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Michigan Lawmakers Propose Overhaul of Auto-Insurance PIP Rules

Michigan Lawmakers Propose Overhaul of Auto‑Insurance PIP Rules: What’s at Stake?

In a bid to curb soaring premiums and bring greater clarity to Michigan’s long‑standing no‑fault auto‑insurance system, the state’s legislature is debating a sweeping rewrite of the Personal Injury Protection (PIP) rules. The proposed package—encompassing both Senate Bill 1018 (S. 1018) and House Bill 1018 (H. 1018)—would re‑engineer the very bedrock of Michigan’s car‑insurance framework: the cap on medical expenses, the allocation of benefits, and the mandatory coverage limits that currently protect drivers and passengers alike.

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The PIP Puzzle: How Michigan’s System Works Today

Michigan’s no‑fault system is one of the most generous (and complex) in the United States. Every licensed driver must carry a minimum of $75,000 in PIP coverage, split into two parts:

1. Medical Expense Coverage (MEC) – which pays all medical costs for an insured driver or passenger, up to $75,000 per claim, without a cap on the number of claims.
2. Personal Injury Protection (PIP) – which covers lost wages, out‑of‑pocket expenses, and, in some cases, disability and death benefits, again capped at $75,000.

Because Michigan imposes a flat $75,000 limit regardless of the number of accidents an insured is involved in over a year, a single uninsured driver who’s in ten separate collisions can exhaust the entire cap, forcing the insurer to dip into the insurer’s “excess” pool to pay the remaining claims. This “no‑fault” approach has been lauded for its speed of compensation but has also been criticized for creating a “pay‑for‑what‑you‑accident” dynamic that drives up premiums.

The Medical Expense Coverage portion, in particular, is a hot spot. In recent years, the average PIP claim cost has surged as medical inflation and “med‑fraud” allegations have bloated bills. Michigan consumers have reported paying higher premiums and being billed for medical services they never received—a problem that lawmakers say must be addressed.

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The Core Proposals of the New Bills

Element	Current Rules	Proposed Change	Potential Impact
Medical Expense Cap	$75,000 per claim, no sub‑cap	Cap at $10,000 per claim for first‑party injuries (with a higher threshold for medical‑necessity cases)	Reduces insurer exposure, potentially lowering premiums; could force drivers to carry supplemental health insurance for serious injuries
Lost Wages and Out‑of‑Pocket	Covered under PIP with $75,000 cap	Split into separate limits (e.g., $20,000 for lost wages, $10,000 for out‑of‑pocket)	Provides clearer benefit structure; may prevent “siloed” claim payments
Mental‑Health Coverage	Optional add‑on	Mandated coverage for all PIP policies	Expands safety net for trauma victims; may increase costs slightly but improves long‑term outcomes
Claims Reporting & Fraud	Manual review, limited real‑time data	Automated fraud‑alert system tied to hospital billing databases	Cuts fraudulent claims, saves insurers billions; protects honest policyholders
Policy Duration	3‑year minimum term	5‑year minimum to allow longer‑term coverage and cost predictability	Decreases policy churn, potentially reducing administrative costs

The cap on medical expenses is the most radical shift. By lowering the ceiling, lawmakers argue insurers can keep premiums lower, as PIP costs no longer ballooned with each serious injury. However, opponents warn that the cap could leave victims under‑insured for truly catastrophic medical bills.

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Who’s Speaking Out?

Insurance Industry

The Michigan Insurance Counselors Association (MICA) released a statement supporting the cap but calling for a “tiered” system that differentiates between routine injuries and life‑threatening trauma. Allstate, one of the state’s largest insurers, issued a joint press release backing the bill’s fraud‑control measures while urging the legislature to include a “cost‑of‑living” adjustment to keep the cap affordable for low‑income drivers.

Consumer Advocacy

The Michigan Consumer Insurance Association (MCIA), in a white‑paper citing a 2022 study from the Michigan Department of Insurance, argues that the current system’s high premiums force many drivers to forgo coverage altogether. They urge the legislature to pair the medical cap with a deductible option for those who prefer lower premiums in exchange for higher out‑of‑pocket responsibility.

Public Health

A coalition of hospitals, led by the Michigan State University Health System (MSUHS), has expressed concern about how a strict cap could delay necessary treatment for patients who do not yet realize the extent of their injuries. The coalition recommends a “medical necessity clause” that would automatically override the cap for treatments deemed essential by a licensed medical professional.

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Broader Context: Michigan’s PIP Reform Roadmap

Michigan’s auto‑insurance reform is not a single‑issue fix but part of a larger auto‑insurance overhaul package that includes:

• Re‑insurance limits to cap the amount insurers must pay into the state’s no‑fault pool.
• Vehicle‑sharing and ride‑hailing insurance rules to reflect the changing nature of transportation.
• A “consumer‑first” audit system that empowers the state to conduct quarterly reviews of insurer pricing structures.

The reform package has been on the state budget agenda for the past two years, with legislators citing a 5% increase in PIP premiums in 2023 as a primary driver for action. The Senate and House have held joint hearings featuring lawyers, medical experts, consumer advocates, and insurance executives, producing a multi‑page report that the legislature will use to fine‑tune the bills.

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What the Bills Mean for Michigan Drivers

• Potential Premium Savings: Early actuarial models predict a 3‑5% reduction in average PIP premiums if the medical cap is implemented without significant increases in supplemental coverage costs.
• Risk of Under‑Insurance: Victims of severe injuries may find themselves paying more out‑of‑pocket or needing to seek additional coverage. The proposed “medical necessity clause” seeks to mitigate this risk but is still under debate.
• Administrative Changes: Drivers may experience simpler claim forms and more predictable benefit limits, but the introduction of a fraud‑alert system could mean additional documentation during claims.

The bills are slated for a floor‑vote in the Senate next month, followed by a similar vote in the House. Should both chambers approve the proposals, the package will move to the Governor’s desk for signature.

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Final Thoughts

Michigan’s auto‑insurance PIP overhaul represents a bold attempt to balance two perennial conflicts: the insurer’s need to control costs and the consumer’s right to adequate protection. The proposed medical expense cap is a high‑stakes gamble that could transform the state’s no‑fault system into a more predictable, cost‑controlled model—but only if paired with safeguards that protect the truly vulnerable. For now, the conversation is heating up, and the stakes remain high for policymakers, insurers, and the 12 million Michiganders who drive the state’s roads.

Read the Full Insurance Business America Article at:
[ https://www.insurancebusinessmag.com/us/news/legal-insights/michigan-lawmakers-propose-overhaul-of-auto-insurance-pip-rules-557155.aspx ]