Since the 1970s, Michigan drivers have operated under a “No-Fault” insurance model. Essentially, the no-fault system requires drivers to look to their own insurance carrier for primary medical coverage resulting from an accident, regardless of whether or not the covered driver caused the accident. Under the current system, drivers receive protection for unlimited lifetime medical benefits (as well as up to 85% of lost income, subject to monthly maximum).

The unlimited medical benefits derive from two sources. The injured driver’s insurance carrier pays the first $500,000 in benefits. If medical expenses exceed $500,000, the insurance carrier will pay the additional amounts but will then be reimbursed from the Michigan Catastrophic Claims Association (MCCA). Michigan drivers pay for these benefits in the form of a premium paid to the carrier and an additional assessment ($145 per vehicle for 2012) paid directly to MCCA. The current debate stems from the MCCA’s claim that the system is unsustainable and that the MCCA cannot afford to cover the spiraling costs of unlimited lifetime medical benefits. Consumer groups complain that the MCCA (which is operated by insurance industry executives) has not shared the data on which it bases its argument.

Pending legislation before the Michigan House would modify the current no-fault statute to impose limits on lifetime medical and rehabilitation benefits. Those limits (ranging from $500,000 to $5 million) would depend upon the level of insurance coverage drivers choose to purchase. Motorcyclists would have medical benefits capped at a maximum lifetime benefit of $250,000.

Assuming the Legislature implements the proposed changes, the question remains, “How will catastrophic claims beyond the available insurance
coverage be paid?” If I opt for the cheapest available coverage and then end up in a catastrophic accident, where will I turn for medical benefits? One option is to purchase excess insurance coverage to protect against the risk. A more probable source for most drivers will be government benefits such as Medicaid. And of course, the possibility remains that the injured driver must forego treatment.

This is a complex, but extremely important, issue. Both sides of the debate raise valid questions that should be answered. Every Michigan driver should take some time to review the issue and understand the potential implications for herself, her household and the State of Michigan.