The Michigan Catastrophic Claims Association (MCCA) has just announced that the current per vehicle assessment of $220 will be lowered to $100 per vehicle for the period beginning July 2nd, 2020 through June 30th, 2021. Michigan drivers pay this assessment on each vehicle on their policy and the fee is the same regardless of insurance carrier.
The new 2020-2021 per vehicle assessment is a 55% reduction from the prior year. Keep in mind that moving forward, the $100 assessment will only be charged to those drivers who continue to purchase unlimited personal injury protection (PIP) coverage on their auto policy. Those who select the $500,000, $250,000, $50,000 PIP limits or chose to opt out entirely will not pay any assessment in the coming year. This will continue moving forward as long as the MCCA is not in a deficit position.
The MCCA was created by the Michigan legislature in 1978 to reimburse insurance companies for PIP benefits they paid out over a catastrophic amount. The current catastrophic amount of $580,000 was set July 1st, 2019 and extends through June 30th, 2021. The cost to reimburse insurance carriers for these high-value claims is the fee reflected in the premium paid on each insured vehicle in Michigan. In their press release, the MCCA attributed the significant assessment reduction to “savings created by cost controls for medical treatment and other changes made to Michigan’s no-fault insurance law on June 11, 2019. These changes are estimated to erase the MCCA’s deficit of approximately $2.0 billion and reduce the annual MCCA assessment by approximately $1.0 billion.”
Under the new no-fault reform law, Michigan drivers will have the option to select from several different coverage limits. The unlimited option will still be available and these will be the only drivers paying the MCCA fee in the coming year. Drivers on Medicaid will have the option to purchase a $50,000 limit and all drivers will have a $500,000 and $250,000 PIP benefit option. Drivers who are on Medicare or have a qualified health plan will have the option to opt out of PIP benefits altogether.
It is important to note when selecting any limit other than unlimited that once the cap is reached, the insurance carrier will no longer pay for an accident victims crash-related medical care, treatment and expenses. The burden of paying these bills will then shift to the driver who caused the accident and would be paid under the liability coverage on their auto policy. This is why we are stressing the importance of carrying adequate liability limits and purchasing a personal umbrella to best protect your assets.
If you have further questions about the new legislation, please give our office a call.