A proposed change in the laws governing insurer payments to Michigan’s Second Injury Fund would not reduce benefits for injured workers, while improving the overall business climate of the state, according to the American Insurance Association (AIA). Senator Bill Bullard (R – Highland) introduced a bill enacting the technical change last week.
“Senator Bullard’s bill will keep Michigan an attractive place to do business by maintaining the status quo in the state’s workers’ compensation marketplace,” said Deirdre K. Manna, AIA assistant vice-president, midwest region. “Any measure that can do that without causing any reduction in benefits to Michigan workers is worthy of widespread support.”
The Second Injury Fund was designed to encourage the employment of persons with disabilities. It protects employers from excess liability when an injury to a worker merges with a preexisting permanent impairment and ends up causing a greater disability that would have resulted from the “second” injury alone. The fund spreads the cost of these injuries over all of the insurers writing workers’ compensation coverage in Michigan.
Most states have a mechanism in place similar to Michigan’s, but they differ in how they assess insurance companies for their payments into the fund. Some states make the assessment based on an insurer’s written premiums, while others, like Michigan, base the assessment on the insurer’s paid losses from the previous year.
A national accounting rule adopted in 1999, however, requires that if a state assesses insurers based on losses, the insurer must recognize its all-time liability to the fund on its books. If the assessment is based on premiums, the liability need only be recognized for one year. Senator Bullard’s bill, SB 718, would change Michigan’s assessment from paid losses to premiums.
“This current technicality in the law has significantly reduced both the statutory capital of Michigan insurers and the amount of business they can write in the state,” Manna said. “Changing the assessment from paid losses to premiums will allow insurers to continue writing workers’ compensation coverage in Michigan, while not reducing — even by one penny — the benefits paid to injured workers.”
The bill, which is neutral for state revenue purposes, was referred to the Senate Financial Services Committee.
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