What is the Michigan Catastrophic Claims Association?
Recently, there’s been a lot of buzz in Michigan regarding the latest price hike in auto insurance. Other than your wallet being $28.00 lighter, what does this mean to the average driver? The simple answer is hopefully nothing.
In Michigan, every auto insurance policy must include coverage for personal injury protection benefits (“PIP” benefits). Included as part of your PIP benefits is coverage for all reasonable and necessary expenses related to injuries sustained from an auto accident. In short, if you’re involved in an auto accident–your medical bills will be covered by your auto insurance.
In addition to requiring PIP coverage, every Michigan auto policy includes a mandatory assessment for the Michigan Catastrophic Claims Association (“MCCA”). The MCCA is a statewide fund that every insured Michigander pays into as part of their auto insurance premium. Effective July 1, 2019, the yearly premium is set to increase from $192.00 to $220.00 per vehicle.
Why I hope you’ll never need this coverage.
If your auto accident related medical bills exceed $555,000.00, your claim will continue to be handled by your same auto insurance company but will be funded by the MCCA. The MCCA is designed to reimburse insurance companies for PIP medical claims that exceed the monetary threshold (which is set to rise to $580,000.00 for 2019-2020). Michigan is unique from many other states because under Michigan’s No-fault system, an injured party’s PIP medical benefits are unlimited and can last for their lifetime. Hence the reason I advise all my clients to never release their PIP insurance company for future benefits.
So what’s the fuss?
The MCCA has come under intense scrutiny lately after a repeated history of increased premiums coupled with a lack of accountability to the public. The MCCA has no obligation to disclose its financial information to the public and is exempt from the Freedom of Information Act (‘FOIA”). In an effort to bring some transparency to the situation, Governor Whitmer has ordered an audit of the MCCA. The audit will hopefully bring some answers as to why auto insurance in Michigan continues to increase and ways we can address the issue other than higher costs.
Although the premiums for the catastrophic fund may seem like a lot when you’re not utilizing such coverage, if you’re seriously injured in an auto accident you’ll be happy to have the MCCA. In the grand scheme of medical coverage, a $28.00/ year increase should not be a shocking sticker price for unlimited lifetime coverage.
With that said, this article is not intended to make light of the unexplained increase. It appears to me that $28.00 is not the problem. The problem is the lack of transparency behind the MCCA’s unsubstantiated increase in cost to Michigan drivers. Should theses costs be the public’s burden? Is the increase necessary to keep the system running? Are there alternative measures to make the system more affordable without sacrificing coverage? For the public’s sake, let’s hope the audit begins to resolve some of these unanswered questions.
The information and opinions above are generalized and not intended to convey legal advice. If you have questions regarding your specific case, contact us for a FREE consultation at 616.608.3061.