Maintaining balance in workers’ comp system

The Maine economy has been at a crossroads in recent weeks as the Legislature wrestled with how to address the so-called Kotch loophole. The loophole, opened in February by a Maine supreme court decision, would have made employers liable for pre-existing and nonwork-related conditions. The cost to employers would be astounding, pushing annual comp premiums up by $45 million and creating retroactive liability of about $200 million. Fortunately, the Legislature chose the right path when it acted to close the Kotch loophole.

Debates about Workers’ Compensation are always contentious because the stakes are so high. On one side of the issue are worker advocates who are justifiably fighting to preserve benefits for workers who are hurt on the job at no fault of their own. While everyone would like to provide generous benefits, Maine already ranks seventh in the nation in comp costs and employers must be involved in the debate or comp costs could increase even further. In the end, the best solution to these debates is to maintain the balance in Workers’ Compensation between the benefits we would like to provide and the costs employers can afford to pay.

The Kotch loophole threatened to severely disrupt the balance in the workers’ compensation system achieved during the 1992 reforms. At the time, getting the system under control was so divisive that it led to a shutdown of state government. The loophole would have returned us to the days preceding the shutdown when Maine led the nation in comp costs, placing our businesses at a competitive disadvantage and busting the budgets of municipalities, schools, and non-profit organizations. In addressing Kotch, the Legislature has kept costs in line, ensuring that our workers compensation system does not bankrupt Maine’s economy.

The bipartisan legislation overturning the Kotch loophole prevents a court-directed, retroactive expansion of the comp program that would have allowed for the stacking of work and non work-related injuries. And while some have argued that closing this loophole is an attack on injured workers, it just is not the case.

Twenty-five percent of all injured workers are going to continue to qualify for lifetime benefits and current applicants are not going to face additional hurdles when they seek assistance. In addition, the legislation will become more responsive to those most in need because a provision of the bill will allow the stacking of two or more workplace injuries that occur after Jan. 1, 2002. Consequently, those least able to work are most likely to qualify for lifetime benefits.

Claims that injured workers are victimized by the action taken to close the Kotch loophole ring especially hollow when one considers where the program has been heading in recent years. Weekly benefits have been increased for workers, the term for temporary benefits has increased from five to seven years, and the physical impairment level, which triggers lifetime benefits, has decreased from fifteen to just under twelve percent. These changes to the benefits side of the equation have pushed premiums higher after a few years of decline. The Kotch loophole, which would have essentially created a new employer sponsored disability program on par with Social Security, just could not be allowed to stand.

The Kotch loophole threatened the very stability of Maine’s Workers’ Compensation system. I am pleased that after weeks of heated debate, we have been able to close the loophole and maintain the all-important balance between benefits and costs.

Rep. Russell Treadwell, R-Carmel is the lead Republican on the Joint Standing Committee on Labor.