Defunding MCCA by $1 billion will not make MCCA more transparent, only makes it less secure
Defunding the Michigan Catastrophic Claims Association (MCCA) by $1 billion only makes it less secure. It does not make the MCCA more transparent.
What it does accomplish is this: It jeopardizes the MCCA’s ability to carry out its most important and vital mission – paying for No Fault insurance medical benefits for catastrophically injured Michigan auto accident victims.
Recently, in my blog post, “$1 billion raid on MCCA for road repair?,” I took issue with the proposal in House Bill 4560, which was introduced by Rep. Pete Lucido (R-Shelby Township). HB 4560 would allow $1 billion would be taken from the MCCA to pay for Michigan road repairs. Then the MCCA “shall reimburse” itself for the $1 billion it would be forced to hand over.
Today, I’m taking to task the op-ed that ran in The Macomb Daily by Rep. Derek Miller (D-Warren), one of Rep. Lucido’s co-sponsors on HB 4560.
Entitled “Road funding bill a good first step toward transparency,” Rep. Miller splits his time in his column between trying to make HB 4560 look like a MCCA transparency measure (which it’s not) and soft-pedaling the real harms that will be done by taking $1 billion out of the MCCA.
HB 4560 is not about MCCA transparency
HB 4560 has absolutely nothing to do with MCCA transparency.
By taking away $1 billion, the public learns nothing more about the MCCA’s inner workings, except that it now has $1 billion less to work with in ensuring that catastrophically injured auto accident victims get the No Fault insurance benefits they need and are entitled.
If transparency at the MCCA is truly Rep. Miller’s goal, then there are far more effective, and relevant strategies than House Bill 4560 proposes.
For instance, Rep. Miller could become a co-sponsor of the MCCA transparency bills, House Bills 4386-87, which were introduced in March 2015 by Rep. Henry Yanez (D-Sterling Heights). Under Rep. Yanez’s proposals, the MCCA would be subject to Michigan’s Freedom of Information Act and Michigan’s Open Meetings Act. For more information, please take a look at my blog post, “Should the MCCA be subject to FOIA & Open Meetings Act?”
Significantly, as a member of the House Insurance Committee, Rep. Miller could help ensure that Rep. Yanez’s bills are brought before the Committee for a hearing and he could help Rep. Yanez urge Rep. Miller’s fellow Committee members to recommend passage of the bills by the full House of Representatives.
Additionally, if MCCA transparency is the goal, Rep. Miller could introduce his own bill proposing MCCA transparency measures such as an annual financial statement that requires, among other things, “A statement of the assumptions, methodology, and data used to make revenue projections … [and] to determine the [MCCA’s] annual assessments.” To learn more, take a look at my blog post, “How about some Republican-style transparency for the MCCA?”
No ‘interest’ in HB 4560’s $1 billion raid on the MCCA
As I mentioned in my recent blog post, “$1 billion raid on MCCA for road repair?,” there are plenty of things wrong with HB 4560’s proposal siphon-off $1 billion from the MCCA:
- The money in the MCCA isn’t meant to be given away: It’s meant to pay for the No Fault insurance medical benefits of catastrophically injured Michigan auto accidents. The MCCA’s existing funds are committed to enabling the MCCA to pay for the existing and projected liabilities that the MCCA is obligated to pay.
- The MCCA, which is currently running a $410 million deficit, doesn’t have $1 billion to give away.
- Taking $1 billion out of the MCCA will increase its deficit to approximately $1.4 billion and, thus, in order to pay down the deficit, MCCA assessments will go up and the increased costs will be passed along to consumers in the form of higher auto insurance prices.
- The money in the MCCA’s catastrophic claims fund is “not state money” that can be taken away. (See MCL 500.134(3) and (6)(c)) The funds that are currently in the MCCA’s possession were, ultimately, paid for by Michigan auto insurance consumers, who had the reasonable and legally-based expectation that the assessment monies would be used exclusively to pay for No Fault medical benefits in the event that they (i.e., the consumers) were catastrophically injured in a Michigan car crash.
But in order to distract from HB 4560’s harmful consequences, Rep. Miller tries to downplay things by insinuating that, instead of taking a “real” $1 billion from the MCCA, HB 4560 would only be tapping into “the interest earned by the current MCCA …”
There’s a couple of things wrong with the gloss that Rep. Miller is putting on HB 4560
First, the bill says nothing about the $1 billion being taken from “interest” that the MCCA is earning.
Instead, HB 4560 specifically states:
“There is appropriated from money held by the [MCCA] $1,000,000,000.00 … The [MCCA] shall disburse the money ….”
Second, even if the $1 billion were to be somehow be taken from “the interest earned” by the MCCA, that would still reek financial havoc on the MCCA.
Whatever you call it – “interest” or “money held” – it’s $1 billion the MCCA will be losing.
Assuming for the sake of argument that the MCCA’s liabilities remained constant, its deficit would increase from $410 million to $1.4 billion.
But because liabilities are unlikely to remain constant and will likely continue to increase as they have in recent years, taking $1 billion from the MCCA will cause dramatic and substantial increases to the deficit.
Between 2011-12, 2012-13 and 2013-14, the MCCA’s liabilities increased $1,490,404,000, $1,087,681,000 and $624,608,000, respectively.