Governor Snyder is currently doing his best to push for the lowering of Michigan auto insurance rates through Personal Injury Protection [PIP] reform. This includes recognizing that Michigan is currently the tenth most expensive state when it comes to no-fault insurance.
What is PIP and how does it affect Michigan drivers? PIP is a specific coverage that is found on all Michigan auto policies. In this state, if you are injured in an auto accident, you have access to lifetime unlimited medical care. In order to fund this type of system, the state of Michigan has established an organization called the MCCA or Michigan Catastrophic Claims Association. Every vehicle that is insured in the state of Michigan is currently charged $178 per vehicle per year which goes directly into that fund. When auto injuries occur, the first $500,000 come from your auto insurance carrier. The remaining costs are pulled from this fund.
Here are some interesting points from both sides of the current PIP system in Michigan:1
- Michigan is the only state in the nation mandating unlimited medical coverage for auto accidents. The next highest state is New York at a max of $50,000 in reimbursement from the state fund.
- The average auto accident medical claim has increased by 324% in the past 12 years going to over $44,000 in 2012. The next highest state, New Jersey, averages $17,570.
- The average catastrophic medical claim weighs in around $1.4 million.
- The cost for drivers to pay the MCCA fee has increased from $5.60 per vehicle in 1998 to $178 per vehicle in 2012. That is a 3100% increase. Even then, the MCCA has a $60 billion unfunded liability.
- MCCA was over-funded in the mid 1990’s which is what provoked the State of Michigan to refund all drivers a portion of money. Looking back, these funds would have helped to supplement the shortage of today.
- Patients covered by no-fault insurance are claimed to be charged higher rates than patients covered by other means – for the same procedure.
- At least 20% of Michigan drivers are driving uninsured.
There is another side to the PIP reform argument. Let’s not forget that if no-fault did not exist, the state would turn to a lawsuit driven system. 2
- In this scenario, it is often determined that the monetary savings on the auto insurance policy will simply transfer to higher out of pocket costs in the form of legal council, increased health insurance premiums, and more responsibility on the states Medicaid system.
- One recent example is the state of Colorado, which shifted to a lawsuit driven system ultimately causing a 205% increase in Medicaid expenses. This resulted in an enormous cost transfer to taxpayers in that state.
- In our state, the estimated cost shift to taxpayers lies somewhere around $30 million.
- As of 2012, Michigan’s PIP coverage is said to cost only 5% more than the national average (or about $23.)
- “Placing a ceiling on PIP payments will serve to introduce uncertainty for the injured individual on whether or not he or she can afford rehabilitation treatments. This uncertainty inevitably causes delay and markedly reduces the possibility of successful rehabilitation.”
3Michigan insurance commissioner, Thomas C. Jones via http://www.michiganautolaw.com/auto-lawyers-blog/2012/02/14/7-things-to-know-on-nofault-reform/