Employers with employees residing in Michigan may want to revisit their health plans’ coordination-of-benefits (COB) provisions for motor vehicle accident-related medical expenses. Beginning July 1, 2020, legislation (2019 Pub. Acts 21 and 22) revises the state’s no-fault automobile insurance law in a way that could increase health plans’ exposure to costs resulting from motor vehicle accidents.
Michigan requires no-fault automobile insurance policies to provide unlimited personal insurance protection (PIP) covering medical costs for injuries sustained in a motor vehicle accident. This coverage must include reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.
Coordinated vs. Uncoordinated Coverage
Michigan residents can lower their automobile insurance premiums under the current system by selecting “coordinated” coverage. This coverage option makes any health insurance — including employer-sponsored health coverage — the primary payer rather than the automobile insurance. Coordinated coverage costs the insured less than uncoordinated coverage, which pays all medical and recovery costs related to a motor vehicle accident.
Under the current system, however, employees covered under a health plan that either excludes or limits coverage for auto accidents must enroll in unlimited, uncoordinated coverage, so the motor vehicle carrier pays all injury-related costs. The new legislation changes this requirement.
To reduce auto insurance premium rates, Michigan’s amended no-fault automobile insurance law will no longer require drivers to purchase unlimited PIP medical coverage for motor vehicle injuries. The policyholder may elect reduced PIP medical coverage, which generally will have a lower premium.
For auto insurance policies issued or renewed after July 1, 2020, the policyholder may elect one of the following levels of PIP medical coverage:
Qualified Health Coverage
“Qualified health coverage” — which may include an employer-sponsored group health plan — doesn’t exclude or limit coverage for injuries related to motor vehicle accidents and has an annual deductible of $6,000 or less per individual, annually adjusted by inflation. Medicare (Parts A and B) coverage also meets this definition.
Michigan regulators have informally stated that a COB provision making an employer-sponsored group health plan the secondary payer of medical claims related to car accidents will not disqualify the plan under these rules. As a result, liability for medical costs related to motor vehicle accidents may shift to self-funded employer plans that meet the definition of “qualified health coverage.” For example, if an individual elects lower PIP coverage after June 2020 and has a car accident causing injuries, the plan’s coverage will kick in when it would not have done so under current law.
Self-funded group health plan sponsors should decide how and whether to cover expenses incurred for injuries sustained in a motor vehicle accident on or after July 1, 2020. These employers should consider whether to amend their plan’s COB language for auto insurance policies in Michigan and whether it should differ from COB provisions with respect to auto insurance policies in other states.
The standard COB options and implications in Michigan are as follows.
Setting a motor vehicle injury-related deductible at $250,000 or $500,000 to match the new PIP options would shield the health plan from most accident-related costs, but this strategy could run afoul of the federal Affordable Care Act’s limits on in-network out-of-pocket (OOP) costs. Final regulations set the 2020 annual OOP limits for nongrandfathered group health plans at $8,150 for self-only coverage and $16,300 for other coverage — far below the PIP amounts.
Another strategy — placing a ceiling on motor vehicle injury costs — likely would violate federal rules barring lifetime and annual dollar limits on essential health benefits (EHBs). Many motor vehicle accident-related medical expenses, such as X-rays and hospitalization, presumably are plan-covered EHBs, so placing a ceiling on those costs would impose prohibited dollar limits.
Before the changes in Michigan’s no-fault automobile insurance law take effect, employers whose self-funded group health plans cover Michigan residents should do the following:
─ Clarify how the employer’s group health plan interacts with Michigan’s PIP requirements, including the plan’s COB provisions
─ Explain that PIP benefits for a motor vehicle injury last indefinitely, but employer-sponsored group health plan coverage may end at some time due to a change in plan eligibility, termination of the plan or other unforeseen factors
─ Respond to participant requests for proof of coverage and explain whether the employer-sponsored health and/or disability insurance will provide benefits for injuries caused by a motor vehicle accident — even though this documentation isn’t required under current law
Michigan’s regulatory agencies are expected to issue rules and additional guidance before the law’s effective date. This may clarify some of the provisions, and employers will want to review any guidance.