The Michigan Catastrophic Claims Association (MCCA) Board of Directors announced it has lowered the assessment that the state’s motorists pay for their unique auto insurance unlimited medical benefits. Beginning July 1, motorists will pay $69.00 for the twelve-month period ending on June 30, 2003. This compares with the annualized $71.15 assessment motorists are paying for the first six months of 2002.
“Although this assessment is more than motorists have paid for the last several years” Michigan Office of Financial and Insurance Services (OFIS) Commissioner Frank M. Fitzgerald, said. “Michigan motorists have benefited from the return of over $3 billion of excess surplus since 1995.”
A change in the MCCA’s threshold amount caused the MCCA board to reconsider the assessment for 2002. Until July 1, the MCCA pays for medical claims that exceed a $250,000 threshold; Public Act 3 of 2001 gradually increases that amount. As of July 1, the threshold will increase to $300,000. It will increase every year on July 1st until reaching $500,000 in 2011. From this point forward, it is anticipated that MCCA assessments will be set for a July 1 – June 30 period.
The MCCA assessment for the first half of 2002 increased $56.74 from 2001 levels. In 2001, the MCCA assessment was $14.41 – after a $47.21 surplus credit. The 2002 MCCA assessment for the first half 2002 is $71.15 with no surplus credit. The MCCA assessment is calculated to pay for both current and anticipated medical costs associated with catastrophic auto insurance claims. At each assessment, the MCCA analyzes the amount needed to cover the lifetime claims of all people catastrophically injured in a car accident and the assessment is set to provide for sufficient funds to pay for coverage now and into the future. This analysis includes review of the investment return that the fund receives, the number of new cases, medical cost inflation, and any changes to coverages. For instance, the MCCA assessment reflects the impact of the primary seatbelt enforcement law that took effect April 1, 2000. Without taking that impact into account, it is estimated that the MCCA assessment would increase to $80.11 for 2002.
Depending on how a motorist pays for auto insurance coverage, their insurance company may adjust for this decrease in the assessment. For instance, if the yearly assessment has already been paid in full, the insurance company may credit the policyholder to account for the decrease in assessment. If auto insurance is paid for on a more frequent basis, the insurance company may adjust future payments to account for the decrease in assessment.
Also, the assessment may not always be reflected as exactly $69 on policy statements. Insurance companies can charge administrative costs with this assessment and sometimes lump this assessment in with other coverages.
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