Montana State Fund Cuts Rates 20%

By | June 6, 2011

As predicted by Montana Commissioner of Securities and Insurance Monica Lindeen, the board of Montana State Fund, the state’s largest workers’ compensation insurer, has cut its rates by 20 percent. The move is expected to help the business community and encourage more job creation and higher wages.

The 7-0 vote by the Montana State Fund board (MSF) comes on the heels of House Bill 334, a workers’ compensation reform package passed in the 2011 legislative session. The new rates for MSF’s 26,000 customers will kick in July 1, 2011.

Although its workers’ compensation costs are going down, Montana has the highest workers’ compensation rates in the country. And lawmakers made workers’ compensation reform a top priority. Lindeen approved a 22.4 percent reduction in workers’ compensation insurance loss costs in May. If MSF’s 20 percent cut is followed by other workers’ compensation insurers in Montana, it would mean a savings of about $80 million in workers’ compensation rates.

The MSF board’s decision was not made without some hesitancy though, as board member James Swanson of Glendive wondered if 20 percent was too deep a cut and suggested going with a reduction of about 17 percent instead.

But two legislative liaisons to the board, Rep. Chuck Hunter, D-Helena and Sen. Joe Balyeat, R-Bozeman, told the panel that lawmakers – and some businesses – would complain if the reduction were any less than 20 percent.

“If you go below 20 percent you’ll hear cries of ‘Wait a second, cut more,'” Balyeat said.

The National Council on Compensation Insurance, the nation’s largest provider of workers’ compensation data, had estimated a 22.4 percent cut in the cost of losses, but that does not include operating costs and other fees such as contribution to equity. Laurence Hubbard, state fund CEO, said he and his staff were more comfortable in recommending a 20 percent cut.

“It’s something that makes me nervous, but not outside the range of what makes me feel comfortable,” he told board members.

On May 2, Commissioner of Securities and Insurance Monica Lindeen approved a 22.4 percent loss cost filing.

Board chairwoman Elizabeth Best of Great Falls asked Hunter if the Legislature was expecting a 22.4 percent reduction or greater.

He said lawmakers were expecting the decrease to be “very close” to what NCCI had estimated and said any deviation from that would be “disturbing.”

Montana paid nearly $400 million in workers’ compensation rates last year, officials said. Lawmakers say they consistently hear from business owners that the high rates are keeping them from expanding their business, paying employees better or forcing them to move out of state.

Workers’ comp reform legislation, HB 334, was signed by the governor April 12. Among provisions in the bill are ending medical benefits 60 months after the day the injury occurred instead of the last time medical services were used. It does allow people to have the benefits renewed every two years with a panel review. It sets up fee schedules. Permanent Partial Disability is 9 percent of the claims but 70 percent of the cost. A part of the proposal is to require an impairment rating of at least Class 2, or “moderate” impairment, instead of “mild” in order to receive Permanent Partial Disability wage loss benefits.

The bill also provides the ability for insurer and worker to agree to settle non-disputed medical benefits. And it prohibits claims for workers’ compensation benefits in cases where employees are on breaks off the premises.

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