An increase in the amount Michigan drivers will pay into a fund for accident victims with brain damage, paralysis and other catastrophic injuries is renewing a call by some lawmakers for more transparency in how the rates are determined and broader insurance reforms.
The Michigan Catastrophic Claims Association in March announced that the state’s insured drivers will pay $30 more per vehicle annually into the fund effective July 1, raising the per-vehicle assessment to $175. The 21 percent increase is needed, the association said, to cover the costs of Michigan’s one-of-a-kind law providing uncapped lifetime coverage for medical expenses resulting from auto accidents.
The state’s law could be altered as Michigan legislators consider broader changes to no-fault auto insurance later this year. Bills pending in the Legislature would offer motorists potentially less expensive insurance in exchange for limited personal injury protection coverage.
But some lawmakers want faster and independent action, saying the claims association should be subject to open meeting and freedom of information laws to help shed light on how rates are determined.
“I don’t think you can have a discussion on no-fault reform without thoroughly analyzing and discussing it,” Rep. Phil Cavanagh, a Democrat from Redford Township, said of the Michigan Catastrophic Claims Association. “People need to be told what’s going on behind closed doors.”
Cavanagh’s bills that would require the association to be subject to open meetings and freedom of information laws, introduced in mid-2011, are unlikely to advance in the Republican-led Michigan Legislature. Similar measures in past years have fizzled because the MCCA — created by a state law in 1978 — is considered a private, non-profit association made up of member insurance companies. The money it collects comes from auto insurers and vehicle owners, not public taxes.
Cavanagh has grown so frustrated that he’s trying to “push the envelope” by drafting a resolution that would call for the state to appoint an emergency financial manager for the association, even though that likely can’t be done because the MCCA isn’t a unit of government.
Rep. Pete Lund, a Republican from Macomb County’s Shelby Township and chairman of the House Insurance Committee, said there should be more transparency in the MCCA process and that some measures along those lines could be included in a broader insurance reform package. But Lund noted open meetings and similar laws can’t apply to private organizations, and he considers the bigger issue to be changes that could rein in insurance costs.
“I think you can take a look at what’s going on here and you can see there is the need for serious reform in no-fault,” Lund said. “That’s why the rates are going up the way they are. It’s not because the insurance companies are making profits. It’s because of the fact the insurance companies are having to pay these outrageously high benefits that no other state even comes close to.”
All Michigan auto policyholders currently must buy unlimited medical benefits as part of their coverage. Regular auto insurance policies handle coverage up to $500,000, after which all insured motorists are assessed the fee to cover more severe cases reimbursed through the MCCA.
The association covers medical bills for roughly 12,800 accident victims across the state. Last year it paid out $927 million in claims resulting from catastrophic injuries.