Many people are worried that Michigan’s No-Fault auto insurance system is headed for very hard times. According to Pete Daly’s Insurance News Net article “Crisis Predicted In No-Fault’s Unlimited Coverage,” the amount of these Michigan auto insurance claims went up by 13% in less than a decade. This unlimited lifetime medical coverage is only required through your auto insurance in Michigan, where every auto insurance company in the state has to pay into the coverage pool.
The Michigan Catastrophic Claims Association, MCCA, reimburses auto insurance companies for any medical bills they have to pay over $500,000. After the MCCA started accruing too much debt, they had to double the amount they would cover after from $250,000 to the current $500,000. The unlimited medical benefits in Michigan are interesting because the state requiring the next highest medical coverage only mandates $50,000 worth of medical benefits. Auto insurance companies will have to pay yearly premiums of $175 for each car they insure, an increase starting July 1 from the current $145. $141.93 of that is for paying claims, $32.72 goes towards the MCCA’s debt, and $0.35 is for administration.
Unfortunately, the $32.72 doesn’t go far in covering the $2 billion in debt that the MCCA has already incurred. Last year, $927 million was paid out in catastrophic claims. Due to Michigan’s generous lifetime medical coverage mandate, insurance companies are worried that they will have serious financial troubles if the MCCA becomes insolvent and they have to cover this lifetime medical care. A House Bill introduced last year would eliminate required lifetime coverage and give options of $500,000, $1 million or more chosen by individuals. The default maximum would be $500,000. So far, the bill hasn’t gone anywhere.
The Michigan Association of Insurance Agents has some ideas that they believe would help ease some of the costs. They think that a medical fee schedule for PIP insurance, similar to that used for Worker’s Comp insurance, would really help lower costs related to PIP insurance. They think that there should be clarification in the reimbursement for medical care performed by family members, because some are getting paid for every hour of every day. MAIA also believes there should be more clarity in what is considered “serious impairment” and “pain and suffering” because there may be some questionable claims.
Right now there is some work that needs to be done to help sustain Michigan’s auto insurance PIP coverage. Whether the unlimited lifetime coverage needs to be changed or some of the other items associated with the coverage altered, we’ll continue to follow this story.