The Michigan Catastrophic Claims Association (MCCA) Board of Directors set this year’s assessment at $100.20 per car and $20.04 per historical vehicle after an annual review of the pool’s financial statements. The increase is effective July 1, 2003 through June 30, 2004. The assessment funds a pool of money for medical costs from which the MCCA reimburses no-fault auto insurers for benefits that exceed $300,000 resulting from an auto accident.
“The MCCA was created by the legislature as a means of spreading costs across all Michigan motorists for providing these unique and valuable unlimited benefits,” said Michigan’s Office Financial and Insurance Services (OFIS) Acting Commissioner Ronald Jones.
The pure premium (the actual cost for each vehicle in the state of Michigan to fund the MCCA pool) for 2002 was $68.90. For 2003, the pure premium is $79.30, and the deficit adjustment is $20.80 with a $.10 administrative expense, setting the assessment at $100.20 – a result of the fact that there is no surplus to be offered as a credit. Twenty dollars and eighty cents ($20.80) of the assessment is to recoup part of the estimated deficit of approximately $200 per car.
“Although the MCCA assessment technically is made to the insurance company, companies typically pass the assessment on to policyholders,” commented Acting Commissioner Jones. “Some insurance companies include the MCCA assessment in the personal injury protection (PIP) portion of your insurance premium. Other companies sometimes list this as a ‘statutory assessment’ or ‘MCCA assessment’ on the declarations page of the policy.”
Even though the amount assessed for each insurer by the MCCA is the same, each company may include administrative and other miscellaneous costs in the amount it assesses policyholders for this coverage. Therefore, each policyholder’s actual MCCA assessment may vary.
It was anticipated that the MCCA would see a surplus through 2004, which could be used as a credit to the assessment. Due to decreased investment returns and increasing medical costs, the surplus was exhausted sooner than anticipated. Surplus has been used as a credit to the MCCA assessment since 1995 – returning $3 billion in surplus, including a one-time lump sum of $180 for each Michigan vehicle insured as of March 18, 1998.
The MCCA assessment is calculated for both current and anticipated medical costs associated with catastrophic auto insurance claims. It is important to note that there are sufficient funds to pay for coverage now and into the future. Each year, the MCCA analyzes the amount needed to cover the lifetime claims of all people catastrophically injured in a car accident.
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. The analysis yields an amount needed to pay these lifetime claims and a per vehicle assessment is set based on that amount.
A recent change in Michigan law, Public Act 3 of 2001, impacted the MCCA’s operation. As of July 1, 2002, the MCCA began paying for claims that exceed $300,000, up from $250,000 previously. The amount will increase each July 1st until it reaches $500,000 in 2011.
Future adjustments will be based on the consumer price index.
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