There continues to be considerable and understandable confusion about the effects of Michigan’s new auto No-Fault insurance law, which the Legislature passed in June 2019.

No area of the new law has created more confusion than the “opt-out” provisions which took effect on July 2nd of this year.

The intent behind the “opt-out” options was to give people who have their own sources of health care coverage the ability to save money on auto insurance by allowing them to “opt-out” of or otherwise “drop” the medical coverage that is normally required in a No-Fault car insurance policy.

Unfortunately, lawmakers added to the confusion over the availability of the “opt-out” provisions by not clearly explaining how and when they applied to veterans who depend on the Department of Veterans Affairs for their health care and military families whose health care is provided through the TRICARE program.

VA benefits do not cover car accident-related medical care

The new No-Fault law did not create a VA benefits opt out for drivers who receive their health care through the U.S. Department of Veterans Affairs (VA). Although the new No-Fault law specifically allows drivers with Medicare to opt-out of No-Fault medical coverage, it did not create a similar, specific opt-out for drivers covered by Veteran benefits.

In Bulletin 2020-37-INS, Michigan’s Insurance Commissioner stated that enrollment in VA benefits does not qualify as the “qualified health coverage” that is required by the new No-Fault law because VA benefits “excludes or limits coverage for injuries related to motor vehicle accidents.”

The Bulletin explained that only under very limited circumstances would VA benefits reimburse a veteran for “emergency care in a non-VA facility” after a car accident.

No-Fault, VA benefits and qualified health coverage

Because VA benefits do not qualify as “qualified health coverage” for purpose of the No-Fault law, drivers who depend on VA benefits for their health care may be ineligible or they may render their family members ineligible for the following No-Fault coverage levels:

• $50,000 coverage level for drivers on Medicaid: Touted as providing an “average” savings of 45% for all drivers who chose this coverage level, it will be unavailable if the driver’s spouse or family member who lives in the home depends exclusively on VA benefits for health care. (MCL 500.3107c(1)(a); 500.2111f(2)(a))
• Medicare opt-out: Touted as eliminating the premium for No-Fault medical coverage for drivers on Medicare by allowing such a driver to forfeit or “opt-out” of all No-Fault coverage for medical bills after a car accident, this option would be unavailable to a driver whose spouse or family member who lived in the home had only VA benefits as a source of health care. (MCL 500.3107d(1); 500.2111f(3))
• $250,000 coverage level with qualified health coverage exclusion: This little-talked-about coverage option involves a driver who has “qualified health coverage” choosing a No-Fault PIP medical benefits coverage level of $250,000, but agreeing to be excluded from all No-Fault medical coverage in return for a 100% reduction in the No-Fault portion of his or her auto insurance premium. (MCL 500.3109a(2)) Additionally, the driver’s spouse and/or family member who lives in the home must have “qualified health coverage.” Consequently, this option is unavailable if the only source of health care available to a driver and/or his or her spouse or family is VA benefits.

TRICARE is ‘Qualified Health Coverage’ under No-Fault

In Bulletin 2020-39-INS, Michigan’s Insurance Commissioner stated that TRICARE, which is health care coverage provided to military families and their dependents through the U.S. Defense Health Agency, “is insurance and qualifies as QHC” for purposes of No-Fault auto insurance.

The Commissioner also noted that the failure to meet either of those criteria explained why no VA benefits opt out was recognized.

QHC stands for “qualified health coverage” which describes the type of health insurance coverage that Michigan drivers must have in order to qualify for certain levels of No-Fault auto insurance.

As a result of the Bulletin, drivers who have TRICARE may select certain No-Fault coverage levels that are unavailable to drivers who depend on VA benefits for their health care:

• $50,000 coverage level for drivers on Medicaid
• Medicare opt-out
• $250,000 coverage level with qualified health coverage exclusion