DAVE CHRISTENSEN SPEAKS ABOUT MICHIGAN NO-FAULT LEGISLATION AND INSURANCE
Our resident subject matter expert Dave was recently asked to opine on the impact the new No-Fault legislation has had on the MCCA (Michigan Catastrophic Claims Association), PIP, and the pass-along consequences to Michigan consumers.
Watch the segment here:
The Rising Costs of Michigan No-Fault Insurance – Why You Will be Paying More in 2023
As of July 1, 2023, Michigan residents will experience an increase in their no-fault insurance costs. This rise in premiums can be attributed to two key factors: a Michigan Catastrophic Claims Association (MCCA) hike in fees and the implementation of new legislation. Below, we will briefly cover the reasons behind these developments and explore their implications on the affordability of auto insurance in Michigan.
MCCA FUNDING ISSUES
The MCCA is a non-profit organization that was established to provide unlimited medical coverage for injuries to motorists and accident victims, including catastrophic ones such as traumatic brain and spinal cord injuries. It acts as a form of reinsurance that reimburses auto insurers once the size of an accident victim’s medical bills exceeds a set threshold.
The association collects funds through a per-vehicle assessment imposed on auto insurance policies. However, the MCCA is facing a significant shortfall due to a confluence of factors: the economy, financial decisions by the organization, a surge in the volume of claims, and changes in legislation. MCCA funds swung from a surplus of $5 billion dollars in 2020-2021 to the $3.7 billion deficit it amassed in 2022. This shortage is a direct result of the MCCA issuing a $400 refund check in 2022 to all Michigan vehicle owners to disperse their surplus. One year on, through this new assessment, they are taking back what was dispersed, plus some, in these “deficit recoupment” charges.
IMPACT OF CHANGES TO NO-FAULT LEGISLATION
Michigan legislature passed new legislation to help stabilize the insurance market. The goal was to balance the financial burden among policyholders while maintaining essential coverage. However, the 2019 overhaul of the no-fault law has effectively transferred the financial burden to Michigan residents, injured parties, and care providers, and negatively impacted the quality of care provided.
The new legislation introduced a fee schedule that limits the amount medical providers can charge for treating auto accident victims. While this measure aimed to reduce medical expenses, it has resulted in reduced access to care for accident victims and far-reaching disputes between providers and insurers. Many providers have had to close their doors as insurers have cut reimbursements. The net effect for victims and caregivers as well as rehabilitative and long-term facilities has been widespread, and, in some cases, devastating.
Additionally, Michigan drivers are now allowed to opt out or choose lower Personal Injury Protection (PIP) coverage options. By selecting reduced coverage, policyholders may pay lower premiums. However, this option transfers the financial responsibility to individuals, leaving accident victims with insufficient coverage for their medical expenses, especially for long-term care.
The legislation also modified the MCCA assessment with the intent to stabilize the association’s finances and prevent further losses. However, the burden of that falls directly on the shoulders of Michiganders, leading to higher insurance costs:
- Drivers choosing unlimited, lifetime medical coverage — known as personal injury protection (PIP) – will be charged $122, up from $86.
- Drivers choosing any other PIP option, including zero-dollar PIP, will be charged a $48 assessment for deficit recoupment. Currently, drivers who choose an option besides unlimited pay no MCCA assessment or fees.
DAVE CHRISTENSEN on CBS
Recently, Dave was asked to speak as a subject matter expert on a CBS Detroit newscast about the impact of these changes (watch the video here).
“For nearly 50 years we had the No-Fault system (in Michigan),” responded Dave Christensen. “That provided the best medical coverage of any insurance anywhere in America – no matter whose fault the accident was. Now, you may not get paid out, and you will not get the care that you need, most importantly – you will end up on another system (Medicaid, etc.) if you have a lifelong catastrophic injury. It [the MCCA] doesn’t provide nearly the care you got through no-fault coverage with your auto insurance company.”
The MCCA is trying to bolster its reserves to mitigate the losses it has experienced. The overhaul to No-Fault legislation has contributed by allowing reduced or opt-out PIP options and changing how insurance companies reimburse care provided through the MCCA. The result means rate hikes for vehicle owners and drivers, and a lower amount and quality of care for those who need it most.
It is essential to stay up-to-date and understand these changes so you can make informed decisions when selecting your auto insurance options. Without question, the attorneys here at Christensen Law strongly recommend you have PIP coverage.
If you have any questions about your current coverage or would like us to review your existing policy limits, please reach out to us here.