HELENA – On the last day of the legislative session, lawmakers added a 2.75 percent premium tax on insurance sold by the Montana State Fund to pay for continuing claims for workers injured before July 1990.
The new fee takes effect on July 1. The proceeds will be used to pay down the costs of the so-called “Old Fund,” which still has an estimated liability of $50 million.
The 2011 Legislature passed a bill to decrease workers’ comp premiums for businesses but also had to develop a way to repay money the state borrowed from the “old fund” account to balance the budget eight years ago.
“This approach takes on a longer view … and places more responsibility on the board and the fund to address the Old Fund on a long-term basis,” Senate President Jim Peterson, R-Buffalo, told Lee Newspapers of Montana on Friday. “It was kind of a compromise.”
Peterson said even with the premium assessment, customers of the State Fund should still expect about a 22 percent reduction in worker’ compensation costs because of reforms lawmakers passed earlier in the session.
However, State Fund President Laurence Hubbard said the actual reduction hasn’t been determined. The State Fund Board is scheduled to meet May 20, when it will set rates for the fund’s 23,000 customers.
“This is an added expense that we’ll have to absorb,” Hubbard said. “We’ll have to look at it, within our estimated annual costs, and our board will have to make appropriate decisions on how to manage it. We get our costs paid only by the premiums we charge our customers.”
Hubbard said he expects the final rate reductions will be between 15 percent and 20 percent.
Montana has had among the highest workers’ comp insurance rates in the nation, and a reform package passed by the Legislature was expected to cut rates by as much as 25 percent, starting July 1.
But lawmakers still had to deal with covering the costs of the Old Fund, which was created in another effort to reform the State Fund.
House Bill 604 initially covered some of the shortfall with a transfer from the general fund. However, the bill was amended Thursday — the final day of the legislative session — to reduce the state’s liability to $13 million, with the rest to be covered by the premium tax.
Rep. Chuck Hunter, D-Helena, voted against the bill, saying the 2.75 percent assessment will be seen as a tax by every business that has to pay it.
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