HB 5886 (2025-2026) – Michigan Insurance: No-Fault; Coverage and Benefits; Miscellaneous Changes
Overview
- Jurisdiction: Michigan
- Purpose: Amend the Michigan Insurance Code (1956 PA 218) to adjust no-fault personal protection insurance (PPI) coverage, the catastrophic claims association (CCA) framework, and related provisions. The bill ties its enactment to passage of HB 5887, 5888, and 5889.
Key Provisions and Changes
1) Personal Protection Insurance (PPI) and Coverage Options
- Section 3101 (general security and required coverages) – Maintains that owners/registrants must maintain security for payment of PPI, property protection, and residual liability insurance while driving on a highway. It continues to define who is covered under PPI and related terms (motor vehicle, motorcycle, etc.).
- Section 3107c (PPI coverage levels) – For policies issued or renewed after July 1, 2020, insurers must offer a selection of PPI coverage levels. Coverage options include:
- $50,000 per person (limited eligibility tied to Medicaid and household coverage conditions for policies issued before July 1, 2027)
- $250,000 per person
- $500,000 per person
- No PPI coverage (for policies issued or renewed after June 30, 2027)
- Additional note: An insurer may offer higher or additional PPI levels starting after June 30, 2027.
- Section 3107d (Election to not maintain PPI)
- Allows applicants to elect to not maintain PPI if they and their household have qualified health coverage (QHC). Requires documentation and a form to explain benefits/risks of not maintaining PPI.
- If a qualified health coverage ceases, insured individuals have 30 days to obtain PPI coverage; otherwise, they risk ineligibility for PPI during the gap.
- Special priority and protections apply for scenarios involving Medicaid or other qualifying coverage.
- Section 3114 (PPI benefits coordination)
- Sets rules for how benefits are paid when multiple policies could apply, with priority based on the policy that provides PPI coverage.
2) Catastrophic Claims Association (CCA)
- Section 3104 (CCA structure and membership)
- Creates the CCA as an unincorporated nonprofit. All insurers offering required security must be members; the association handles claims, losses, and premium determination.
- Financial mechanics
- The CCA covers 100% of certain PPI losses above specified annual limits, with a stepped schedule of loss-coverage amounts by policy years (increasing from $250,000 through $675,000, indexed biennially for increases).
- Biennial adjustments to the maximum liability amount: beginning July 1, 2025 to June 30, 2027, the cap is $675,000, adjusted every odd-numbered year by the lesser of 6% or CPI, rounded to the nearest $5,000.
- Premiums and claims administration
- The CCA must set premiums to cover expected losses/expenses, including IBNR (incurred but not reported) liabilities, with adjustments for prior deficits/surpluses.
- Members are charged premiums based on written car-years; the plan of operation requires specific reporting, refunds, and cost-containment measures.
- The director has authority to order refunds if assets exceed 120% of liabilities (subject to actuarial findings).
3) Governance, Oversight, and Transparency
- Board and director oversight
- The CCA is governed by a five-member board plus an ex officio director. The director appoints board members; terms are staggered with a maximum 4-year tenure for members.
- Reports and consumer information
- Annually, the CCA must publish consumer statements and reports detailing claims activity, financial condition, investment performance, and cost-containment measures.
- Regular actuarial examinations and legislative reports are required, with independent actuaries engaged every three years (starting after 2022).
4) Related Amends and Sunset Triggers
- Enacting sections indicate repeal of certain 3107d provisions by July 1, 2028, and the bill’s effective date is contingent on the passage of HB 5887, 5888, and 5889.
Impacts
- Policyholders: A broader range of PPI coverage options, with potential reductions in PPI benefits if electing not to maintain coverage and if qualifying health coverage is in place.
- Insurers: New obligations to participate in the CCA, calculate premiums to cover expected losses, and adhere to reporting/actuarial requirements.
- Consumers: Greater transparency via annual consumer statements from the CCA; potential changes in out-of-pocket costs depending on chosen PPI coverage and qualifying health coverage arrangements.
