Michigan’s No-Fault Insurance Vehicle Fee to Rise in July

Michigan’s yearly per-car charge that supports the state’s no-fault auto insurance system will rise by $11 on July 1, highlighting recent efforts to reform an increasingly costly system that awards injured motorists unlimited crash-related medical benefits.

The Michigan Catastrophic Claims Association (MCCA) announced the fee hike on Wednesday. The private reinsurance fund supports the costliest no-fault injury claims filed under state-required personal injury protection (PIP) coverage.

The MCCA fee is initially charged to Michigan coverage providers but ultimately passed on through insurance premiums to the state’s drivers, who are required to have PIP coverage under the no-fault law. Michigan’s allowance of unlimited PIP benefits over a lifetime is the only one of its kind in the U.S.

Over recent years, the MCCA fee levels have been as follows:
–$104.58 in 2008-09
–$124.89 in 2009-10
–$143.09 in 2010-11
–$145 in 2011-12
–$175 in 2012-13
–$186 in 2013-14

The fee increase is determined partly through evaluations by actuaries who analyze trends including the health of the economy, returns on investments, inflation of medical costs and the number of claims the MCCA receives.

The recent assessment showed that the MCCA is facing a $2 billion deficit, with more than 15 percent of the new per-vehicle $186 fee going toward reducing that deficit.

Benefits Overview Shows More than Half Going to Attendant, Residential Care

The association also published estimates of cost breakdowns for services that the newly increased per-vehicle fee funds.

According to the MCCA, around 25.5 percent of the increased fee will go toward residential care services, while just over 39 percent will go toward attendant care (around 20 percent for family attendant care and 18.5 percent for agency attendant care).

The percentages are taken from $156.44 of the total per-car fee that is earmarked for an expected rise in new claims.

The MCCA also hinted at increasingly heavy burdens facing the association that could cue future reform efforts.

According to the MCCA, nearly 29,500 claims have been reported to it since 1979, and those claims are expected to cost around $83 billion total. Between the middle of 1978 and last year, the MCCA paid out about $9.9 billion in claims.

In 2012, the association reportedly paid out $947 million in catastrophic injury claims, most of which were to cover medical costs of spinal cord, back and neck injuries.

Those staggering price tags likely won’t shrink anytime soon, with medical care costs continually outpacing general inflation and the association doling out benefits for severe car crashes to more drivers every year, according to the MCCA.

MCCA officials said in a statement that costs have been “steadily climbing.”

No-Fault Advocacy Group’s Lawsuit Seeks MCCA Info

The MCCA has come under fire in recent months after outside groups like the Coalition Protecting Auto No-Fault (CPAN) have been trying to open up its financials and meetings to the general public.

CPAN filed a lawsuit after those records requests were denied, saying they wanted the court to compel the association to produce financial- and claims-related documents that would be crucial to an informed debate about the MCCA, no-fault reforms and the association’s growing deficit.

The association, however, argued that its records are already publicly available on its website; it filed an appeal in January.

Insurance commissioner Kevin Clinton repeated the association’s contention that relevant data is already publicly available to members of the House Committee on Insurance.

John Cornack, CPAN’s president, issued a curt response about the association: “What are they trying to hide?”

“If the MCCA is truly transparent and the information that CPAN is seeking was actually available to the public then why would the MCCA continue to fight our lawsuit?” said Cornack. “It doesn’t make sense.”

In an affidavit filed with the circuit court in February, CPAN offered a more specific listing of information it was seeking in its records requests, including “actuarial assumptions and models.”

CPAN also commented on the recent MCCA fee increase, saying it was another example of a cagey move by an association whose operations should be open to the public eye.

“Here we are again, hit with a secretive rate increase that consumers can do nothing about,” Cornack said in a statement. “This fund is controlled entirely by insurance companies, its meetings are closed to the public and its rate setting information is completely closed off from public scrutiny – and that’s exactly why CPAN brought a FOIA lawsuit against the MCCA.”

MCCA in Crosshairs of Legislators’ No-Fault Reform Bills

State lawmakers are also taking a hard look at the MCCA, with one even proposing to eliminate the association.

Sen. Virgil Smith (D-Detroit) offered several proposals in two pieces of legislation introduced earlier this month. Under Smith’s SB 251, benefits for the no-fault system would be capped at $50,000 while the MCCA would be abolished after its debts are paid.

Proposals from another Democratic senator, Glenn Anderson of Westland, also center on the MCCA. Anderson’s bills—SB 102 and SB 103—would overhaul the MCCA’s structure, giving the insurance commissioner a voting seat on the association’s board of directors and empowering the position to issue an independent audit every year. The proposals also include specifying the association as a “public body” that would be required to host its meetings openly.

All of those bills are still being considered by the Senate Committee on Insurance.

About Charles Nguyen
Charles Nguyen is an enterprising journalist who reported for Patch.com and the Desert Dispatch and was the editor in chief of the Guardian (the twice-weekly newspaper at the University of California, San Diego) before coming to Online Auto Insurance News.

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