Michigan Auto Insurance Rates to Climb; MCCA Raises Fee Substantially
Finally the Michigan Democrats or at least our Governor is concerned or is attempting to show concern and has ordered an audit of the Michigan Catastrophic Claims Association (MCCA).
The MCCA issued a statement yesterday that simply read:
The Michigan Catastrophic Claims Association (the MCCA) assessment to insurance companies will be $220.00 per insured vehicle effective July 1, 2019 to June 30, 2020.
Currently Michigan drivers are assessed a $192.00 MCCA every year and this $28 increase amounts to a 15% increase in that year over year rate. The increases are simply a pass through from the MCCA to the auto insurance companies and ultimately your insurance premiums.
Last year the MCCA raised our fees 13%, these fee increase are 600% or more than inflation.
The claim threshold from where the insurance companies pay up to before tapping the MCCA will also rise from $550,000 to $580,000 this summer.
An interesting fact is that this pending increase in our fee has driven our fee up 76% since reaching $124.89 in 2009
For those who may not know, what is the Michigan Catastrophic Claims Association is they state on their website:
The Michigan Catastrophic Claims Association (MCCA), a private non-profit unincorporated association, was created by the state Legislature in 1978. Michigan's unique auto insurance no-fault law provides unlimited lifetime coverage for medical expenses which result from auto accidents. The MCCA reimburses auto no-fault insurance companies for each Personal Injury Protection (PIP) medical claim paid in excess of a set amount. Currently that amount is $555,000. That means that the insurance company pays the entire claim, but is reimbursed by the MCCA for medical costs over $555,000.
All auto insurance companies operating in Michigan are assessed to cover the catastrophic medical claims occurring in Michigan. Those assessments are generally passed on to auto insurance policyholders. The 2018-2019 assessment is $192.00 per vehicle.
According to the Detroit News Governor Whitmer reacted to this large increase by ordering an accelerated state audit of the Michigan Catastrophic Claims Association.
The MCCA has been independently audited the last 3 years by accounting firm Plante Moran. That last audit scope, according to the report generated in 2018 was:
We have audited the accompanying statutory financial statements of the Michigan Catastrophic Claims Association (the "Association"), which comprise the statutory statement of admitted assets, liabilities, and accumulated deficit as of June 30, 2018 and 2017 and the related statutory statements of operations, changes in accumulated deficit, and cash flows for the years then ended, and the related notes to the statutory financial statements.
The question I have is how is this accelerated audit ordered by Governor Whitmer going to be different in scope from the last 3 audits? The key to this accelerated audit is the scope. This scope must be different then their yearly audits and must include their rate calculation process, the fee schedules of the charges they pay and how those charges measure up to charges paid by Medicare, Medicaid and Michigan’s Workmen’s Compensation Agency. The devil is in those details. I believe you will find that the MCCA is paying quite a bit more for the same medical tests and treatments.
Governor Whitmer said in a statement that the Michigan residents are:
feeling the pinch of paying the highest auto insurance rates in the nation and it’s time to do something about it…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.
Michigan’s Insurance Department Director Anita Fox said in a statement concerning the ordered audit:
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
The Michigan Catastrophic Claims Association was created by the Michigan Legislature in 1978 but is controlled by insurance companies. This fund currently has a balance of approximately $20.6 billion in assets but they claim that the fund currently has $23.5 billion in long-term liabilities. The MCCA is not subject to public records requests so we do not know their fee calculation process. The MCCA does publish internal financial and independent auditor reports each year.
MCCA Executive Director Kevin Clinton told Michigan lawmakers that their annual fee is designed to cover current-year catastrophic claims but also gradually pay down a $2.9 billion deficit over 15 years.
Tricia Kinley the Insurance Alliance of Michigan Executive Director said in a statement of their own:
It’s time the Michigan Legislature sees the state’s auto no-fault system for what it is: A failed policy experiment that has forced drivers from Metro Detroit to the western Upper Peninsula to choose between paying their auto insurance premium or buying groceries
John Cornack, president of the Coalition Protecting Auto No-Fault, said Wednesday:
Every year it asks for more money, yet it refuses to show us the rate-making data it uses to determine its financial health and set its annual assessment…This is yet another example of the auto insurance industry not being held accountable due to a lack of strong consumer protections in Michigan.
Michigan, it is time to not only audit the MCCA but also look at reforming this system.