The 50th State May Create Hawaii Monopolistic State Fund

The idea of a Hawaii Monopolistic State Fund may not just be a subject tossed around by Workers Comp aficionados. A new piece of legislation referred to as House Bill 2715 may change the Hawaii WC landscape permanently. Please remember HB 2715 is quite a few steps from being enacted including surviving a veto by the Governor.

Picture of Hawaii Monopolistic State Fund Map

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The shocker is that all the states that have decided to switch from a monopolistic state fund to more of a regular insurance market discovered paydirt for the employers. Nevada and West Virginia are among the successful transitions from monopolistic to the regular marketplace.

You can find the Hawaii Monopolistic State Fund bill here > HB 2715 . It is a .PDF file. It may be worth downloading to follow along with my analysis or to read on your own. The first part of the bill is original. The second part amends older legislation.

My curiosity overcame me and yes, I had to read this complete bill. Some of the more interesting passages from the bill are: (my comments are in italics)

Page 1 Line 12 – The workers’ compensation law includes certain statutory presumptions that place on the employer the burden of producing substantial evidence to the contrary to rebut a claim for a covered work injury. Despite this presumption, recommended medical treatment or vocational rehabilitation plans are delayed or arbitrarily and capriciously denied; approved services provided by medical or other healthcare professionals go unpaid; and there is a reluctance to accept workers’
compensation cases for fear of being denied reimbursements, all of which contribute to a dysfunctional health care system that cannot rehabilitate the injured worker.

Woman Pulling Hawaii Monopolistic State Fund A Giant Briefcase

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A state fund is going to solve this concern or add to it?

Page 7 Line 15 – An employer with two or more lost-time claims greater than $10,000, and a loss ratio greater than 1.0, over the immediately preceding three years shall be placed in the high
risk division.

That is not the definition of a high-risk employer.

Page 8 Line 16 The contingent liabilities of members provided in section 431:4-317 may be separated so that members assigned to the high risk division have a further contingent liability for deficits in the high risk division; provided that no contingent liability shall be in the aggregate for more than five times the annual premium rate of the member’s policy nor for a term of more than one year.

Does this mean a 500% addition to an employer’s premium? Ouch – if I am reading that passage correctly.

Interestingly enough, the bill has been voted on twice.

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Your Workers Comp Premiums Overcharged

Graphic of Dollar Sign Overcharged On Dry Mud

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Another way to know you been overcharged on your Workers Comp Premiums. The following is a prime example of a Monopolistic Workers Comp State Fund not providing the proper service to their insureds. If a carrier or fund of any type is mailing out or applying refunds, this means that the employers were charged too much premium when their original policy was written and then again at the year-end payroll audit.

The Department of Labor & Industries (L&I) began mailing dividend checks last week to 100,000 employers as the final step of a process to return excess funds from the state’s workers’ compensation system. Another 28,000 employers will receive credit toward their next workers’ compensation premiums. The remaining 11,000 employers will have their dividends applied to premiums already owed or other debts.

Last year, employers and workers enjoyed a partial workers’ comp rate holiday, according to L&I Director Judy Schurke. Employers and workers saved more than $300 million in workers’ compensation premiums by not having to pay Medical Aid fund premiums during the second half of 2007.

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To complete the rate holiday, employers who did not participate in L&I’s Retrospective Rating Program are also entitled to a one-time dividend. Retro employers receive their proportionate share through their retrospective rating assessments.

The dividends will total $37 million, and dividends will average $266 per employer. How much an individual employer receives will be based on the Accident Fund premium he or she paid in the second half of 2007. Checks will be sent to 100,000 employers in amounts ranging from $10 to several thousand dollars. About half the checks will be between $10 and $100. Another 28,000 employers will have their next-quarter premiums credited.

About 11,000 employers who owe workers’ comp premiums or may otherwise have a debt with L&I or other agencies may see their dividends applied to those debts rather than receive a check directly. An employer will be notified if a dividend is applied to debts