The association announced the fee on auto insurers will rise from $192 to $220 on July 1, a $28 increase that will ultimately be passed along to consumers in the form of higher rates.
Gov. Gretchen Whitmer on Wednesday ordered an accelerated state audit of the Michigan Catastrophic Claims Association after the private non-profit's board voted for a 15 percent increase in the annual auto insurance assessment.
State law requires auto insurance companies to pay the assessment to cover costs of lifetime medical benefits guaranteed under Michigan’s no-fault auto insurance law.
The MCCA operates as a reinsurance program, reimbursing auto insurance companies for expensive medical claims for motorists who are catastrophically injured in auto accidents. The claim threshold is also set to rise from $550,000 to $580,000 this summer.
The pending increase in the fee — which has risen 76 percent since reaching $124.89 in 2009 — comes as Michigan lawmakers develop plans to reform the state’s no-fault auto insurance and rein in rates that already rank among the most expensive in the nation.
Drivers across the state are "feeling the pinch of paying the highest auto insurance rates in the nation and it’s time to do something about it," Whitmer said in a statement. “Michiganders deserve to know why they are being forced to shell out hundreds of dollars in additional fees for car insurance, which is why I’m ordering an audit to provide drivers with the transparency they deserve."
MCCA officials testified before a Senate committee earlier this month, disputing anti-transparency accusations while arguing that “waste and fraud” in the medical system is driving up insurance costs.
The association, created by the Michigan Legislature in 1978 but controlled by insurance companies, is sitting on $20.6 billion in assets but claims $23.5 billion in long-term liabilities. It is not subject to public records requests that could shed further light on its fee calculation process but publishes internal financial and independent auditor reports each year.
The annual fee is designed to cover current-year catastrophic claims but also gradually pay down a $2.9 billion deficit over 15 years, MCCA Executive Director Kevin Clinton told lawmakers.
In announcing the pending $28 fee increase on Wednesday, the MCCA said its costs are rising, in part, because more individuals are receiving benefits and medical care costs continue to rise.
The association said it paid out $1.2 billion in 2018 for claims resulting from catastrophic injuries. The majority of claims involve brain and spinal cord injuries, multiple fractures, and back and neck injuries. Most of the payments were for attendant care, prescriptions and hospitalizations.
The Michigan Department of Insurance and Financial Services, which Whitmer ordered to conduct a separate and accelerated audit, has the authority to examine MCCA documents and review its operations, a process that last occurred in 2015, according to the administration.
“Today we told the MCCA that we were concerned and strongly urged them to provide more information so the public can understand the basis for this fee increase,” Insurance Director Anita Fox said in a statement welcoming the governor's request for a financial audit.
Other long-discussed reform ideas include a fee schedule for medical providers that would cap the amount they are allowed to charge insurers for patients injured in auto accidents. Ronald Dwyer of Roninsureme.com, has been one such voice for better fee scheduling. "I have been stating for years that we need to put medical fee scheduling in place similar to that of Medicare/Medicaid.", Said Ronald Dwyer. "Right now their is no true cap only the term 'Reasonable Costs' ."
Dwyer also stated the following "Michigan is not the only state in the union with no-fault, we are though the only state with unlimited benefits. We don't not want to get rid of our unlimited benefits or our no-fault coverage - which is to prevent you from having to go to court to sue the other driver to get medical reimbursements. Two main factors have driven the cost of insurance; 1) No True Fee Scheduling for medical coverages/benefits 2) Our legislature in the mid 1990's opened up Pandora's box by easing restrictions on lawsuits pertaining to auto accidents through legislation. This has caused a rise on insurance claims that are most of the time frivolous which in turn have raised insurance premiums to record levels. If we fix these two issues we can keep our unlimited benefits and keep our insurance premiums more affordable."
Michigan’s Republican-led Senate and House are developing proposals that are expected to provide motorists with the “choice” to purchase auto insurance policies with reduced medical coverage. Dwyer believes this is a very bad idea, "What will happen is your will have to pools of coverage and everyone will want to make the wrong choice by taking the reduced coverage. This will leave the other pool with few participants which will then make the unlimited coverage to expensive and it will collapse. It will be a back door way of reducing coverage for all with no guarantee about lowing premiums for a long period of time. "
Supporters of Michigan’s no-fault auto insurance system contend that eliminating the state’s guarantee of lifetime medical benefits would end an important safety net for some injured motorists and ultimately force more residents into bankruptcy and on to government health coverage.
