$400-per-vehicle refunds coming for Michigan drivers, Whitmer says

Lansing — The Michigan Catastrophic Claims Association plans to refund state drivers $400 per vehicle with checks coming in the second quarter of 2022, Gov. Gretchen Whitmer's administration announced Tuesday.

The Democratic governor called on the MCCA to issue refund checks to distribute its $5 billion surplus in November. Democratic and Republican lawmakers have supported the refund effort. Under state law, the MCCA levies an assessment each year to cover claims for those catastrophically injured in car accidents.

The organization's analysis found that about $3 billion of the surplus could be returned to policyholders. The MCCA sought "to issue the largest possible refund to policyholders while maintaining sufficient funds to ensure continuity of care," said a letter from Kevin Clinton, the association's executive director.

Whitmer said Tuesday that "these refunds and the recently announced statewide average rate reductions are lowering costs for every Michigan driver."

“Michiganders have paid into the catastrophic care fund for decades, and I am pleased that the MCCA developed this plan so quickly after unanimously approving my request to return surplus funds to the pockets of Michiganders," the governor said.

For years, Michigan had been known for its high auto insurance prices. Lawmakers overhauled the system in 2019. Lt. Gov. Garlin Gilchrist said the coming refunds are "a major win for all drivers — especially Detroiters — who have paid the highest insurance rates in the nation for decades."

But the refund has critics. The 2019 reforms drastically reduced the reimbursement rate auto insurance companies pay for services that don't have a Medicaid code, like bathing, feeding and other services performed by home health care aides or recovery homes. As of July, those providers receive 55% of their previous rates. 

Those changes upended life for many of the state's residents who were injured in car crashes and whose care has been covered by insurance, said Tom Judd, president of the Michigan Brain Injury Provider Council, a trade association for brain injury rehabilitation clinics. Some care providers are closing and discharging clients with auto insurance policies, meaning there is less available for people with serious injuries who need ongoing care.

"This kind of energy and focus is misguided when we have people who are losing care," he said. "When we have people who are struggling to provide care and we have families who are in turmoil. For those people who are going through that process, it looks as if the concern and priority of the governor and the Legislature are not with them."

Judd said his organization and other advocacy groups have tried unsuccessfully to push legislative leaders and Whitmer to reconsider the rate cut.

"We're not trying to relitigate reform," he said. "We're not trying to do things that would impact any success that the reform is having. What we are doing is making sure the people who have been promised lifetime care, and people who are choosing lifetime (personal injury protection) options have access to care in the event they are in a catastrophic crash."

How refund will work

The board of the MCCA voted on Nov. 3 in favor of issuing refund checks to drivers across the state. The association submitted its refund plan with more details to the Department of Insurance and Financial Services, known as DIFS, on Monday. Under it, money will go to every Michiganian with an auto insurance policy in force as of 11:59 p.m. on Oct. 31, according to the governor's office.

The surplus funds will be turned over by the MCCA to the insurance companies operating in Michigan by March 9, 2022, and the insurers will be responsible for issuing checks to eligible policyholders, according to the governor's office.

DIFS will direct insurers to issue refund checks to consumers as expeditiously as possible with a deadline of 60 days after the transfer of funds.

“DIFS stood with Gov. Whitmer in calling upon the MCCA to return surplus funds to Michiganders with auto insurance, and we applaud the MCCA for taking the necessary next steps to deliver the largest refund possible to drivers while maintaining the viability of the fund," DIFS Director Anita Fox said. "In the coming months, DIFS will work to ensure that refund checks are issued to Michigan consumers as quickly as possible."

Those eligible for the refunds don't need to take action to receive them, the governor's office said Tuesday.

The association's surplus grew from $2.4 billion at the end of 2020 to $5 billion as of June 30. The estimated surplus resulted "from realized and expected savings from reforms to Michigan's no-fault insurance law and higher than projected investment returns," Clinton wrote in a letter to Fox on Monday.

Before the changes in 2019, Michigan drivers were broadly required to have unlimited personal injury protection as part of their auto insurance with the MCCA assessment being paid by everyone with a policy.

After the changes, the MCCA had liability for policies issued before July 2, 2020, and for new policies in which drivers chose unlimited coverage — Clinton has previously said about 80% of Michigan drivers chose to stick with unlimited coverage.

In an interview, Clinton said policyholders who didn't choose unlimited coverage will still get the refund because if there were a deficit in the MCCA, everyone would have to pay to resolve it.

The top question he's hearing from the public currently is, "Where is my money?" Clinton said. It will take a couple of months to refund the dollars because of security rules and the process involved in the large transfer, he said.

“We’re glad to hand it back," Clinton said.

The refunds will go to individuals who have insurance policies for their motorcycles, but not to vehicle owners with storage policies, according to DIFS.

Industry group backs move

The Insurance Alliance of Michigan issued a statement in support of the $3 billion refund, saying the MCCA had "landed on a refund amount that balances giving insured drivers back the money they deserve while protecting the longevity of a fund that pays for the cost of medical care for Michiganders seriously injured in car accidents."

The alliance advocates on behalf of the insurance industry in Lansing.

"This refund adds to the mountain of evidence that reforms passed with bipartisan support by the Legislature and signed into law by Gov. Gretchen Whitmer are working and delivering real savings to drivers across the state," said Erin McDonough, executive director of the organization.

Last November, the claims association announced its assessment charged per vehicle was decreasing to $86 for the period beginning July 1, 2021, through June 30, 2022, a 14% reduction.

The Legislature created the MCCA, but it's not considered a state agency.

Individuals who have historical vehicles will receive $80 refunds, according to Clinton's Tuesday letter.

Although policy rates have lowered for Michigan drivers, reforms have fallen short of some key objectives, the University of Michigan’s Poverty Solutions team found in an analysis released Tuesday. Auto insurance in Michigan remains more expensive than in any other state and premiums continue to be higher in Detroit than the state average, according to the UM analysis.

"More must be done to eliminate discriminatory rate-setting practices and further reduce premiums,” said Amanda Nothaft, senior data and evaluation manager at Poverty Solutions. "We also need to consider the impact on people who have been catastrophically injured in auto accidents and ensure medical providers are appropriately reimbursed for long-term care.”

Nothaft co-wrote the recent policy brief with Patrick Cooney, Poverty Solutions assistant director. They recommended the Legislature require insurers to provide more coverage options, prevent discriminatory rate-setting practices that increase prices in majority-Black ZIP codes and revisit the reimbursement rates for long-term care services.

"Michigan's Catastrophic Claims Fund could play a much larger role in ensuring long-term support for people catastrophically injured in an auto accident," Cooney said.