MONTANA SELF INSURERS' ASSOCIATION

July 2023 Update - Part 2

Last week I shared that sometimes there is just too much information for one Update. I also do not want to inundate you with a ridiculously long Update that does not get read. That was the case this month. Here is Part 2 of the MSIA July Update – with more information you should be aware of. Thank you for you indulgence in seeing two parts to this month’s Update

MT Economic Affairs Interim Committee Appointed – Reasonable Questions About MSF’s Role
CA Supreme Court Decision on Take Home COVID
National Council of Self Insurers (NCSI) Annual Conference
MSIA Annual Dues – Due Now
MT Economic Affairs Interim Committee Appointed – Reasonable Questions About MSF’s Role

In between every legislative session, the legislature appoints interim committees to review regulatory rules, Agency reports, results and to study and if appropriate, recommend legislative changes to be considered next session. Traditionally, interim committee representation has been evenly split between the political parties and their recommendations have been pretty easily accepted in the ensuing legislative session. This year, the majority has determined to represent more of the majority and less of the minority party on the committees.

The Interim Committee which reviews the Department of Labor rules, MSF operations and workers’ compensation issues is the Economic Affairs Interim Committee (EAIC). EAIC meetings and topics can range from ho-hum routine to some pretty exciting issues (if you’re a WC geek).

EAIC Members are:

Sen Kenneth Bogner R – Miles City (Senate Pres Pro Tem)
Sen Steve Fitzpatrick R – Great Falls (Senate Majority Ldr)
Sen Shane Morigeau D – Missoula
Sen Mark Noland R – Bigfork (Senate Bus & Labor Cmte V Chair)
Rep Jon Karlen D – Missoula
Rep Josh Kassmier R – Bozeman
Rep Brandon Ler R – Savage
Rep Jennifer Lynch D – Butte
Rep Ron Marshall R – Hamilton
Rep Nelly Nicol R – Billings

The Committee is pretty stacked with people who have been on either the House or Senate Business & Labor Committees, where most WC bills are heard. Among other things the EAIC will discuss will be what, if anything they want to study regarding Montana State Fund (MSF) Included in the options are:

Review the most recent audit performed on the MSF; presentation by LAD; look at why MSF handles the state’s residual market; look at why MSF has an “irrevocable certificate of authority”.

The MSF Hunt for Premium – For What Purpose?

In honesty the list is not among the higher priorities for the legislature. However, we may want to suggest they consider reviewing the new MSF approach to increase their premium volume. At the last MSF Board meeting in June, they heard from management about decreasing premium volume and their desire to change that direction. Where that increased premium will be coming from makes it a public policy consideration for MSIA and our members.

Montana’s three-way system – self insurance, private carriers and the state fund – serves our market relatively well. When the state fund uses its’ special role and financial power derived as a result of that role to under-price their product to the point where one of the legs in that three-legged stool fails, we have a problem. If MSF takes enough business away from Plan 2 private carriers, our market fails. If MSF takes enough business from self insurers, our market fails. Their public policy role is to assure the maintenance of a competitive market in the state – not to drive others out. Traditionally, MSF has used their guaranteed role in the marketplace to do just that. They did not ‘buy’ premium volume by pricing the business at a loss. That seems to have changed and it may not be a positive result for the overall Montana marketplace.

In fairness, part of this is a function of the economics of the insurance industry. The workers’ compensation line right now is the most profitable line in the P & C business and has been for a number of years. More capital is flowing into the WC line and we are seeing new levels of competition.

On the other hand, if Plan 2 private carriers stopped writing in Montana, I would bet we do not generate enough business for them to notice, in comparison to their national business.

However we Montana based employers, and MSF are VERY involved and notice even minor changes in the Montana marketplace. When MSF uses their financial standing to underprice policies, to capture business, they tend to take it away from Plan 1 carriers. When they get to the point where they take enough business, we are left with adverse selection and our pools and groups can no longer survive. We have already seen the counties (MACO) workers’ compensation program sell to MSF and we have seen the Montana Hospital Association (MHA) business sell to MSF as well. Now, with their targeted effort to grow premium, we can expect more.

That leads to the public policy question, ‘At what point, is a state government entity, appropriate to assure a competitive marketplace and when does it go too far?’ MSF’s traditional approach has been not to write business at a loss and that position has lead to greater system stability – a benefit to all Montana employers and workers. MSIA can support the presence of MSF as a stabilizing force in our marketplace, but when it becomes a driving force, we have to ask if they are fulfilling their proper role, or going too far.

As a result, MSIA will be working with public policymakers to at least ask the question and bring the issue to their attention.

CA Supreme Court Decision on Take Home COVID

The California Supreme Court issued a unanimous decision on July 6 in Kuciemba v Victory Woodworks. In this case, Corby Kuciemba allegedly contracted COVID at work and infected his wife who was hospitalized and kept alive via a ventilator. Under CA’s COVID presumption law, Kuciemba’s COVID was covered under workers’ compensation. Both Kuciembas’ sued Victory Woodworks in Federal Court seeking damages alleging Victory had a duty of care to the family members, as well as the employee under workers’ compensation law. The 9th District Federal Court sent the case to the CA Supreme Court for resolution of what is a state law issue.

In a similar case, Matilde Ek v See’s Candies, Ek allegedly contracted COVID in the workplace and brought it home to her husband who ultimately died from it. The CA Second District Court of Appeal allowed Ek’s case to proceed based on the potential that the employer did have a duty of care to the family. See’s Candies appealed that decision to the Supreme Court.

What this means for MSIA members who do business in California is that the Supreme Court has decided that the state will be in line with other states in identifying that there would have to be an extraordinary situation where the derivative injury doctrine within the workers’ compensation system would extend beyond the individual employee to others in their family. For members who do not do business in California, it provides us the opportunity for a sigh of relief as had the Court decided otherwise, we likely would have seen a new effort to expand the decision to other state.

Both cases deal with the derivative injury doctrine, which provides that WC is the exclusive remedy for claims that are derivative of a workers’ WC injury. It had not been applied to family members, but to the injured workers themselves. These cases tested the potential expansion of that doctrine, and in this decision the CA Supreme Court determined it should not be expanded. However, they provided that while there was a moral obligation on employers to protect workers’ and family members, there was a greater societal public policy basis not to impose that obligation on employers as part of the workers’ compensation law.

The questions raised by Kuciemba and See’s Candie’s have been resolved in the employer’s favor. This decision will likely be significantly relied upon in other states where the same questions have come to the Courts as a result of the pandemic. I am not aware of any pending cases in Montana, however, if the decision had gone the other way, I expect we would have seen them. The full decision is here: S274191.PDF (ca.gov)

NCSI Annual Conference

Normally, I would not bother you with recommendations from vendors about their products. At the same time, I am always on the lookout for programs or opportunities to be able to do our business better, more fairly and more efficiently. At the recently concluded National Council of Self Insurers Annual Conference in Denver, I was exposed to a new approach to a product that intrigued me from an claims management operational perspective.

While it may sound like a commercial, I encourage members to consider Social Discovery as part of the initial claims investigation process (Social Discovery | Accurate Intelligence). Social Discovery provides a review and guaranteed report on individual’s social media presence. While we are all familiar with using a tool like this in addressing the potential of fraud, in this case they recommend using it as part of the initial claim investigation. What made me sit up and take notice was their guarantee of the validity of the information they provide and the pricing.

Through the National Council we have access to other national self insured employers as well as peer state self insured associations. Those relationships are well worth our time as they help us understand more about the issues we face, and will be facing, as well as help keep us up to date on what is going on in other states’ workers’ compensation systems.

MSIA Annual Dues – Due Now

July 1 is the start of the MSIA fiscal year. It is time for your dues payments to help keep the Association going in representing your interests on public policy issues, keeping information you should have coming to you and our Continuing Education Webinar series going. Our Association has grown and we are gaining more and more credibility, thanks to your support for our efforts. We are also being noticed nationally more and more, based on out work with the National Council of Self Insurers and the recent appointment of MSIA to the UWC Board of Directors. UWC is a national business association focusing on unemployment and workers compensation issues at the federal level. MSIA has been asked to serve as workers’ compensation subject experts as part of that Board.