On July 1, the Michigan Catastrophic Claims Association, an entity created by the states to provide unlimited lifetime coverage for medical expenses which result from auto accidents, announced that drivers will be responsible for a $28-dollar increase.
The reason for the increase is to cover anticipated new claims and expenses and address a $3.9 billion estimated deficit related to existing claims. Ismael Abreu, Farmers Insurance agent in Grand Rapids, Michigan, explains that this increase is difficult to deal with, but necessary as it will ensure all Michiganders are guaranteed their medical expenses covered. “It’s hard to explain to my clients that their rates are going up, but it’s because of personal injury protection that ensures everyone who gets into an accident has their expenses covered.”
Currently, the state of Michigan is considered a no-fault state providing unlimited personal protection coverage to all drivers. This concerns those in Michigan who get into a car accident and will have their medical expenses, wage-loss benefits, and damage done to property covered no matter who caused the accident.
But in May, Michigan legislators voted in favor of changing the state’s no-fault auto insurance systems that would allow drivers to choose their level of personal injury protection coverage—instead of being required to choose the unlimited option. In addition, the change in law will no longer permit insurance companies from setting rates based on gender, marital status, credit score, or zip code. This change will not take effect until next summer.
Abreu says he is skeptical the change in law will lower rates for drivers on the west side of Michigan.
“The bill will help lower the rates of people who live in Detroit; those people end up paying highest-in-the-nation rates, so I think it means people in West Michigan will end up eating the rest of the costs.”
Even though insurance companies will not be able to use zip code to determine rates, they will still be able to determine rates by “territory,” A territory could be as small as a census track or the size of a neighborhood.
Researchers at House Fiscal Agency predicted more people will end up on Medicaid if the bill is implemented. This means that those who suffer any major injuries from car crashes will end up under the Medicaid program after their medical costs have exceeded their own personal coverage. The agency estimated that this will yield $58 million in the next 10 years for long-term-care costs and $14 million in the next 10 years for acute injury costs.
According to the new law, if a driver doesn’t have unlimited personal injury protection coverage and they get into a car accident that is not their fault and their medical cost are more than the amount of coverage they purchase, they will be able to sue the at-fault driver for the remaining charges.
By Michelle Jokisch
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