The Auto Insurance Letter Is a Health Plan Question.
Michigan drivers can choose how much medical coverage their auto policy carries, and some can drop it by relying on their health coverage. Employees will ask you for the letter that proves the health plan qualifies. The letter is the easy part. The trade behind it is the part worth understanding.
Since the 2020 reform, every Michigan driver chooses one of six levels of auto medical coverage, known as PIP medical. If nobody chooses, the policy defaults to unlimited. Choosing a lower level, or excluding someone from it, depends on that person having qualifying health coverage, and for many employees that coverage is the employer plan. For a quick estimate, use our free opt-out payment calculator.
This page sets out the six options, what each choice gains and gives up, and where the employer’s role begins and ends. Which option to pick is a decision for each employee and their auto insurance agent. It is not a decision the employer makes, and we do not make it for anyone.
Michigan’s Auto Choice: What It Gains and What It Gives Up
What Choosing Less Gains
- The main reason people choose a lower level or an exclusion is a lower auto premium. The reform required insurers to cut statewide average PIP medical premiums, by about 10% for unlimited, 20% for $500,000, 35% for $250,000 and 45% for $50,000, for policies issued or renewed after July 1, 2020. Any one driver’s premium depends on their own circumstances, so the saving should come from a quote.
- Accident injuries are paid under the health plan the employee already has and already knows how to use, instead of two policies deciding which pays first.
- There is no paying twice for overlapping medical coverage.
- A person with Medicare Parts A and B can opt out of PIP medical entirely, with proof of enrollment rather than an employer letter.
What Choosing Less Gives Up
- The auto policy’s own medical benefit. A health plan pays under its network, deductible, copay and visit limits, and care the plan limits or excludes is the employee’s to cover.
- Stability. Health coverage often depends on a job, and a serious injury is often followed by time away from work. If the job and the coverage go, so does the only medical protection for auto injuries.
- Household flexibility. Everyone excluded needs qualified coverage or their own auto coverage, so one person’s lapse becomes the whole household’s problem.
- Margin for error. A driver who loses qualified coverage has 30 days to replace it or add auto medical coverage back, or there are no auto medical benefits. Michigan’s Assigned Claims Plan can pay up to $2 million during that window only (DIFS).
- Recourse when at fault. An injured driver who caused the accident has only the health plan. One who did not may have a claim against the other driver, which is slow and depends on that driver’s limits.
- Paperwork. For the exclusion, $50,000 and opt-out options, DIFS tells insurers to collect a signed selection form and proof of coverage at every renewal, so the letter is a yearly task, not a one-time one.
What Michigan Drivers Can Choose
Each level is the most the auto insurer pays per person per accident for an injured person’s medical expenses. Unlimited is the default.
Unlimited
No dollar limit. This is what a policy carries if the driver does not choose.
Up to $500,000
The most the auto policy pays per person per accident is $500,000.
Up to $250,000
The most the auto policy pays per person per accident is $250,000.
$250,000 With Exclusions
Available when the named insured has non-Medicare health coverage that covers auto accident injuries, and household members can be excluded if their health insurance covers those injuries. Anyone not excluded keeps $250,000. This is the option employer coverage most often supports.
Up to $50,000
Available when the named insured is enrolled in Medicaid, and household members have another auto policy, Medicaid or health insurance that covers auto accident injuries.
PIP Medical Opt-Out
Available when the named insured has Medicare Parts A and B. Household members need another auto policy or health insurance that covers auto accident injuries.
Where the Letter Gets Complicated
Six places an employer’s role in this decision gets tested.
Employees ask for proof that the health plan qualifies, and the right source of that letter depends on how the plan is funded.
What we do about it: We confirm who issues it, the carrier for a fully insured plan or the employer or its administrator for a self-funded or level-funded one, and we help produce it.
The plan must not exclude or limit auto accident injuries, and the individual deductible has to be at or below a state threshold, currently $6,579 for July 2026 through June 2027 under DIFS Bulletin 2026-08-INS. It is measured per individual, not per family, and a change in plan design at renewal can move a plan across it.
What we do about it: We check every plan option against the current threshold each renewal and tell you before open enrollment which options qualify.
A plan that limits or excludes auto accident injuries cannot qualify, however low its deductible is.
What we do about it: We read the plan document for accident exclusions and limits before any letter goes out.
Excluding a household member requires that person to have health coverage that covers auto accident injuries, so the letter has to identify who is covered.
What we do about it: We make sure the letter lists the covered individuals and that employees know a dependent who is not on the plan is not covered by it.
The signed selection form and proof of coverage come back at each auto policy renewal, so the same request reaches HR every year.
What we do about it: We schedule the letter alongside open enrollment so it is ready before employees ask.
An employee who leaves or loses eligibility may also lose the coverage their auto election depends on, with a 30-day clock running.
What we do about it: We build the 30-day warning into termination and COBRA notices so employees hear about it from you before an accident.
Questions Employers Ask About the Michigan Auto Law
Should We Tell Employees to Opt Out?
No. The choice depends on each person’s household, finances and auto policy, and belongs with them and their auto agent. Our job is to make sure the letter is accurate and the plan qualifies.
Does Every Health Plan Qualify?
No. The plan cannot exclude or limit auto accident injuries, and the individual deductible has to be at or below the state threshold. A plan with more than one option may qualify on some and not others.
Who Writes the Letter?
For a fully insured plan, the carrier. For a self-funded or level-funded plan, the employer or its administrator. Employers can write their own, following DIFS guidance.
Does Medicare Need a Letter?
Not from the employer. A person with Medicare Parts A and B can opt out of PIP medical with proof of enrollment. Medicaid enrollees cannot opt out, but can choose the $50,000 level.
What Happens If an Employee Loses Coverage?
They have 30 days to replace qualified coverage or add auto medical coverage back. After that, there are no auto medical benefits for the person who was excluded.
Is This an HR Liability?
The risk is a letter that says the plan qualifies when it does not. That is a plan-document question, and it is one we check before the letter goes out.
What if an Employee Does Not Choose?
The policy defaults to unlimited PIP medical coverage, so doing nothing keeps the broadest auto coverage.
How Often Is the Letter Needed?
DIFS tells insurers to collect proof of coverage at every renewal for the exclusion, $50,000 and opt-out options, so employees who rely on the plan usually need a current letter each year.
Does the Deductible Count Per Family?
No. It is measured per individual. A plan with a family deductible above the threshold can still qualify if the individual deductible is at or below it, which we confirm in writing.
Related reading: Proof of qualified health coverage · Letter of eligibility · Form 1095-B
Where the Rules Come From.
The laws and rules named on this page link to the statute or regulation they come from. This is general information, not legal or tax advice, and rules change, so check the current text.
COBRA Continuation Coverage (29 U.S.C. 1161)
Requires many group health plans to offer temporary continuation coverage after a qualifying event.
ACA Reporting (26 U.S.C. 6056)
The statute behind employer reporting of offers of coverage on Forms 1094-C and 1095-C.
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