Michigan’s no-fault auto insurance system is very unpopular. With the insurance industry, that is.
Whereas they can sell policies of defined, limited benefit amounts in other states, they are required by law in Michigan to sell everyone policies that cover unlimited lifetime medical benefits in the event they suffer catastrophic injuries in an auto accident. See: personal injury lawyers Detroit MI
The system – or at least one aspect of it – is unpopular with another group of people, and that is a certain subset of accident victims. They don’t like it because, when insurance companies try to deny claims for various and sundry reasons, the accident victims’ only recourse by law is to go to court. The insurers and their clients spend way too much time in Michigan courts fighting over benefits, because an insurance policy is a private contract, and the only way to enforce the terms of a contract is civil action.
So if you’ve got a massive head injury and can’t work – but the insurance company’s doctor says you’re just fine and don’t need any more treatment – you need to hire your own attorney and take on the insurance company lawyers.
There is a lot wrong with Michigan’s no-fault insurance law. But it’s hard to see how the reform proposal being championed by State Rep. Peter Lund (R-Shelby Township) solves any of them. Lund appears to accept the argument of the Insurance Institute of Michigan that lifetime benefits have caused costs to spin out of control. So Lund proposes to do away with unlimited lifetime benefits, and instead to give consumers a choice of three levels of coverage – $500,000, $1 million or $5 million.
Proponents of this bill point to a survey by Epic Consulting that indicates 99.1 percent of all auto accidents result in medical bills of less than $250,000, which means, they say, that almost everyone would be just fine with the levels of insurance Lund proposes.
But here’s the rub.
If 99.1 percent of all accidents result in medical bills of less than $250,000, then how exactly are the state’s generous benefits supposed to be costing the insurers so much money? Would they have us believe that the 0.9 percent of accidents that exceed that amount are pushing them to bankruptcy? See : Detroit Attorney
Because you should know that they are not. No auto insurer pays out more than $500,000 in medical benefits to any accident victim. Once the cost exceeds $500,000, the cost is taken on by the Michigan Catastrophic Claims Association, which was created by the state but is a private company operated by the insurers. The MCCA is funded by an assessment that everyone pays along with their insurance bills.
And lest you think the MCCA is being driven to the poor house by these costs, it is not. Far from it. Very far from it. How far? During fiscal year 2010, MCCA paid out $816 million in claim reimbursements on 1,348 cases, while taking in $827 million in assessment income and $526.5 million in investment income.
Pretty good, huh? But you don’t know the half of it. The MCCA also has asset reserves – are you sitting down? – of $12.9 billion. That’s more than one-quarter the amount of Michigan’s entire state budget. You read that right. The MCCA has enough money to bankroll all state government operations for the first three months of the year. That’s some serious money.
The reason MCCA has that much money is that it is trying to remain actuarially sound – and it’s done one heckuva good job – such that it would have enough resources to pay all the lifetime benefits of its current caseload in the event it could no longer collect assessments or investment income.
So while Michigan insurers complain that they can’t make enough money, they are running the board of the MCCA, which has an enormous asset base and is expanding it each year. That $12.9 billion could do an awful lot to mitigate the costs of no-fault insurance. But it won’t. It will sit in the coffers of the MCCA, which continues to collect assessments that currently cost each insured motorist $150 a year.
Lund’s proposed solution, rather, is to introduce “consumer choice” in the form of three levels of coverage. This, he says, will allow motorists to buy the level of coverage that suits their needs.
And how, exactly, does Lund know what any given motorists’ need would be? How would a motorist know? No one chooses to be in an auto accident and suffer even $1 worth of injuries. No one knows if or when they will be maimed for life. So no one can intelligently determine what their level of need will be.
For the 99.1 percent whose medical costs do not exceed $250,000, the new levels of coverage will indeed be just fine. For those who do not, the law graciously permits them to try to find someone to sue for the additional coverage they need.
That’s not much a reform, now is it? Lots of Michigan residents already have to sue, just to get the coverage they’ve already paid for. The difference, of course, is that under the present system, a lot of them actually win.
Under Lund’s brave new no-fault world? Hey, there’s always Medicaid, folks! And what kind of fiscal condition is Medicaid in? Oh. Right. Not good. Maybe Medicaid could borrow some money from the MCCA.
Dan Calabrese is a Michigan View.com columnist. He is also editor-in-chief of The North Star National and author of the spiritual thriller “Powers and Principalities,” a story set in Royal Oak, Michigan( http://www.dancalabresebooks.com)
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