“As our high school mathematics teachers reminded us: you need to show your work. That is true for the commissioner’s calculations as well.”
With that admonition, the Massachusetts Supreme Judicial Court criticized and returned the 2024 and 2025 workers’ compensation rate decisions to the state’s insurance regulators for reconsideration. The court found that they failed to explain why they chose to order a 14.6% rate cut in 2024 and a change in the methodology for rating public housing authority employees for 2024 and 2025.
The high court’s opinion, written by Justice Scott L. Kafker, is a partial victory for the industry’s Workers Compensation Rating and Inspection Bureau (WCRIB) which had appealed both rate decisions. The 2024 decision ordering the 14.6% cut was issued by then-acting Commissioner Kevin Beagan and the 2025 decision that continued the 2024 rates was issued by current Commissioner Michael Caljouw, who was appointed in October 2024.
The high court affirmed the commissioner’s authority to reject WCRIB’s rate proposals and the 2024 rate decision insofar as it determined that the then-existing rates were excessive. However, because the commissioner must provide a “specific, reasoned explanation” for the 14.6% decrease, the court remanded that matter to the insurance department for further consideration. In addition, the commissioner must also address the issues related to public housing authority employees (class code 9033) in connection with both the 2024 and 2025 decisions.
The 14.6% decrease went into effect July 1, 2024. Then in the next round of rate oversight, the new commissioner rejected a WCRIB proposal for a 7.1% increase and left rates for 2025 the same as they were in 2024.
State officials said the 14.6% rate cut was worth $87 million to employers while the denial of the 7.1% increase for 2025 would save employers another $80 million.
WCRIB objected to several parts of the rulings that rejected certain traditional methodologies used for underwriting profit, indemnity paid loss, and rates for public housing authority employees.
Chief Objection
But the chief WCRIB complaint before the court was the lack of any explanation for the specific 14.6% decrease.
WCRIB did not contest the commissioner’s authority to order a specific rate decrease. That authority is expressly provided in the law which states that if the commissioner “determines that any already effective premium is excessive, he shall order a specific decrease.”
What WCRIB did contest, and the court said, “reasonably so,” was the lack of any explanation for the specific percentage decrease.
The high court found that the commissioner properly exercised his authority in finding WCRIB’s rates to be excessive and also in disapproving some WCRIB methodologies, but that he failed in his obligation to explain, in the 2024 decision, the basis for his decision to order a 14.6% rate decrease, which was almost double the decrease that WCRIB had recommended.
Rate Process
In the rate regulation process, the commissioner is tasked with determining if WCRIB submitted sufficient evidence to show that its proposed rates will not be inadequate, excessive or unfairly discriminatory and that they fall within a range of reasonableness. The insurer group maintains that in 2024 the commissioner never reviewed its rates to confirm if they fell within a range of reasonableness.
The rate approval process includes hearings with testimony from WCRIB, the Division of Insurance’s own State Rating Bureau, and the attorney general’s office. The court acknowledged that the 14.6% figure lies between WCRIB’s proposed rate decrease of 7.6% and the attorney general’s proposed rate decrease of 17.5% may be relevant but the court found that does not explain the end result.
“The commissioner must provide a reasoned explanation as to how he determined, as he necessarily did here, that the 14.6% decrease in rates falls within a range of reasonableness. He cannot simply order a percentage decrease without more,” the court stated.
The court also found that WCRIB raised legitimate questions regarding a change in the rating of housing authority employees but again the commissioner never provided an adequate response or explanation. The court commented that the commissioner appears to have singled out the 9033 class code for a different methodology and not provided a reasoned explanation for so doing so.
WCRIB files for rates on behalf of the more than 300 carriers offering workers’ compensation in the state. By tradition, rates change July 1 of every year. According to its website, WCRIB has not made a rate filing for 2026. By law, rates must be reviewed at least once every two years.
Neither the Department of Insurance nor the WCRIB has yet responded to the court decision and remand.
WCRIB warned that such a significant decrease in 2024 would lead to rates that would be inadequate as further post-COVID pandemic data emerged. The rate organization maintained that if the commissioner had approved the 7.6% decrease it proposed for 2024, then its 2025 rate filing would have been for a relatively small rate decrease of 1.0%.
“Thus, rather than being able to maintain a more modest rate decrease for two years, the data now points to a rate increase to correct for the excessive decrease ordered” by the commissioner for 2024,” the rating agency argued at the time.
There has not been a rate increase since 2016.
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