A long-awaited change to Maine’s workers’ compensation system has resulted in a second rate decrease for 2012 of 3.8 percent, which is on top of the recently announced decrease of 3.2 percent.
The 3.2 percent decrease, announced late last month, was expected to reduce premiums in the insured market by about $6.1 million per year. Insurance Superintendent Eric Cioppa said Friday the 3.8 percent decrease should save Maine companies an additional $7 million in 2012.
Cioppa, who has been working in the field since 1988, said he can’t remember ever seeing two rate drops announced in one year. The latest decrease means that Maine’s workers’ comp rates have dropped by almost 50 percent since 1993.
“It’s certainly good news for employers in Maine to see any costs going down by basically about 7 percent in a year when everyone’s scraping for every last dollar,” said Michael Bourque, senior vice president for external affairs at the Maine Employers Mutual Insurance Co. The company was created by the Legislature in 1993 to serve as the guarantor of workers’ compensation insurance for Maine companies.
“It’s at a time when we look across the border at New Hampshire, where they’re seeing a 7.5 percent increase [in workers’ comp premiums]. It’s certainly better for Maine employers to be on that side of the coin than the other.”
The first rate drop of 3.2 percent was attributed largely to employers’ increasing focus on safety.
But the new drop, as requested by an industry rating organization, the National Council on Compensation Insurance, is the result of the Maine Workers’ Compensation Board finally issuing an official medical fee schedule, according to Cioppa.
Paul Sighinolfi, the board’s executive director, explained that the 1992 legislation that set up the current workers’ comp system required the board to set up a fee schedule listing what hospitals could charge for medical procedures related to comp claims.
That fee schedule never was created. The last executive director had recused himself from the issue because of a conflict, said Sighinolfi. And the board — made up of three labor representatives and three management representatives — was unable to agree on a fee schedule.
In its absence, hospitals were able to charge the somewhat ambiguous rate of what was “usual and customary” for the procedures, said Sighinolfi. That caused problems, in particular for self-insured companies such as Bath Iron Works, which lack the leverage to negotiate fees for workers’ comp-related procedures that large insurance companies had.
Sighinolfi said the fee schedule was a major issue for him to tackle when he took over the board in March. He worked with board members, the Maine Medical Association, Maine Hospital Association and private consultants to put together a fee schedule. It was approved by the attorney general, the governor and unanimously by the board, Sighinolfi said. The secretary of state signed off on it this week, he said.
“It will significantly reduce medical costs within the system, which will ultimately reflect in a reduction of premiums of 3.8 percent,” said Sighinolfi.
“One of the major issues for me in this process was to ensure we didn’t come up with a fee schedule that discouraged providers from participating in our system. I wanted employees to have accessibility and I wanted them to be able to have the right to choose physicians who are known to be good and competent.”
The new schedule does that, he said, and also gives a level of predictability to employers and carriers, who now know what their exposure is to costs.
The resultant rate drop by the National Council on Compensation Insurance speaks volumes, said Bourque.
“It goes to show the fee schedule has been something that has been really languishing for years,” said Bourque. “It took a long time to get here, and it shows it’s worthwhile, worth real money to employers, I think.”
Jon Fitzgerald, BIW’s vice president and general counsel, said Friday the company is pleased the Maine Workers’ Compensation Board “is taking steps to achieve the goal of lowering medical costs.”
He noted that the yard, which is one of Maine’s largest private employers, and other companies filed a lawsuit against the board in 2007 seeking to enforce the law and establish a fee schedule.
“After two court decisions in favor of employers and BIW, the effort to control workers’ compensation medical costs has been further aided by legislation passed last spring which ensures physicians cannot charge employers more than 105 percent of the providers’ average reimbursement for any particular procedure,” said Fitzgerald. “Through that legislation … the Maine Health Data Organization will begin to collect and publish data ensuring a level of transparency that will allow employers to verify they are being treated equally in terms of the costs of treating injured workers. That will be another important tool to achieve what the Maine Legislature was trying to do when it passed the law in 1992 — gain some measure of control over the spiraling costs of workers’ compensation in Maine.”
Sen. Christopher Rector, R-Thomaston, co-chairman of the Senate’s Labor, Commerce, Research and Economic Development Committee, said the establishment of the schedule was a long time coming.
“I think the ground work really was laid 19 years ago; what was necessary was having the will to execute,” he said.
Rector credited Sighinolfi with getting the question resolved, calling him “a rock star” in terms of having the ability to get to the fundamental heart of the issue.
The rate drops come as legislators prepare to consider an overhaul of workers’ comp in Maine. Rep. Andre Cushing, R-Hampden, the House assistant majority leader, has a bill in that was held over from the last session, LD 1571.
Among other things, the bill would eliminate the requirement that a doctor have an active practice in order to be qualified to conduct a medical examination and also provides that if an employee chooses to have a physician present at an employer-required examination, the employee must pay the cost of that physician.
And under current law, compensation must be paid for the duration of the disability if the employee’s permanent impairment “is in excess of 15 [percent].” If less than 15 percent, the compensation is limited to five years, unless the board extends it.
The new bill would eliminate that extension ability, and would further limit the amount of time workers could receive compensation for their injuries.
The bill also would change how labor representatives are appointed to the board, giving the governor greater control over picks for those positions.