29 May 2019

Self-Funded Employer Group Health Plans: Michigan’s New No-Fault Law Requires Action

Employers sponsoring self-funded group health plans with Michigan employees must re-examine their coordination of benefit rules as a result of the new Michigan no-fault reform legislation.  And, regardless of whether design changes are made, the law will require employers to educate employees as to their new coverage options and how to make sure they don’t have any gaps in their combined coverage.

Up until now, Michigan residents have been required to purchase no-fault auto insurance with unlimited medical (PIP) coverage.  In other words, Michigan drivers experiencing serious injuries in a car accident have been assured of comprehensive medical coverage through their auto insurance.  However, if a Michigan resident is also enrolled in a fully-insured employer group health plan, that plan is required to pay first, on a primary basis, before no fault provides benefits.  On the other hand, self-funded employer group health plans subject to the federal law known as ERISA (basically all employer plans other than plans sponsored by governmental or church employers) may either exclude coverage for auto accidents or pay on a secondary basis.  Because Michigan no-fault has provided such a high level of medical coverage, most self-funded plans exclude or pay secondary.

After reaching an agreement with Governor Whitmer, the Michigan legislature passed significant no-fault reform legislation on May 24, 2019. Governor Whitmer is expected to sign the bill. One of the key changes under the law is that residents will now be able to elect a capped level of medical (PIP) coverage—either $250,000 or $500,000.  (And there are special rules providing even more flexibility for individuals enrolled in Medicare and Medicaid.)  If a self-funded plan excludes coverage an employee electing one of the new caps may be without coverage in the event of a catastrophic accident.  Yet if the self-funded plan pays secondary, an employee electing one of the new lower caps will shift significant cost to the employer plan in the event of such an accident.

If you are an employer sponsoring a self-funded group health plan with Michigan residents, join Mary Bauman and Tripp VanderWal for a free webinar on Wednesday, June 26 at 10 am to discuss the new law, its impact on your plan and an action plan for moving forward.  Click on the link to register.