A portion of Michigan drivers’ auto insurance bills will be getting slightly cheaper next year.
The Michigan Catastrophic Claims Association, or MCCA, recently announced it will lower its annual per-vehicle assessments on Michigan auto insurance policies, starting July 1:
- Drivers choosing unlimited, lifetime medical coverage — known as personal injury protection, or PIP — will be charged $90, down from $122.
- Drivers choosing any other PIP option, including opting out of PIP coverage, will be charged a $20 “deficit recoupment” fee, down from $48.
The fee reductions appear to reflect a normalization of the MCCA’s finances following the surprise outcome of a court case that concerned medical price controls for those suffering catastrophic injuries from auto accidents.
The Michigan Supreme Court ruled in July that the price controls in Michigan’s 2019 no-fault insurance overhaul do not apply to the care of those whose injuries happened before the overhaul took effect on June 11, 2019.
The MCCA, which along with state regulators had assumed the price controls applied to everyone, acted last year to raise its fees for 2023 after the Michigan Court of Appeals made a similar ruling in the case in August 2022.
The partial overturning of the price controls meant a projected cost to the MCCA of $3.7 billion, which when coupled with declines in the stock market and a decision to issue $400 per-vehicle refund checks to Michigan drivers in spring 2022 — before the outcome of the court case was known — swung the MCCA from an actuarial surplus to a deficit.
To be sure, the new lower MCCA fees — running from July 1 through June 30, 2025 — won’t guarantee cheaper car insurance next year. The rising cost of vehicle parts and repair work has led to significant insurance price hikes nationwide in recent years.
The MCCA is a nonprofit corporation controlled by the insurance industry that manages the catastrophic care fund. It acts as a form of reinsurance that reimburses auto insurers once the size of an accident victim’s medical bills exceeds a set threshold, currently $635,000.
There were 15,712 accident victims who were at that threshold as of June 30. Of those individuals, 1,916 had auto policy dates after the June 2019 cutoff set by the court case and are subject to the price controls, according to the MCCA.
There was a legislative push in Lansing this fall to relax the price controls for those more recent catastrophic victims, while also boosting no-fault reimbursement rates for hospitals and medical providers treating any auto accident patient — not only the catastrophically injured.
The legislation passed the Senate but not the House.
The MCCA’s latest financial report showed a $2 billion actuarial deficit and $21.6 billion in total assets, or down $5.6 billion in assets since 2021. So if the MCCA were to immediately liquidate all its stocks, bonds and other holdings, the $21.6 billion is how much money there would be.
Although the MCCA per-vehicle fees are higher since the court case, they are still lower than before the no-fault overhaul. The highest MCCA fee was $220 in 2019.
In a news release this month, MCCA attributed the fee decline in 2024 to the medical price controls on recent accidents and a new utilization review process that also was part of the no-fault overhaul.
“We are pleased that all drivers will see a reduction in the MCCA’s assessments for 2024-2025, as well as the reduction in the MCCA’s estimated deficit,” said Michigan Department of Insurance and Financial Services spokesperson Laura Hall. “As a consumer protection agency, we continue to work to see that drivers receive the cost savings created by Michigan’s auto insurance law, while ensuring continuity of care for people who were in injured in auto accidents.”
Runaway medical bills were a major reason why auto insurance premiums in Michigan were at various times the highest in the nation by some measures, especially in urban areas such as Detroit.
Prior to the no-fault overhaul, Michigan was the only state that required all motorists to buy unlimited, lifetime medical coverage as part of their auto insurance — and without any mandated price controls on the medical care.
The reform gave Michiganders a first-ever choice in the amount of PIP coverage to buy. Those who choose less than unlimited PIP must now fall back on their health insurance for auto accidents.
The MCCA fee was never the full cost of Michigan’s no-fault system, as only a small fraction of accident claims are big enough to cross the $635,000 threshold for switching to a catastrophic claim.
Before the overhaul, the average size of no-fault medical claims in Michigan was $33,437 in 2017, according to a study by the National Insurance Research Council. Costs for those claims would be reflected in the price of PIP coverage.
“Michigan drivers are seeing costs go down because auto no-fault reforms are working and the latest example of this is the annual fee reduction by the Michigan Catastrophic Claims Association,” Erin McDonough, executive director at the Insurance Alliance of Michigan, an industry group, said in a statement Wednesday.
Contact JC Reindl: 313-378-5460 or jcreindl@freepress.com. Follow him on X @jcreindl.
