A significant increase in mandated liability coverage is the principal feature of Michigan’s revised no-fault auto insurance law. But the potential consequences of the legislation are a source of controversy throughout the state.
Prior to the reformed law, signed in May 2019, Michigan drivers were required to carry $20,000 of liability for the injury of 1 person and $40,000 for the injuries of 2 or more. Those requirements are now raised to $250,000 and $500,000 respectively.
That’s a big increase.
The most obvious consequence will be premium increases for policyholders. The state insists residents will see a net savings by the time reduced medical claims are factored in.
Unsurprisingly, the insurance industry, which opposed the new requirements, is skeptical.
Critics of the law fear post-lawsuit accidents will increase. They believe lower liability limits restrained legal action, since defendants would often lack the ability to pay a large settlement. The expanded liability coverage makes the deep pockets of the insurance company a more inviting target for the plaintiff, according to critics.
The state sought to allay fears about increased health care costs, which would presumably come from more claims being filed, with price caps on medical services being applied to hospitals. The caps will use the current costs of health care services and then limit the facility to charging 55 percent of that figure.
There’s little doubt that hospitals will be able to absorb the blow, but critics fear for the future of specialized rehab clinics, which typically care for those with more serious injuries. They argue that these clinics don’t mark up their prices as drastically as hospitals do, and thereby can’t absorb a 45 percent cut in revenue without eliminating staff.
How everything will work out with the revised Michigan no-fault law remains to be seen. It’s safe to say there will be a lot of eyes watching carefully.
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