurance company may contract to pay benefits for attendant care that are more than the statutory hourly limitations.

3. DATE OF EFFECT—Under the 2019 legislative changes, the weekly hourly limitations will apply to any attendant care provided after July 1, 2021. Furthermore, beginning on that date, it appears that those hourly limitations will apply to auto accident victims injured prior to the effective date of the 2019 legislative changes

E. Consequences When Victims Incur Medical Expenses Exceeding Their PIP Benefit Coverages

It is a virtual certainty under the new law that many people who purchase one of the limited PIP benefit coverage options will sustain severe injury in a motor vehicle accident resulting in medical and rehabilitation expenses that exceed their chosen coverage.  The question then becomes, what happens to those unfortunate victims?  An equally important and related question is:  what happens to the at‑fault driver who causes those victims to incur these excess medical expenses?  Unfortunately, the answer to both of these questions under the 2019 legislation will be brutally harsh.

1. CONSEQUENCES FOR THE VICTIM.

The victim who incurs medical and rehabilitation expenses in excess of the victim’s PIP coverage has the following options:  (1) sue the at‑fault driver (if there is one) for the excess medical expenses, which option will, for all practical purposes, depend upon the amount of the at-fault driver’s liability insurance; (2) pay the excess medical expenses out of the victim’s personal financial assets; (3) go bankrupt; and/or (4) attempt to qualify for medical coverage through some kind of government program such as Medicaid.

2. CONSEQUENCES FOR THE AT-FAULT DRIVER.

At‑fault drivers who cause victims to incur medical expenses in excess of the victim’s no-fault PIP coverage will be personally financially liable for all of those excess medical expenses.  This liability did not exist under the original no‑fault law because all victims had full coverage for their medical expenses.  Under the 2019 legislation, the only way drivers can protect against this new tort liability is by purchasing as much liability insurance coverage as they can afford.