Court Case Could Cost Montana Workers’ Comp System $200M

February 10, 2006

A looming workers’ compensation court case could cost Montana taxpayers $100 million and force a roughly $160 million rate hike for business buying insurance from the Montana State Fund, the agency’s top official said.

Laurence Hubbard, president of the Montana State Fund, told the governor’s budget director that the court case is among the biggest issues facing the two insurance programs for workers’ comp.

The case is currently in the Montana Workers’ Compensation Court, but is expected to be appealed to the state Supreme Court regardless of which way the lower court rules, Hubbard said.

Right now, the State Fund terminates benefits when someone turns 65 or is eligible to draw Social Security. The case could force the agency to pay benefits to people for as long as they live.

The case was brought by Catherine Satterlee, who was injured while working at a store.

If the State Fund loses, it would be forced to pay the benefits retroactively to anyone who lost their workers’ compensation benefit at 65, Hubbard said.

He said those cases could stretch back years, and noted the agency wasn’t charging premiums high enough to pay for the lifetime benefit.

“We would have to take dramatic action,” he said.

Hubbard was laying out the agency’s priorities to David Ewer, the governor’s budget director, who is beginning work on the state’s 2007 budget.

Hubbard estimated the so-called Old Fund, a pool of money set aside to pay the medical costs and lost wages for Montanans injured on the job before July 1990, faces a $100 million hit if the state loses the case. That money would have to come from state general tax money.

The active State Fund account faces an additional $163 million of exposure if Satterlee prevails, which would lead to increased premiums for companies that currently pay into the system.

It could take more than a year for the case to wrap up, Hubbard said. Business interests have joined Montana State Fund to fight it.

Satterlee has argued in the case that the law terminating benefits at 65 is unconstitutional because it treats injured workers differently because of their age. Also, she says it is wrong to let the federal Social Security Administration decide when Montana workers no longer receive disability payments.

The State Fund argues it is reasonable to stop paying benefits to workers at the time they would have been expected to retire.

“We’re all waiting with bated breath to see what the Supreme Court has to say,” Hubbard said.

The Old Fund is also facing a separate $14 million to $16 million liability that will have to be paid by taxpayers. That is being blamed on a move by the 2003 the Legislature to siphon the Old Fund’s $22 million in reserves to balance the state budget.

Hubbard told Ewer that the State Fund otherwise is on solid financial footing, and will be requesting little in the way of legislation at the 2007 Legislature.

Topics Workers' Compensation

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