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Sen. Virgil Smith of Detroit just can’t do enough for Michigan’s insurers

April 8, 2013 by Steven M. Gursten

It’s a shame his ideas would most punish the people he represents;  Smith now wants to give driver’s cash to state auto insurers too

Sen. Virgil Smith

Does Virgil Smith represent the people of the 4th District, Detroit?  Or does he represent the state’s powerful insurance companies?

Well, judging from his latest proposal, if Sen. Virgil Smith of Detroit were to become a Saint, he would be the patron saint of Michigan’s auto insurance industry.  Smith’s latest  proposal to give our own MCCA money to Michigan’s already highly profitable auto insurers by closing the MCCA would be only the latest insurance industry “miracle.”

In Smith’s recently introduced No Fault Reform bill, Senate Bill 251, he proposes to end Michigan No Fault’s nearly 40-year-old guarantee of unlimited, lifetime medical benefits for injured auto accident victims.

And let’s be very clear about this.  It is Smith’s own constituents in cities like Detroit that he represents who would be most harmed by his idea of low caps of $50,000 on medical bills.  The tortfeasors (the other drivers who cause the car accidents that cause these injuries) are either uninsured or have minimum bodily injury insurance policy limits, so all the excess medical bills would NOT be reimbursed by the other person’s insurance who caused the car accident.  And since so many people in cities like Detroit do not have any health insurance at all, or uninsured motorist coverage, these seriously injured people would be pushed onto Medicaid, and the cost would be pushed onto the rest of us as taxpayers under Smith’s proposals.

That means the quality of medical care would be drastically lowered, and the cost and taxes on all of us would be higher.  Detroiters are those who can least afford Virgil Smith’s ideas on No Fault insurance reform.

Smith’s bill also lays out plans to close down the Michigan Catastrophic Claims Association (MCCA), which pays for the unlimited, lifetime benefits provided to catastrophically injured auto accident victims. A catastrophic injury is one whose benefits costs have exceeded $500,000.

However, the most bizarre thing about Smith’s proposed closure of the MCCA is that the MCCA’s Board of Directors, once it has “[wound] up the affairs of the association,” will “transmit any remaining money held by the association to its members,” i.e., the highly profitable auto insurers whose pocketbook-busting auto insurance rates are the catalyst for No Fault reform efforts like Sen. Smith’s.

Either Smith doesn’t understand how the MCCA works, or he doesn’t care.

Either way, Smith’s giveaway to the auto insurance companies is unacceptable.

If there’s any money left over after the MCCA’s closure (which, in a sane world, will never happen), then it should go to the people who put it there: Michigan auto insurance consumers.  The people in Detroit that Smith represents.  They are the ones who paid it.

For more information, click here to read a comprehensive analysis of Michigan No Fault reform and the latest developments.

How the MCCA works

The MCCA pays for the No Fault benefits for catastrophically injured auto accident victims after their benefit costs have exceeded $500,000. The MCCA continues to pay for those benefits on an unlimited, lifetime basis, as long as the No Fault medical benefits are reasonably necessary to the victim’s accident-related care, recovery or rehabilitation.

The funds used to pay for catastrophic victims’ benefits are raised by charging an annual per vehicle assessment to all of the auto insurance companies authorized to do business in Michigan.

But, here’s the kicker: It’s Michigan auto insurance consumers who ultimately pay the assessments because the auto insurers pass along the full amount of the assessments to the consumers in the form of auto insurance price increases. The assessment is currently around $175 a year, and it was recently increased by 21 percent.

Even the MCCA acknowledges this fact on its website (www.michigancatastrophic.com): The assessments charged to the No Fault insurers “are generally passed on to auto insurance policyholders” and “are reflected in the auto premiums all Michigan policyholders pay.”

That’s why Michigan auto insurance rates always shoot up whenever the MCCA increases its assessment rate.

Whatever Sen. Smith’s “saintly” aspirations may be with regard to the auto insurance industry, it would take a miracle for the premium-paying public not to see what a boondoggle he’s proposing by wanting to give money to auto insurance companies that rightly belongs to and was paid for by the drivers from across the state of Michigan, including the people he represents in the 4th District Detroit.

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