PORTLAND — The political dispute over how much money the Legislature saved by rewriting Maine’s workers’ compensation laws came down Thursday to a statistical duel between two insurance actuaries.
The experts’ widely differing opinions — one estimates the savings at 7.7 percent, the other at 30.9 percent — are the focus of a three-day hearing aimed at determining if workers’ comp insurance rates should be raised or cut.
Maine’s acting insurance superintendent, Jeri Brown, ultimately must decide which expert to believe when she sets new rates, and attorneys in the case expect she’ll carve out a position between the two extremes.
“The question is what is the most probable version of cost savings,” said Don Perkins, an attorney representing the Maine Chamber of Commerce and Industry and other business groups. “Usually faced with that situation, a regulator comes down somewhere in between.”
While the hearing’s opening day featured a legal challenge to Brown’s objectivity in the case, the second day moved into the mind-numbing realm of actuarial projections.
Attorneys for the insurance industry, the Maine AFL-CIO, business groups and the state’s public advocate took turns grilling each other’s experts, trying to get them to admit a flaw in their estimates.
Barry Llewellyn, a vice president and actuary for the National Council on Compensation Insurance, defended his estimate that workers’ comp costs would be reduced by 7.7 percent because of the Legislature’s overhaul.
The NCCI, representing insurance companies in 36 states, originally had asked for a rate increase of about 30 percent, but has lowered its request to about 22 percent as a result of the legislative changes.
Allan Schwartz, president of an actuarial consulting firm and a former assistant commissioner with the New Jersey Department of Insurance, has countered with his own estimate for the public advocate that workers’ comp costs would be reduced by 30.9 percent.
Citing his opinion, the Maine AFL-CIO, business groups and the state public advocate’s office are lobbying for rates to be reduced by as much as 30 percent.
Schwartz contended in an interview that Llewellyn ignored potential cost savings in his calculations.
“I think their position is one of wait and see rather than trying to price it correctly up front,” he said.
Llewellyn countered that Schwartz has misinterpreted several of the changes in calculating how much money they would save.
For instance, he said, Schwartz had estimated that a change eliminating compensation to injured workers who later suffer injuries unrelated to their work would reduce costs by 4.1 percent, while Llewellyn said there would be no savings.
“If you analyze these piece by piece, he’s overstated the savings,” Llewellyn said. “He’s used inappropriate studies to base his conclusions. He’s also failed to take into account the fact that many of these changes won’t take effect until rules are promulgated.”
Workers’ comp, which insures employers against liability for on-the-job injuries, was the focus of a bitter battle this summer between Democratic legislative leaders and Republican Gov. John R. McKernan.
Businesses are required to buy the insurance, which pays benefits to injured workers, but they contend the rates in Maine are exorbitant. McKernan contends the Democratic-controlled Legislature didn’t go far enough in cutting workers’ comp costs.
During the legislative battle, McKernan linked action on workers’ comp to his approval of a new state budget. His refusal to sign the budget led to an unprecedented government shutdown for nearly three weeks in July.
Llewellyn testified for the insurance industry Thursday that there was “ample evidence” current workers’ comp rates are “inadequate.”
But he conceded under questioning by Patrick McTeague, an attorney for the Maine AFL-CIO, that insurance companies had never given small business policyholders refunds, or premium credits, after benefits to workers had been cut in the past, lowering the insurance industry’s costs.
Llewellyn said that was because “of the inadequacy of existing rates.”
He also disputed McTeague’s contention that insurance companies would have “extra money” when at least one of the workers’ comp changes made by the Legislature takes effect Oct. 17.
Under that change, an injured worker’s fringe benefits, such as medical insurance, no longer will be included in calculating the employee’s total weekly compensation. Under workers’ comp, injured employees generally receive two-thirds of their average weekly compensation while they are unable to work, so the change will lower the amount of money they receive.
The Legislature made such other changes in the system as authorizing independent medical examiners to assess workers’ injuries and their capacity for work. It also imposed limits on lump-sum payments to lawyers, encouraged injured workers to find medically suitable jobs and cut off benefits for those unwilling to work.