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Small Maryland insurance fund warned it could be insolvent next year unless assessments or costs change
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Summary
DLS told lawmakers the Uninsured Employers Fund's reliance on a third-party administrator and a long-stagnant 2% assessment rate leave it at risk of insolvency in FY28; UEF staff urged lawmakers to raise assessments or allow in-house claims capacity.
Department of Legislative Services analysts and UEF staff told the Public Safety and Administration Subcommittee that the Uninsured Employers Fund is at financial risk unless revenues increase or expenditures fall.
DLS analyst Micah Richards said the FY27 UEF allowance is about $6.1 million, but projected close-of-year fund balances and the cost of a third-party administrator (TPA) create insolvency risk: "Based on the estimated revenues and expenditures, we are projecting that their fund balance at the close of fiscal 27 is $1,700,000," he said, adding that without a revenue increase or lower expenditures, the fund would likely be insolvent in FY28.
Richards and committee members focused on the TPA arrangement (the contract is with CorVel) as a significant cost driver and recalled a four-month contract lapse in 2024 that temporarily improved FY25 results. DLS recommended restricting $100,000 of UEF funds until the agency submits a report documenting whether a TPA is needed for the full five-year contract and the agency's ability to bring claims functions in house.
Saron Taylor, UEF fiscal-account technician, described earlier attempts to hire in-house claims staff (roughly 2016'17) and the decision to use a TPA after applicant pools lacked experienced workers' compensation claim specialists. She said the 2% assessment rate has been unchanged since about 2009 and is inadequate; previous proposals to raise the rate to 2.5% were vetoed. "The current 2% assessment rate is inadequate," Taylor told the committee, and she urged consideration of an increase to 4% or 4.5% to sustain the fund.
Committee members asked why the fund's trajectory is not driven more by agency choices; DLS replied that policy decisions about assessment rates and whether to outsource claims are central. Chair said the committee would follow up and expressed disappointment that acting Executive Director Andrew Anderson had not appeared in person.
No vote was taken; the subcommittee requested the capacity report and signaled continued oversight given the fund's small balance and potential insolvency timeline.
