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What’s the truth about the Michigan Catastrophic Claims Association’s claimed billion-dollar deficit?

May 8, 2012 by Steven M. Gursten

MCCA’s contradictory accounts call for emergency manager and increased transparency

Michigan drivers deserve the real story about the Michigan Catastrophic Claims Association.

Especially when the insurance industry executives that make up the MCCA board are asking drivers to pay the highest per vehicle assessment costs ever. But a straight story is hardly what Michigan drivers are getting when it comes to the MCCA. In fact, the public can’t even look at the numbers. Instead we are asked to take their word for it, at the same time that the insurance industry is pushing for wide-ranging No-Fault changes.

In the MCCA’s official press releases, financial statements and annual reports:

  • The MCCA contradicts itself about the actual dollar amount of its deficit.
  • The MCCA reveals that its deficit shrunk by nearly $1.5 billion between 2010 and 2011.
  • The MCCA reveals that it is currently devoting a smaller percentage of each assessment to deficit reduction than it did in previous years, despite the ongoing deficit problem.

Standing alone, those deficit problems are significant for the MCCA, whose purpose, since its creation in 1978, is to use assessment revenue from Michigan drivers to pay for the medical costs in excess of $500,000 of catastrophically injured auto accident victims.

But when those deficit problems coexist with the MCCA increasing its annual assessment to the unprecedented level of $175 per vehicle, which will inevitably result in higher auto insurance rates for drivers, those deficit problems become significant for every driver in Michigan.

Michigan drivers deserve to know what the MCCA is doing with their money and why the MCCA insists on taking more of it.

Appointing an emergency manager to take over the MCCA as Rep. Philip Cavanagh (D-17th District) proposes is a reasonable step whose time has come.

At a minimum, the time has come for the Michigan Legislature to act on bills (two of which were sponsored by Cavanagh) aimed at making the MCCA more accountable to Michigan drivers and the public.

MCCA deficit discrepancies

There appears to be a lack of agreement within the MCCA about what its current deficit is.

According to its press releases, the “estimated deficit” has been running at approximately $2 billion since 2010.

Yet, the MCCA’s annual report to the Insurance Commissioner and its financial statement prepared by PricewaterhouseCoopers report different figures. For the fiscal year ending June 30, 2010, the MCCA’s official financial documents stated the deficit was $2,528,399,000.

And, according to those same documents, the deficit was $1,034,992,000 for the fiscal year ending June 30, 2011.

MCCA deficit reduction

In case you missed it above:

The MCCA deficit shrunk by nearly $1.5 billion between 2010 and 2011.

Shockingly, the MCCA has not publicized that fact and neither has any of the auto insurance industry leaders condemning Michigan’s No-Fault system and calling for so-called “reform” in the form of slashing Michigan drivers’ medical benefits without any promise of savings or lower premiums.

As if the nearly $1.5 billion reduction between 2010 and 2011 were not enough, the MCCA’s press releases also show that the deficit dropped from $2.2 billion in 2009 to $2 billion in 2012.

Yet another discrepancy.

Finally, despite the ongoing nature of its deficit problem, the MCCA’s press releases show that the percentage of each annual assessment used for deficit reduction has gone down slightly in recent years. For the 2009-10 assessment, the percentage was 19 percent. Today, for the 2012-13 assessment, the percentage is 18 percent.

(Sources of MCCA information: Press releases, financial statement, annual report)

Let in the sunshine

Given the uncertainty about the amount of the MCCA’s deficit, its recent, unpublicized nearly $1.5 billion reduction in the budget and its recent unprecedented in its annual assessment, it is certainly time, as Rep. Cavanagh says in his recent Detroit Free Press column, “for some sunshine to be blown into this process.”

Here’s what the State Rep from Redford Township is proposing:

  • On April 17, 2012, Cavanagh introduced House Resolution 228 which “implore[s] the Michigan Department of Treasury to conduct a financial review of the Michigan Catastrophic Claims Association (MCCA) to consider the appointment of an emergency financial manager …”
  • On June 16, 2011, Cavanagh introduced in the Michigan House of Representatives House Bill 4785 to eliminate the MCCA’s exemption from the Michigan Freedom of Information Act.
  • On June 16, 2011, Cavanagh introduced House Bill 4786 to require that the MCCA comply with the requirements of Michigan’s Open Meetings Act. Under Michigan’s Open Meetings Act, the meetings of “public bodies” are required to be open to the general public so that anyone can attend. Moreover, any deliberations and/or decisions of the public body must be made during the public, “open meeting.” (MCL 15.261, et al.)[On January 26, 2011, a similar bill was introduced in the Michigan Senate, SB 75.]

Steve Gursten is one of the nation’s top insurance lawyers handling auto accident lawsuits. He is head of Michigan Auto Law and president of the Motor Vehicle Trial Lawyers Association. Steve frequently writes and speaks about Michigan No-Fault law and auto insurance, and is available for comment.

Related information to protect yourselves:

More MCCA data needed before No-Fault price hike

How much money is really in the Michigan Catastrophic Claims fund?

How to be a smart shopper when buying Michigan No-Fault auto insurance

Michigan Auto Law is the largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state. We have offices in Farmington Hills, Detroit, Ann Arbor, Grand Rapids and Sterling Heights. Call (248) 353-7575 to speak with one of our Michigan insurance lawyers

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