Michigan Policyholders to See $30 Increase in Mandatory MCCA Fee

Michigan Policyholders to See $30 Increase in Mandatory MCCA Fee

by Ben Zitney, Online Auto Insurance News Team

Michigan drivers will have to pay a little extra next year to help fund the association that allows them to enjoy lifetime medical coverage through their auto insurance policies.

The fee is actually charged to insurance companies for every vehicle they have on the books, but the cost ultimately gets passed on to consumers.

Currently, the fee is set at $145 per vehicle, but that will go up to $175 starting July 1, amounting to an increase of about 21 percent. That’s according to an announcement on Friday from the Michigan Catastrophic Claims Association (MCCA), the entity that runs the fund.

MCCA fee

The MCCA is necessary in Michigan because insurance policies issued to drivers in the state are unlimited in the amount of coverage they provide.

No other state in the nation employs such a system, and members of the industry say that it has resulted in huge costs to insurers and has made low cost car insurance in the state virtually impossible to find.

The only way that insurers in the state have been able to shoulder the burden as well as they have is the fact that the MCCA exists.

The MCCA reimburses Michigan auto insurance companies for claims that exceed the $500,000 threshold, so insurers themselves in the end do not actually have to pay lifetime medical benefits to their policyholders.

According to the announcement released by the MCCA, the association paid insurers $927 million in 2011 in reimbursement for claims above the $500,000 limit.

There were 1,617 claims put on the MCCA’s books in fiscal year 2010-2011. About 40 percent of those claims involved brain injuries suffered by policyholders. Other claims frequently taken on by the MCCA include paraplegia, quadriplegia and burns.

A key reason the MCCA routinely has to up the annual assessment, it says, is rising medical costs, but another looming issue is the MCCA’s deficit.

Only about $142 of the annual fee will actually go to pay for claims suffered by drivers in the state. The other $33 is going to pay for the estimated $2 billion deficit that the MCCA has racked up since its inception in 1979.

The more than 28,000 claims that the MCCA has taken on since it first started will end up costing it $85 billion, the association estimates.

 

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