Economic Affairs Interim Committee

Subcommittee Studying State Fund Gathers More Information

Committee: Economic Affairs Interim Committee
Author: Pat Murdo
Posted on May 3, 2018


generic icons of group meeting and presentations

The Economic Affairs Interim Committee meeting as a subcommittee to study the future of Montana State Fund under Senate Joint Resolution 27 decided to take home the contrasting viewpoints and other information presented April 27 for further study before determining next steps for the remaining meetings this interim.

At the April 27, 2018, meeting the subcommittee heard how the State Auditor’s Office determines solvency among workers’ compensation insurers, a factor used to review insurers’ rates. A representative of a national advisory organization on workers’ compensation also described how that organization, the National Council on Compensation Insurance (NCCI), provides a basic recommendation upon which all workers’ compensation insurers in Montana base their rates. This year NCCI recommended an average decrease of 10.7% in what is called loss costs; that percentage varies based on the type of work covered. The decrease, NCCI said, follows a downward trend in claims despite slight increases in costs related to benefits and business expenses.

The subcommittee also heard from Montana State Fund and a coalition named Fair Montana. The coalition is seeking primarily to dissolve Montana State Fund, which has about 60% of the Montana workers’ compensation market based on direct written premium. Montana State Fund presenters and the proponents of the Fair Montana position differed as to whether Montana State Fund’s rates were too high (Fair Montana says yes) and whether Montana State Fund has an unfair advantage (Montana State Fund contends if rates are too high with an advantage then other insurers should have a competitive edge.) Montana State Fund does not pay a 2.75% premium tax that private insurers pay and has all state agencies as a book of business, which may be a plus or a minus for the insurer. The state has waived the tax in part because Montana State Fund must cover Montana employers that other insurers will not cover (a situation known as providing the guaranteed market.)

The full committee will meet July 9 to recommend next steps. Options include:

  • Retain the status quo or make modifications to encourage competition;
  • Revise the current structure of the workers’ compensation system, in which Montana State Fund would no longer be Plan 3, with state entity advantages, but could become a Plan 2 private insurer. (Self-insurers are termed Plan 1.) Employers not covered voluntarily by Plan 1 or 2 would go into a privately insured residual market, which the committee would have to define.
  • Dissolve Montana State Fund and determine who would handle its current policies and all past policies that might result in renewed claims. Associated determinations would include deciding what would happen with Montana State Fund’s assets and who would handle the Old Fund, the Plan 3 workers’ compensation claims that occurred before July 1, 1990; some claims may still be active or could become reactivated.

For more information about the subcommittee, please see the subcommittee website or contact staff.

Subcommittee website: http://leg.mt.gov/eaic under Committee Topics and SJR 27.
Staff: pmurdo@mt.gov or 406-444-3594