Michigan’s Proposed Auto Insurance Reform Sparks Debate

Recent legislation proposed by Michigan’s state lawmakers would make big changes to the state’s current No Fault auto insurance laws. The current No Fault law promises Michigan drivers unlimited financial coverage for medical care from an injury in the event of an automobile accident. This feature of Michigan’s auto law is considered the best safety net in the country. It is also the main focus of the reforms.

The most controversial element of the new law is the cap placed on the amount of protection drivers would be offered for treatment of accident injuries. The bill places a $1 million cap on the medical cover available to drivers following an automobile accident.

Opponents of the bill say the cap violates a fundamental principle in contract law. Michigan drivers bought mandatory auto insurance on the premises of the current No Fault law. It stated that Michigan and its insurance companies promised an unlimited level of protection in the result of an auto injury. Certain terms were agreed to, and one party is now renegotiating these terms.

Opponents have even bigger concerns, however. Some reports say the law will affect individuals already receiving benefits from the MCCA (Michigan Catastrophic Claims Association) and the new guidelines that would be applied to those benefits have yet to be proven effective.

The MCCA collects an annual “per-car” fee of $175 from each Michigan driver. This money is used to reimburse insurers for automobile accident injuries exceeding $500,000 in medical care.

People buy salvage cars through sites like Autobidmaster, improve them and then sell them on. It remains to be seen how the new change will affect the market. If the true cost of ownership decreases, then more people could look to new cars. But if it increases, people at the bottom could rule out buying a used car altogether.

The bill aims to phase out the MCCA, replacing it with a nonprofit organization. The new nonprofit entity would be open to public scrutiny, and officials predict the fees for drivers would be significantly reduced. However, the only savings currently guaranteed to drivers is the $125 per-car annual fee reduction for the first year the reforms take place. Opponents say this is an unbalanced trade-off for Michigan drivers.

“What they’re advocating is obliterating the safety net for severely injured people,” a spokesman for the Coalition Protecting Auto No-Fault told a local news source. “What they’re talking about is warehousing people, because Medicaid doesn’t cover rehabilitation costs.”

Many Michigan healthcare professionals worry about the handful of critically injured drivers who will no longer be covered as a result of the $1 million cap. The bill’s supporters insist the cap would be applied to future claims and that the unlimited coverage would still be applied to the people whose benefits are currently exceeding $1 million.

Arguments for the reforms are based mainly on concerns about high insurance premiums and claims by the MCCA that it is financially unsustainable under the current model. Many analysts question the legitimacy of these claims, referencing a rebate the MCCA issued drivers about 15 years ago, as a result of a surplus. In addition, the MCCA has refused to release its financial information and their assertions remain unproven.