Auto insurers in Michigan will begin paying more to cover the cost of personal injury protection (PIP) benefits gauranteed under Michigan’s no fault insurance law.
Beginning July 1, the assessment paid by auto insurers to the Michigan Catastrophic Claims Association (MCCA) will increase to $186 per insured vehicle for the period of July 1, 2013 to June 30, 2014.
The new assessment represents an increase of $11.00 (6 percent) from the current MCCA charge of $175.00. The amount covers anticipated new claims ($156.44), the estimated $2 billion deficit related to existing claims ($29.19), and administrative expenses ($.37).
All auto insurers operating in Michigan are required to pay the assessment.
MCCA assessments are used to reimburse auto insurers for PIP benefits paid in excess of $530,000 per claim. The MCCA paid out $947 million – more than $135 per insured car – in 2012 for claim costs resulting from catastrophic injuries. The majority of these catastrophic claims involved closed head and spinal cord injuries, multiple fractures, and back and neck injuries.
Independent actuarial consultants evaluate expectations for medical cost inflation, economic conditions, investment returns and the number of claims presented to the MCCA. The actuarial committee recommends to the MCCA Board of Directors the annual assessment. It is adjusted for fund surpluses or deficiencies from earlier assessments. Currently, the MCCA has a $2 billion deficit, which represents $300.77 per insured car.
Since its creation by the Michigan Legislature in 1978, the MCCA has faced steadily climbing costs associated with providing unlimted lifetime catastrophic claim insurance:
- Michigan’s unique no-fault auto insurance law provides unlimited lifetime coverage for medical expenses resulting from auto accidents. Michigan is the only state in the nation that requires all drivers to purchase these unlimted benefits. The state with the next highest mandatory level (New York) requires $50,000 of coverage.
- Each year an increasing number of individuals are receiving benefits from catastrophic auto accidents.
- Payments to full time family or agency attendant and residential care providers comprise 60 percent of claims payments.
- Since 1979, there have been more than 29,474 claims reported to the MCCA, which will cost an estimated $83 million.
- Medical care costs continue to rise more rapidly than general inflation.
- Unlike other insurance types, such as Medicare or workers’ compensation, Michigan’s no fault auto law does not contain comparable cost control measures.
Source: Michigan Catastrophic Claims Association
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