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BREAKING NEWS: Insurance Commissioner opposes $1 billion raid on MCCA to rix roads

July 14, 2015 by Steven M. Gursten

Statement from DIFS director says HB 4560 could jeopardize MCCA’s ability to provide No Fault benefits to catastrophically injured auto accident victims and possibly result in auto insurance price increases

Michigan insurance commissioner Patrick McPharlin

Should $1 billion be taken away from the Michigan Catastrophic Claims Association (MCCA) and Michigan’s catastrophically injured auto accident victims to pay for road repairs?

As an attorney who has been helping Michigan automobile accident victims for nearly 20 years, I say, “No way.”

Thankfully, I’m not the only one who feels that way. Indeed, I’m in very good company, as evidenced by the statement issued yesterday by Michigan’s Insurance Commissioner Patrick McPharlin (the Director of the Michigan’s Department of Insurance and Financial Services).

Voicing strong and unequivocal opposition to House Bill 4560, which was introduced by Rep. Pete Lucido (R-Shelby Township) and supported by Rep. Derek Miller (D-Warren), the Insurance Commissioner made the following compelling points about the harmful effects of HB 4560’s proposal to defund the MCCA by $1 billion “for highway purposes”:

  • The MCCA “is a private, nonprofit association that exists for the sole purpose of ensuring that the medical bills of Michigan’s catastrophically injured auto accident victims can continue to be paid.”
  • “The assets of this fund must remain in order to assure that all claims, current and future, can be paid.”
  • “This unprecedented taking of funds held by a private association would likely be unconstitutional …”
  • The unprecedented taking of $1 billion of MCCA funds “could jeopardize the ability of [catastrophically] injured [auto accident] claimants to collect benefits under their insurance contracts.”
  • Additionally, “reducing money in the fund could result in the need for the MCCA to increase its assessment on insurance companies-further driving up the cost of auto insurance in our state.”

As the Insurance Commissioner’s statement indicates, the MCCA’s sole mission is to pay for the No Fault medical benefits of catastrophically injured auto accident victims. It raises the funds to carry out its mission by charging assessments to Michigan auto insurance companies, who pass along the cost of those assessments to consumers in the form of higher auto insurance prices.

Under HB 4560, $1 billion of the “money held” by the MCCA would be taken away and put in the “Michigan Transportation Fund,” where it would be used for highway purposes.

Taking $1 billion from the MCCA hurts auto accident victims and doesn’t increase MCCA transparency

As regular readers of this blog know, I have been – and continue to be – an ardent opponent to HB 4560’s proposed $1 billion raid on the MCCA.

In my blog post, “$1 billion raid on MCCA for road repair?,” I made some of the same points as the Insurance Commissioner:

  • “The money that’s in the MCCA’s possession is intended for one purpose and one purpose only: Paying for the No Fault medical benefits of catastrophically injured Michigan car crash victims. 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.”
  • “In HB 4560, Rep. Lucido says the MCCA ‘shall reimburse’ itself from, among other things, ‘future assessments paid to the’ MCCA. You know what means, right? Higher MCCA assessment payments in the future and, thus, higher auto insurance prices and payments for consumers. By taking $1 billion out of the MCCA, that adds $1 billion to the MCCA’s existing $410 million deficit, making the new deficit $1.4 billion. To pay down the increased deficit, the MCCA would have to increase the “deficit reduction” portion of its annual per-vehicle assessment – the costs of which would be passed along to consumers in the form of higher auto insurance prices.”

And, in another blog post, “My response to Rep. Derek Miller on HB 4560, $1 billion raid on MCCA to fix roads,” I explained why – despite assertions to the contrary – depriving the MCCA of $1 billion it needs to pay for the No Fault benefits of catastrophically injured auto accident victims will not make the MCCA’s assessment-calculation process somehow more transparent. Instead, it will make the MCCA considerably far less financially secure.

Ultimately, I agree wholeheartedly with the Insurance Commissioner’s closing remark in his statement:

“‘We all want to fix the roads. However, fixing roads is a public responsibility that should be carried out with public funds.’”

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