Before we start breaking out the bottles of champagne to celebrate the Michigan Catastrophic Claims Association’s announcement that it will reduce its MCCA fee by 55% from $220 to $100 under the new No-Fault law, I think we need to put this news in context.

Don’t get me wrong about this MCCA assessment fee drop. If it lowers car insurance prices, then I’m all for it. Michigan drivers have paid too much for too long for car insurance.

But I’m skeptical that this reduction in the Michigan Catastrophic Claims Association fee will actually generate any real savings for drivers.

Here’s what the Michigan Catastrophic Claims Association has told us about its MCCA assessment fee reduction:

• The Michigan Catastrophic Claims Association is lowering its annual, per vehicle assessment or catastrophic injury fee to $100 for the period from July 1, 2020, to June 30, 2021.
• This is a reduction of 55% from the $220 fee that is currently being charged to drivers for the period from July 1, 2019, to June 30, 2020.

Hold the champagne. What concerns me about this is:

• First, the reduction of the MCCA fee (and any savings that it translates into for drivers) doesn’t take effect until July 2020. That’s 7 months from now.
• Second, Michigan drivers need help today. Insurance companies are raising auto insurance premiums NOW – and they have been raising premiums on drivers even before the new No-Fault law was even enacted (as confirmed by Tricia Kinley of the Insurance Alliance of Michigan in comments to Crain’s Detroit Business). So insurance companies can preemptively raise prices but Michigan consumers having to wait 7 more months to see this savings seems as one-sided as things have generally gone with the insurance industry in this state over the past 40 years.
• Third, the MCCA fee reduction will last for only one year. For the drivers who will continue to pay the Michigan Catastrophic Claims Association fee under the new No-Fault law, this one-year fee reduction will likely prove to be only a temporary relief.
• Fourth, and here’s the real rub, for a great many drivers – and sadly it’s probably going to be for a majority of drivers under the new auto No-Fault law – the MCCA fee reduction which takes effect on July 1, 2020, will be meaningless. Remember under the new auto law that the new PIP medical benefit caps of different levels of PIP insurance coverage will become available July 2, 2020. Millions of Michigan drivers will then forfeit their right to unlimited medical coverage if they are injured in a car accident. That means they lose the current benefit of unlimited necessary medical PIP to pay for catastrophic injuries, but it will also mean they will stop having to continue paying the MCCA assessment fee (except for whatever portion is necessary to pay down any existing MCCA deficits).

In other words, the $100 reduction in the MCCA fee will have come way too late to do most Michigan drivers any good. And if these drivers are seriously hurt in a car crash and chose to elect any level of PIP coverage besides unlimited PIP, they are also out of luck: No Michigan Catastrophic Claims Association fund coverage and medical protection.

What is the Michigan Catastrophic Claims Association fee?

The Michigan Catastrophic Claims Association (MCCA) is a non-profit association that pays for the medical expenses of catastrophically injured car accident victims in Michigan. The MCCA fee is the money that the Michigan Catastrophic Claims Association uses to pay these medical expenses which are raised by charging an assessment fee (or MCCA premium fee or catastrophic injury fee) to Michigan auto insurance companies who then pass the Michigan Catastrophic Claims Association assessment costs along to drivers. As the MCCA fee goes up, so do drivers’ premiums.

How is the MCCA fee affected by the new No-Fault law?

Unless there is clarifying legislation, it looks like the new auto No-Fault law intends to eliminate the MCCA fee for all Michigan drivers who choose any level of PIP coverage besides unlimited PIP. The MCCA fee will then be eliminated from their auto insurance bill under the new No-Fault law (unless there is a deficit, in which case my own interpretation is that drivers – even drivers who are no longer eligible for Michigan Catastrophic Claims Association protection, will have to continue to pay for it).

The takeaway here: It’s still going to cost them.

Under the current No-Fault law, every Michigan driver has unlimited No-Fault PIP medical benefits, which provides what is called “catastrophic injury” coverage for car accident victims. The cost that drivers pay for such catastrophic coverage is the MCCA assessment fee

Under the new No-Fault law, Michigan drivers will have the choice to keep unlimited coverage or opt for one of the new coverage limits of $500,000, $250,000, $50,000 for people on Medicaid and a full opt-out from medical coverage for people on Medicare. In return, auto insurance companies are expected to reduce their average premiums by 20%, 30%, 45% and 100%, accordingly. However, most drivers will be disappointed when these changes fail to actually deliver any meaningful, long-term savings on their individual car insurance premiums.

For those drivers who keep unlimited coverage, they will continue to pay the MCCA assessment fee.

For those drivers who get rid of unlimited coverage, they will no longer have to pay the MCCA assessment fee (except when there is a deficit from a previous year). In other words, to get rid of having to pay the cost of the MCCA assessment fee as reflected in higher premiums, drivers will have to forfeit their right to guaranteed medical coverage if they suffer catastrophic injuries in a car crash.

Why doesn’t the MCCA assessment fee reduction really matter under the new No-Fault law?

It doesn’t really matter now because it doesn’t help drivers who desperately need rate relief now.

And it doesn’t really help in the future because fewer drivers will be paying the MCCA fee as a result of their having sacrificed their unlimited coverage in favor of the promised savings associated with one of the limited No-Fault PIP medical benefits coverage levels.