Big reforms are coming to Michigan PIP - How the changes will impact Medicare Secondary Payer compliance

June 17, 2019 / 6 min read

On May 30, 2019, Michigan Governor Gretchen Whitmer signed into law Michigan Senate Bill 1 (S.B. 1)[1] which makes significant changes to Michigan’s personal injury protection (PIP) system, including allowing policy limit PIP plans and a PIP opt-out feature for Medicare beneficiaries. A main objective behind S.B. 1’s reforms is to help reign in high premium costs, with Michigan reportedly having the highest average auto insurance premiums in the nation.[2] While this new law covers many different aspects of Michigan PIP, this article highlights the changes made in the PIP coverage area and its related impact on Medicare Secondary Payer (MSP) obligations.

New Michigan PIP coverage and opt-out features

Michigan has long been unique nationally allowing for unlimited PIP benefits. While individuals may keep unlimited PIP coverage under the new law, starting July 2020, S.B. 1 will now permit individuals to purchase PIP plans with different coverage limits. In general, subject to certain qualifications and criteria, S.B. 1 will now allow individuals to purchase PIP plans with policy limits of $500,000.00, $250,000.00, or $50,000.00.[3]

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The new law also allows certain individuals to opt-out of PIP coverage altogether. Specifically, S.B. 1 provides, in part, that individuals may “elect not to maintain coverage for personal protection insurance benefits” if they have “qualified health coverage” which is defined, in part, as “[o]ther health or accident coverage” that “does not exclude or limit coverage for injuries related to motor vehicle accidents.”[4] Likewise, under S.B. 1 individuals with “coverage under parts A and B of the federal Medicare program” may also opt-out out of PIP.[5]

PIP Medicare opt-out provision – potential challenges?

The PIP Medicare opt-out option may raise Medicare secondary payer (MSP) considerations given the MSP statute’s overall objective of ensuring Medicare’s secondary payer status in relation to injury claims. On this point, it is noted that 42 C.F.R. 411.32(a)(1) provides that “Medicare benefits are secondary to benefits payable by a primary payer even if State law or the primary payer states that its benefits are secondary to Medicare benefits or otherwise limits its payments to Medicare beneficiaries.” Thus, it will be interesting to see if this part of the new law will eventually be challenged as improperly making Medicare the primary payer, either by CMS, a third-party action against an insurer that accepts a Medicare opt-out as part of the policy procurement process, or other interested parties.

Section 111 reporting - ORM impact

Up until this point with unlimited PIP, Michigan PIP Responsible Reporting Entities (RREs) have grown accustomed to having open ended assumption of on-going responsibility (ORM) per CMS’ ORM reporting rules. This often results in ORM remaining open on these claims, even when the claimant’s treatment has tailed off or the claim is considered inactive.[6]

With S.B. 1 now allowing insurers to issue Michigan PIP policies with coverage limits, Michigan PIP RREs will need to remember that under CMS’ Section 111 guidelines ORM termination is permitted when “the insurer’s responsibility for ORM has been terminated per the terms of the pertinent insurance contract, such as maximum coverage benefits.”[7] Accordingly, Michigan PIP RREs will now have an opportunity to terminate ORM upon policy exhaustion in relation to those PIP policies with coverage limits. It will be important to ensure that ORM is properly terminated in those instances, not only for proper Section 111 compliance, but to also make sure that benefits are properly coordinated for the claimant and to prevent Medicare conditional payments from accruing beyond the period in which the PIP carrier is no longer responsible. Thus, going forward it will be critical that Michigan PIP RREs are aware of the type of policy at issue to properly monitor if, and when, ORM termination becomes applicable.

Conditional payments – limiting Medicare’s recovery

In terms of Medicare conditional payment recovery, unlimited PIP benefits have effectively created a situation where the Michigan PIP insurer can face unlimited conditional payment exposure, notwithstanding available defenses (i.e. causal relationship, etc.). This reality has grown even more prevalent over the past five years as CMS has ramped up recovery efforts against no-fault insurers in ORM situations[8].

This situation, however, will now change in those instances where there is a PIP policy with coverage limits at play. In these situations, CMS’s recovery under the MSP is limited to the available policy limits (See e.g., 42 C.F.R. 411.24 (c)(1)(ii)). By way of example, in a situation involving a $50,000 PIP policy, Medicare would only have a right of recovery up to $50,000 (the total amount of available benefits for that policy). As with Section 111, going forward it is important that Michigan PIP insurers recognize Medicare’s limited recovery rights in situations where there are PIP coverage policy limits as this could prove important in disputing conditional payments.

Questions?

Please feel free to contact the authors at mpopolizio@verisk.com or 786-459-9117 for any questions, or to learn how Casualty Solutions can help you meet your MSP compliance obligations.

[1] S.B. 1 is titled as “Insurance; no-fault; coverage and benefits; make miscellaneous changes.”

[2] Has Michigan Fixed Its Broken Auto Insurance System? Ray Lehman, Insurance Journal (May 28, 2019). On this point, this article notes Michigan’s average premium cost at $2,611 a year, which is reportedly more than double the averages in neighboring states like Indiana ($1,181), $1,175 in Ohio ($1,175) and Wisconsin ($951). Id.

[3] S.B. 1, Section 3107c.

[4] S.B., Section 3107d (1) and (8)(b)(i).

[5] S.B., Section 3107d(8)(b)(ii). Based on the literal text of this section, this Medicare opt-out would only be available to beneficiaries enrolled in Traditional Medicare (which is comprised of Medicare Parts A and B), and is inapplicable to those beneficiaries enrolled in Medicare Part C (Medicare Advantage).

[6] While a complete examination of CMS’ ORM assumption and termination rules is outside of the scope of this article, in general ORM exists so long as it is “subject to reopening or otherwise subject to a further request for payment.” If this is the case, then CMS advises that the ORM should remain open even though the insurer may view the claim as inactive or administratively closed. This can result in ORM records remaining “open” indefinitely in situations where a claimant remains eligible for benefits either statutorily (i.e. workers’ compensation) or when there is unlimited PIP coverage, even if the claimant’s treatment has curtailed. Recognizing this possibility, for these situations CMS created the “Special Exception” which allows RREs to terminate ORM “if they have a signed statement from the injured individual’s treating physician that he or she will require no further medical items or services associated with the claim/claimed injuries, regardless of the fact that the claim may be subject to reopening or otherwise subject to a claim for further payment.” See, CMS’ Section 111 NGHP User Guide (Version 5.5, January 4, 2019), Chapter IV, sec. 6.7.1.

[7] See, CMS’ Section 111 NGHP User Guide (Version 5.5, January 4, 2019), Chapter III, sec. 6.3.2.

[8] In October 2015, CMS added the Commercial Repayment Contractor (CRC) as a contractor to assist it with conditional payment recovery. For more information on the CRC and its role, see, The Medicare Secondary Payer Commercial Repayment Center in Fiscal Year 2017, Report to Congress as Required by Section 1893(h) of the Social Security Act for FY 2017, (March 2018). Page one of this report provides background related to CMS’ CRC recovery process , as well as its specific relation to non-group health plans (such as no-fault carriers). Also, see CMS’ website: https://www.cms.gov/Medicare/Coordination-of-Benefits-and-Recovery/Coordination-of-Benefits-and-Recovery-Overview/Non-Group-Health-Plan-Recovery/Non-Group-Health-Plan-Recovery.html