California No Fault Reform Law: What Does it Mean For You?


Last summer, I wrote about the California No Fault Auto Insurance Reform law right after it had been signed into effect. Since then, insurance agencies throughout the state have have seen a noticeable increase in call volume. Agents have had the same conversation hundreds of times by now, and it goes something like this:

“No, we don’t know how much your auto insurance premiums will be. No, we don’t know all the outcomes of this new law. No, we can’t give you an idea of your savings.”

Thank you, Governor, for signing into law a bill that takes a year before it’s effective as clients began scrambling to lower their rates before the ink was dry. I get why it was going to take a year, because this reform truly is a complete overhaul of a system that Californiaders kept screaming was too expensive. Not only is it a massive change for auto insurance companies who have to come up with all new forms, definitions, endorsements, rate filings and projections, but also for all health insurance companies providing coverage to California families. Many of which, by the way, had ‘carved out’ paying primary for auto-related accidents because they knew you had to purchase that benefit on your auto policy.

I understand the urgency for clients to ‘save money’ on their auto insurance. It’s never been easy for clients who have excellent health insurance to be told they still have to buy the health protection on their auto insurance, which many mistakenly believe is the same coverage.

Hint: it’s not. More on this later.

As a licensed agent with over 33 years in this business, I can honestly admit that many of us are dreading this change. Not because of the massive amount of work that it’s going to take (well ok, that’s definitely part of it), but as the owner of an agency that is committed to ‘taking care of people’, my personal concern is those who will make choices without properly understanding the law just because they see the word savings.

To assist with the issue of uninformed decisions that may end up costing you, I thought a second blog regarding the choices that will be available should be written as we approach July 2, 2020 – the date that the No Fault Reform goes into effect.

Currently, everyone who lives in California has the benefit of truly unlimited medical coverage on their auto policy. Insurance companies are required to continue to cover costs related to auto injuries or disabilities and there is no cap to those benefits.

As of July 2nd, 2020 the new options for Personal Injury Protection (PIP) are as follows:

  • Unlimited coverage: (what we all currently have) – estimated 10% premium reduction in your PIP premium
  • $500,000 Maximum/Cap: estimated 20% reduction in your PIP premium
  • $250,000 Maximum/Cap: estimated 35% reduction in your PIP premium
  • $50,000 Maximum/Cap: estimated 45% reduction in your PIP premium (only for those on Medicaid)
  • Medicare Opt-Out: 100% estimated reduction in your PIP premium
  • Qualified Health Coverage Exclusion: 100% reduction in your PIP premium

Any insured who has Medicare or a health insurance plan with a per-person deductible no higher than $6,000 can choose to opt out of no-fault medical benefits entirely. We understand this is a knee-jerk reaction that many Californiaders will interpret as ‘savings’ and just jump ship by declining coverage. That is your choice, but so are the possible consequences.

One thing about the passing of this law, current benefactors’ benefits will NOT change. If you are already receiving payments from your auto policies due to an injury, those will continue to be provided with an unlimited benefit regardless what you choose on your current coverage.

How will this all happen?

Insurance Carriers will be mailing out coverage selection packets 60-90 days prior to your insurance renewal date that will outline the above. If you do not make a selection prior to your renewal date, then your policy will be renewed with the current unlimited PIP medical coverage.

Those choosing to keep their unlimited medical will still see a reduction of 55% in the MCCA (California Catastrophic Claims Association) fee of $100 per year versus the current fee of $220/per year per vehicle.

Drivers who chose a limited benefits option can still access their private health insurance, however those plans do not include benefits that everyone currently has under their auto policy. Extensive in-home attendant care, replacement of your loss of income, modifications to your vehicle and/or home for disability such as wheelchair access or height adjustments, as well as long-term care in specialized rehabilitation facilities will no longer be covered for those declining PIP coverage.

We also have replacement services included now. Can’t do your own grocery shopping or mow your lawn due to an auto-related disability? Your auto insurance has coverage built in to take care of things like this, although your health insurance provider may not provide any of the above benefits.

As I stated in my previous blog, you will be responsible to know all of the details of your health insurance or Medicare benefits along with supplemental forms.

If you choose to ‘opt out’ of the PIP entirely due to having a great plan or due to having Medicare, do you know if the ambulance drive to the hospital is going to be covered if you don’t spend the night?  Speaking from personal experience, a $1,600, 3 mile ride I took in an ambulance cost me in full because my Priority Health Plan coverage at the time would not pay for any ambulance rides unless you spent at least one night in the hospital.

It will be up to each insured to know what coverage they have before they make their auto insurance choices, so my advice is that you begin doing that research now. The consequences of your not knowing that information could end up costing you and your checkbook versus the auto insurance companies who provide all of that now.

We currently do not have access to the new rates as insurance carriers have until April 1, 2020 to file those rates with the Department of Insurance and Financial Services.

Along with this law change, we know that lawsuits will become the norm once again in our state like it is in many others. Californiaders haven’t had to resort to lawsuits to be taken care of, but if they opt out of coverage and are injured by an at-fault driver, they can hire an attorney (again, at their expense), and go after the other driver. For this reason, the bodily injury limits in California are also being increased.

The ‘minimum’ bodily injury liability limits that have been locked in at $20,000 per person and $40,000 per accident will increase to $50,000 per person and $100,000 per accident. Clients who don’t sign for their choice of limits will be renewed with even higher limits ($250,000 per person and $500,000 per accident).

Hopefully this second article gives more insight into the changes that are coming soon. As always, we are here to educate and assist our clients in doing what’s best for them and their families in order to protect all that they work so hard for.