A slide shown at the Sept. 11 Economic Interim Committee meeting.

By Phil Drake | Montana Watchdog

HELENA – A rare display of bipartisanship in the 2011 legislative session came with the passage of House Bill 334, a sweeping  workers’ compensation reform package expected to cut costs by an average of 20 percent.

In 2010, nearly $400 million was spent on workers’ compensation in Montana, according to estimates. Montana had one of the highest rates for workers compensation in the country, and now a line is forming to take a bit of credit for slicing the compensation pie.

GOP gubernatorial candidate Rick Hill, who, as a legislator, worked on workers’ compensation reform in the 1990s, mentioned during a Sept. 19 debate with Steve Bullock that he, in fact, played a role in the 2011 reform.

Democratic Gov. Brian Schweitzer, who during the 2011 session took a veto branding iron to GOP-backed bills he didn’t like, touts HB 334 — spearheaded by Republican-led Legislature and signed after he sought some compromises — as one of his major accomplishments in the 62^nd session.

“This is a good bill for all the right reasons, everybody in Montana wins,” said Schweitzer, surrounded by lawmakers during an April 5, 2011, bill-signing ceremony in his reception room.
The head of the state’s largest workers’ compensation insurer recently tell lawmakers that HB 334 “keeps us up at night.”

But why?

“We believe the savings are attainable and achievable, but we have to keep our eye on the ball,” Laurence Hubbard, executive director of the Montana State Fund, told the state’s Economic Interim Committee during its Sept. 11 meeting.

Though rates were reduced, he said it’s too early to determine the impact on insurers. Hubbard said it could be at least 2016 — the end of the first five years of the bill being enacted — before it can be determined if the reforms are working.

The most recent workers’ compensation reform began in 2006, when the governor started the Labor-Management Advisory Council, made up of labor and management representatives, to look at changes.

LMAC, headed by Lt. Gov. John Bohlinger, developed a proposal, but the plan was discarded early in the 2011 session in favor of HB 334, a Republican-backed proposal that made deeper rate reductions and, officials said, incorporated many of LMAC’s ideas.

HB 334 was seen as a godsend to employers. By cutting costs, some hoped, wages would increase, helping  employers hire more workers. Even if it failed to knock Montana from its dubious perch, it would at least move the state closer to the rest of the nation.

The National Council on Compensation Insurance estimated HB 334 would bring savings of 20 percent to 44 percent in the first year alone, or guaranteed savings of $84 million to $183 million.

Within weeks of its passage, the Montana State Fund cut rates that kicked in July 1, 2011, then announced in April the rates would remain the same for the next fiscal year that began July 1. Hubbard said in an April 27 news release the board believed “results were still too uncertain and that holding the line on rates would be in the best interest of Montana’s business owners.”

He saw the board’s action as “a sign of faith that we are doing everything we can to reduce lost cost reductions,” and said the goal was to “maintain as much stability as we can for Montana businesses.”

But why so gloomy during the Sept. 11 Economic Interim Committee meeting?

“I was just being frank and transparent with policymakers,” he told Montana Watchdog a few days after the meeting. “I don’t have a lot of data yet.”

What makes him nervous, he said, is whether the state has enough money to fulfill obligations to injured workers. One of the big-ticket items calls for the closure of medical benefits five years from the date of permanent partial injury. Hubbard said that alone made up 12 percent of the 20 percent decrease. The first claim to hit that threshold should hit in 2016.

“If it holds, you will have some good results,” Hubbard told the panel.

Diana Ferriter, administrator with the employment relations division of the Department of Labor and Industry, agreed with Hubbard’s assessment, adding it would be a while before “anything real” would be seen on benefits.

Hubbard said it’s important to give the reforms a chance.

“We just have to have faith and steady as she goes,” he said. “We have to maintain as much stability as we can for Montana businesses. The more stable we can keep the workers’ compensation system the better it is, then we can work with it. There’s not a single employer in the state who doesn’t want to see a worker taken care of.”

Contact Phil Drake at phil@montanawatchdog.org or (406) 442-4561.