Rep. Cavanagh Says Rate Hike Demands Passage of Bills Opening MCCA's Books

Drivers face $175 per car charge, highest ever in MCCA history

LANSING - State Representative Phil Cavanagh (D-Redford Township), sponsor of House Bills 4785 and 4786 to open the Michigan Catastrophic Claims Association (MCCA) up for review, today demanded that the committee take up these bi-partisan bills in light of the recently announced $30 increase in the MCCA charge that motorists will face this August.

“The MCCA is funded by the public’s money and yet rates are set behind closed doors. They hire their own auditors whose conclusions are favorable to the MCCA at the expense of motorists,” said Cavanagh. “We are forced to pay this charge. We need to shine a light and open up this agency now that they are about to charge their highest ever annual assessment. All drivers deserve to know where their hard earned money is going.”

“In their 33 years of existence, the MCCA has paid out nearly $9 billion in total claims. The current reserves are almost $14 billion, far more than they have cumulatively ever paid out, yet the big insurance companies that make up the board are saying that they are facing financial difficulties and need to charge drivers the highest rate per car in the history of the organization,” said Cavanagh. “There is a serious financial discrepancy here and the only way we can get to the bottom of it is if the MCCA is subjected to an outside, independent audit and subjected to the Open Meetings Act.”

In June of 2011, Cavanagh introduced House Bills 4785 and 4786, which would make the MCCA subject to the Open Meetings Act, the Freedom Of Information Act and an independent annual audit. Those bills have sat in the House Committee on Insurance seeing no action. In the meantime, the committee instead considered a bill to drastically revamp Michigan’s current auto no-fault system by cutting Personal Protection Insurance benefits and shifting costs from private insurers to Medicaid — proposals that Cavanagh and many of his House colleagues adamantly oppose.

“The MCCA has to open their books. The House Insurance Committee has to take up House Bills 4785 and 4786 and have a discussion on why we can’t have transparency on the process,” said Cavanagh. “The information that we currently have certainly does not explain why the MCCA fee should increase from $145 to $175 per vehicle. An organization like this that has the ability to charge Michigan drivers fees should be held accountable and forced to show that the fees are necessary.”

The MCCA board, which is made up of representatives from the state’s largest auto insurance companies, determines the MCCA fee every year. It has risen from $3 per vehicle at its creation in 1978 to the current proposed $175. In the late 1990s, when the fund total was just over $6 billion, former Governor John Engler demanded, and the MCCA complied, that they give motorists a $180 per vehicle refund and cap the MCCA assessment at $6 per year for the next two years. Since then, the annual assessment and reserve pot has grown, although there have also been eight annual decreases in the annual rate. The MCCA argues it is not a government agency and therefore it is not subject to the Open Meetings Act or the Freedom of Information Act.