Michigan Catastrophic Claims Association Provides Valuable Protection for Us All… But What Does It Include?

Remember the surprise $400 check you probably received last year as a refund from the Michigan Catastrophic Claims Association? If you’re like most of us, that rebate felt like pretty good news at the time. Governor Whitmer, in announcing the windfall, said it was the result of changes to Michigan’s No-Fault insurance laws made in 2019 which were starting to pay off for Michigan drivers. Unfortunately, that rosy picture doesn’t seem to be quite so true anymore.

Because in recent weeks the MCCA announced it will once again charge an additional assessment to all No-Fault insurance plans in the state. Which means, in essence, you’ll have to start handing back part of that $400 refund every time your policy renews for the foreseeable future. How much? For car insurance policies offering unlimited Personal Injury Protection (PIP) benefits, it’s $122 for the period that began July 1, 2023, and ends June 30, 2024. For folks who didn’t choose unlimited PIP, the fee is $48. (By the way, we do not recommend choosing anything less than unlimited PIP coverage, and we’ll explain why in just a moment.) As a reminder, last year the mandatory MCCA assessment was $86, so it’s risen considerably for 2023-24; future assessment amounts (presuming they continue to be necessary) will be determined by the MCCA board based on statewide insurance expenses down the road.

What is the MCCA… and Why Is It Important?

 
To understand why the state first established the MCCA, we need to look into the history of Michigan’s No-Fault car insurance law. According to the Association, back in 1978, “insurance companies had difficulty obtaining reinsurance for Michigan’s automobile No-Fault policies, which provided for unlimited lifetime medical benefits for people who are catastrophically injured in auto accidents.” In layman’s terms, insurers couldn’t keep up with the rising cost of medical bills for the most seriously injured accident victims and were at risk of becoming unprofitable as a result. To protect insurance companies from possible insolvency, the state developed the MCCA as a financial backstop. Technically, it’s a “private unincorporated, nonprofit association created by the Michigan Legislature in 1978,” and all car insurance companies licensed to operate in the state are required to participate.

Who pays for this important safeguard? Basically, we all do. It’s been part of our No-Fault insurance costs for decades – going all the way back to 1978. It can be listed on your bill under a few different descriptions depending upon your insurance company’s labeling practices. The state says the following (and a bit more) about how MCCA charges are identified for consumers: “Some insurance companies include the MCCA assessment in the PIP portion of your insurance premium. Other companies sometimes list this as a ‘statutory assessment’ or ‘MCCA assessment’ on the declarations page of your policy.” Regardless of the terminology used, over the years the MCCA assessment that has been added to your car insurance bill ranged from a mere $3 in 1978, to as much as $220 in 2019. Last year, because money collected through these mandatory assessments and stock investments made by the Association over the past several years had surpassed the cost of covering catastrophic insurance claims, the fund had accumulated a $5 billion surplus in the bank… so that lovely $400 refund check you received was authorized. This year, the MCCA’s fiscal picture has become far less positive, and the fund currently runs a reported deficit approaching $3.7 billion. Hence, we’ve all been told we’ll be charged an extra $122 (or $48 if you don’t have unlimited PIP benefits – which again we do not recommend) assessment on our car insurance policies to help cover this shortfall.

And keeping the MCCA solvent is in all our best interests – despite the higher cost we’re being charged when we pay our car insurance bills. Because if insurance companies are unable to cover the costs of PIP insurance claims, everyone living in Michigan runs the risk of being unable to receive essential medical care when it’s necessary, and the trickle-down effects on our state’s healthcare system are potentially disastrous.

How the MCCA Works to Protect Insurers and Insured Individuals

 
As you probably know, healthcare costs are a leading cause of personal bankruptcies nationwide. A hospital stay resulting from a serious accident can amount to charges in the hundreds of thousands of dollars. Medical bills for spinal cord injuries alone, for example, average $198,000 in just the first year following a car accident. In subsequent years, as continuing or long-term care is required, those numbers can rise into the millions of dollars. If those costs aren’t covered by insurance, you could find yourself facing financial ruin. On the other hand, if you were smart enough to choose unlimited PIP coverage, you’re safe … but your insurance company will be on the hook for those enormous costs. That’s where the MCCA comes into play. It helps Michiganders (and the car insurance companies licensed to operate here) avoid that significant risk by reimbursing your insurance company for any unlimited PIP medical claims it must pay that exceed $635,000 (up from a maximum of $600,000 last year).

Without this safeguard in place, many car insurance companies would likely be compelled to leave Michigan, and those that remain here would probably have to dramatically raise their premiums. So, as we noted in a recent article, despite the increased assessment we must all pay to support MCCA, we continue to recommend that everyone choose policies with the unlimited PIP benefits which offer essential protection to all Michigan motorists. Choosing a lower-cost policy with minimal PIP protection could leave you and your family vulnerable to bankruptcy (the state calls this “severe financial consequences”), especially following an accident where you were found to be at fault for causing someone serious bodily injury (since you would be personally responsible for any damages that exceed your policy coverage limits). Yes, this kind of coverage costs a bit more up front, but unlimited PIP benefits could save you and those you love from financial disaster down the road.

Our Advice About the MCCA Assessment

 
It might not be your idea of a great way to spend $122, but we suggest that you grit your teeth, bite the bullet, and pay the assessment. There’s really no way around it, since you’re legally required to have car insurance in any case. (And remember that you can possibly save some money on your insurance policy by getting competitive quotes from a few different providers.) Yes, it’s going to hurt to cut that premium check regardless, but it’s a small price to pay considering the alternative if you’re injured in a serious accident and don’t have adequate insurance coverage in place. And remember that just about a year ago, you did collect $400… and if the MCCA has better-than-expected investment returns or smaller than predicted reinsurance costs down the road, you might someday receive another “rebate” like the pleasant surprise that arrived in your mailbox last year.

In closing, we sincerely hope you’ll never be faced with filing a catastrophic PIP insurance claim that would make it necessary for the MCCA to enter the picture. But if you do experience an accident, you can rest assured that when you hire us as your personal injury attorneys we’ll be on your side every step of the way to win you all the compensation and coverage you deserve. To start us working on your behalf, it takes just one simple phone call to 855-MIKE-WINS (855-645-3946) or one quick click of the mouse right here.

Content checked by Mike Morse, personal injury attorney with Mike Morse Injury Law Firm. Mike Morse is the founder of Mike Morse Law Firm, the largest personal injury law firm in Michigan. Since being founded in 1995, Mike Morse Law Firm has grown to over 200 employees, served 40,000 clients, and collected more than $1.5 billion for victims of auto, truck and motorcycle accidents. The main office is in Southfield, MI but you can also find us in Detroit, Sterling Heights and many other locations.