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Panel rejects proposal to raise workers' compensation wage-replacement to 66—1'3% after insurer and actuary testimony
Summary
Committee debate over restoring the indemnity replacement rate to 66 2/3 percent prompted actuarial testimony estimating a 5'6.3% rise in system loss costs; an amendment to raise the rate failed and the committee later recommended against advancing the bill.
A bill to restore New Hampshire workers' compensation indemnity benefits to 66 2/3 percent failed to win committee approval Thursday after testimony from the insurance industry and actuaries that the change would increase workers' compensation loss costs.
Representative Mark Mackenzie, sponsor of House Bill 744, told the House Labor, Industrial and Rehabilitative Services Committee the state formerly paid that replacement rate and that an increase would restore benefits curtailed during reforms in the 1990s. "66 and 2 thirds is to restore a benefit that we had prior to passage of ... 1993," Mackenzie said, arguing the market has stabilized and benefits can be partially restored.
NCCI (the National Council on Compensation Insurance) attorney Nathan Fennessy presented the insurer-side analysis. He said NCCI's modeling shows the change from 60% to 66 2/3% would raise overall workers' compensation system costs by about 5.0% to 6.3% in New Hampshire's voluntary market; when estimated self-insured costs are included the overall system increase could be roughly $17 million to $22 million.
"The analysis was essentially that this increase from 60 to 66 and 2 thirds was approximately 9.7% in direct indemnity cost going up," Fennessy said, explaining how the figure feeds into a systemwide percentage once indemnity is weighted against total system costs.
Christian Citarella, chief property-and-casualty actuary at the New Hampshire Insurance Department, reviewed the NCCI analysis and said while not all carriers will adjust premium in lockstep with loss-cost changes, he would be surprised if final average premiums did not rise by an amount approaching NCCI's upper bound. "I would be surprised if in the end the effect of this legislation would result in an overall average premium increase of that 6.3% high upper bound that was presented by NCCI," Citarella said, later adding he expected an increase greater than his own earlier 4% upper-bound estimate.
Committee members questioned whether higher indemnity would lengthen claim durations and whether that would change carriers' overall exposure. Fennessy said prior analyses show modest utilization increases in some indemnity categories after benefit increases. Citarella noted the insurance market has been a relatively stable sector for businesses in New Hampshire, and cautioned members that workers' compensation has been one insurance product with falling loss costs in recent years.
On a committee roll call the proposed amendment to raise the indemnity rate failed (9 yes, 11 no). The committee then voted 11-9 to recommend the bill "inexpedient to legislate," effectively not advancing the measure out of committee.
Why this matters: The indemnity percentage determines how much of an injured worker's pre-injury wages are replaced while disability benefits are paid. A statutory increase would raise payouts to injured workers but carriers and employers warned that it would add to premium costs at a time when regulators say workers' comp loss costs have generally declined in New Hampshire.
Votes at a glance: Amendment to raise wage-replacement to 66 2/3% — failed (9 yes, 11 no). Motion to recommend ITL (inexpedient to legislate) — passed (11 yes, 9 no).
