Catastrophically injured car crash victims are concerned about how the new, rushed, and poorly drafted No-Fault law could affect the vital medical benefits coverage they receive through the Michigan Catastrophic Claims Association (MCCA).
They have good reason to be.
In this blog post, I will address these concerns as well as concerns about the MCCA insurance assessment and transparency into the MCCA assessment-setting process.
What is the Michigan Catastrophic Claims Association?
The Michigan Catastrophic Claims Association is an unincorporated, nonprofit association that was created by the Michigan Legislature for the sole purpose of paying for the accident-related medical expenses of catastrophically injured car crash victims.
Under Michigan law, an accident victim is deemed to be catastrophically injured and, thus, eligible for medical benefits coverage through the Michigan Catastrophic Claims Association when his or her crash-related medical expenses exceed the “retention” amount – which is $580,000 under an auto insurance policy that was issued or renewed during the period from July 1, 2019 to June 30, 2021. (MCL 500.3104(2)(o)).
Prior to that point, No-Fault medical benefits will be paid by the auto insurance company that issued the policy under which benefits are sought. In other words, until the retention amount is reached and the Michigan Catastrophic Claims Association gets involved, the auto insurer will “retain” the responsibility for paying benefits. The Association’s overall mission was not changed by the new No-Fault law.
Will catastrophically injured car crash victims still be able to get No-Fault benefits through the Michigan Catastrophic Claims Association under the new law?
Some will, but most likely will not.
Once the new No-Fault law’s PIP medical benefits coverage levels become available after July 1, 2020, the only people who will be eligible for catastrophic injury benefits through the MCCA after a car crash will be the people who chose “unlimited” or “no limit” No-Fault coverage in their auto insurance policies. (MCL 500.3104(2))
For the people who limit their No-Fault protection by choosing one of the lower PIP medical benefits coverage levels (MCL 500.3107c(1)(a), (b) or (c)) – or opt-out of No-Fault medical coverage altogether (MCL 500.3107d) – the new auto No-Fault law will create major problems for them if tragedy strikes and they are catastrophically injured in a car crash or truck accident.
They will NEVER will be able to recover No-Fault medical benefits paid through the MCCA. They will have no catastrophic personal injury coverage through the MCCA.
That’s because the Michigan Catastrophic Claims Association provides catastrophic coverage only if a person chooses to pay for catastrophic coverage by purchasing unlimited or “no limit.” This is also reflected in the fact that the only people who will have to pay the full MCCA assessment (an issue I will discuss in greater detail below) are the people who choose to have the protection of unlimited No-Fault PIP medical benefits coverage. This is a drastic change from our old auto No-Fault law in Michigan that will hurt hundreds of car crash victims every year.
Without the Michigan Catastrophic Claims Association, catastrophically injured car crash victims in Michigan will now be like those in every other state. They will be essentially on their own to pay for their bills. Their only other options would be: (1) Suing the at-fault driver for “excess” medical expenses; (2) Making a claim through a private health insurance plan, assuming they have one and it does not have auto accident exclusions or exceptions; (3) Seeking medical care from Medicaid or Medicare; (4) Making a claim under an “underinsured motorist” policy (in the event the at-fault driver doesn’t have the resources to settle an “excess” medical claim); or (5) Paying out-of-pocket.
How does the new No-Fault law affect the benefits that MCCA insurance is currently paying to victims?
This is an important question that many people are asking. The short answer is that the Association will continue to pay No-Fault benefits for catastrophically injured car crash victims who are currently receiving No-Fault benefits through the Michigan Catastrophic Claims Association.
Going forward under the new No-Fault law, the two things that people should know about MCCA insurance coverage are:
- The Michigan Catastrophic Claims Association will continue to be liable for catastrophic injury No-Fault medical benefits payable under “all motor vehicle accident policies issued or renewed before July 2, 2020.” (MCL 500.3104(2))
- However, once the new No-Fault PIP medical benefits coverage levels become available in auto insurance policies after July 1, 2020, the MCCA will be liable for catastrophic injury No-Fault medical benefits payable only on those motor vehicle accident policies “issued or renewed after July 1, 2020” where unlimited coverage was chosen, i.e., No-Fault PIP medical benefits with “no limit” as provided in MCL 500.3107c(1)(d). (MCL 500.3104(2); 500.3104(27))
What is the MCCA insurance assessment?
The MCCA insurance assessment is how the Association raises the funds it needs to pay for the No-Fault medical benefits of catastrophically injured car crash victims.
It is an annual, per-vehicle fee that the Michigan Catastrophic Claims Association charges to the auto insurance companies who are authorized by the State of Michigan to sell policies to Michigan drivers. (MCL 500.3104(7)(d) and (10)(c))
Here’s a fact most people don’t know: The insurance companies DO NOT actually shoulder the burden of the MCCA’s assessment costs.
The MCCA assessment costs fall on you and me . . . as drivers. With a mandate from the No-Fault law backing them up, auto insurers pass along the insurance assessment costs to drivers in the form of higher auto insurance premiums. (See MCL 500.3104(20), formerly 500.3104(22))
The new No-Fault law has not changed the nature or purpose of the MCCA insurance assessment – nor the ability of insurers to pass it along to drivers.
Does the new No-Fault law get rid of the MCCA insurance assessment for Michigan drivers?
Practically speaking, no.
For the time being, until the new No-Fault PIP medical benefit coverage levels become available after July 1, 2020, all Michigan drivers will continue to pay the MCCA insurance assessment.
After the new coverage levels become available after July 1, 2020, here is how the MCCA insurance assessment will work:
- Drivers who will be required to pay the full MCCA assessment: Drivers who choose to maintain unlimited No-Fault PIP medical benefits will continue to pay the full MCCA insurance assessment, which covers payouts, expenses and deficit reduction (where necessary). (MCL 500.3104(7)(d))
- Drivers who may be required to pay the deficit portion of the MCCA assessment: Drivers who choose to no longer maintain unlimited coverage – because they have opted for one of the new coverage levels or opted-out of No-Fault PIP medical benefits coverage altogether – will only have to pay the portion of the MCCA insurance assessment that goes to paying down any deficits that the Michigan Catastrophic Claims Association is running. (MCL 500.3104(7)(d))(“ . . . the portion of the total premium [assessment] attributable to an adjustment for a deficiency in a previous period.”)
Will there be more transparency into the practices of the Michigan Catastrophic Claims Association?
Transparency into the Association’s process and for how it is raising assessments on drivers is an issue I’ve written about for many years on the pages of this auto lawyers blog.
The new No-Fault law addresses the transparency issue by requiring the Michigan Catastrophic Claims Association to submit an “Annual Consumer Statement, written in a manner intended for the general public,” to the House and Senate Insurance committees. (MCL 500.3104(25))
The issues addressed by the Annual Consumer Statement will include, but are not limited to:
- The number of claims opened during the preceding 12 months, the amount expended on the claims, and the future anticipated costs of the claims.
- For each of the preceding 10 years, the total number of open claims, the amount expended on the claims, and the anticipated future costs of the claims.
- For each of the preceding 10 years, the total number of claims closed and the amount expended on the claims.
- For each of the preceding 10 years, the ratio of claims opened to claims closed.
- For each of the preceding 10 years, the average length of open claims.
- A statement of the current financial condition of the association and the reasons for any deficit or surplus in collected assessments compared to losses.
- A statement of the assumptions, methodology, and data used to make revenue projections. As used in this subdivision, “revenue” means return on investments.
- A statement of the assumptions, methodology, and data used to make cost projections.
- A statement explaining what portion of the assessment to insureds as recognized in rates under subsection (20) is attributable to claims occurring in the previous 12 months, administrative costs, and the amount, if any, to adjust for past deficits.
- For each of the preceding 10 years, an injury type summary, categorizing the injuries suffered by claimants the payment of whose claims are being reimbursed by the association, by brain injuries, injuries resulting in quadriplegia, injuries resulting in paraplegia, burn injuries, and other injuries. (MCL 500.3104(25)(a) through (h), (l) and (o))
Is the Michigan Catastrophic Claims Association going to be refunding money to drivers?
Well, it’s possible. But I wouldn’t hold your breath.
The new No-Fault law provides that drivers will be refunded money from the Michigan Catastrophic Claims Association only under very limited circumstances.
Specifically, refunds from the Association will go out only if:
An “actuarial examination . . . shows that the assets of the association exceed 120% of its liabilities, including incurred but not reported liabilities, and if the refund will not threaten the association’s ongoing ability to provide reimbursements for personal protection insurance benefits based on sound actuarial principles consistent with the applicable statements of principles and the code of professional conduct adopted by the Casualty Actuarial Society . . .” (MCL 500.3104(22)
