H.P. 1593 - L.D. 2222
An Act to Revise and Update the Charter of the Maine Employers' Mutual Insurance Company in Furtherance of its Mission
Be it enacted by the People of the State of Maine as follows:
Sec. 1. 24-A MRSA §3701, as amended by PL 1991, c. 885, Pt. C, §1, is further amended to read:
The Maine Employers' Mutual Insurance Company is established for the purposes of providing workers' compensation insurance and employers' liability insurance incidental to and written in connection with workers' compensation coverage to employers of this State at the highest level of service and
savings consistent with reasonable applicable actuarial standards and the sound financial integrity of the company. It is also the purpose of the company to encourage employer involvement and to be responsive to each division's experience, advice, practice and operating effectiveness.
Sec. 2. 24-A MRSA §3702, sub-§3, as enacted by PL 1991, c. 885, Pt. C, §2, is amended to read:
3. Division. "Division" means an industry or geographic grouping as established under section 3712 3712-A.
Sec. 3. 24-A MRSA §3703, sub-§1, as amended by PL 1995, c. 551, §4, is further amended to read:
1. Workers' compensation. The company shall provide workers' compensation insurance and employers' liability insurance incidental to and written in connection with workers' compensation coverage to employers in this State. The company may not write other lines of insurance. The company may not write reinsurance or excess insurance. The company may reinsure workers' compensation and employers' liability insurance written by other insurers that are covering out-of-state employees of Maine-based employers that are insured by the company. For the purpose of providing insurance to Maine-based employers operating in other states, the company may apply to appropriate regulatory authorities in those states for authority to write workers' compensation and employers' liability insurance for Maine-based employers' operations in those states. Until the company has obtained the surplus otherwise required under this Title for casualty insurance companies, the company must receive approval from the superintendent before actually writing policies in each other state. The company may form or acquire subsidiary insurers in other states that are authorized to write only workers' compensation insurance and employers' liability insurance. The superintendent may not authorize a subsidiary insurer formed or acquired by the company to write any line of insurance in this State.
Sec. 4. 24-A MRSA §3703, sub-§4, as enacted by PL 1991, c. 885, Pt. C, §3, is repealed.
Sec. 5. 24-A MRSA §3703, sub-§5, as enacted by PL 1991, c. 885, Pt. C, §3, is amended to read:
5. Composition of the board. The board consists of up to 13 9 members. Nine Six members must be officers, directors, employees, partners or members of policyholders who purchase workers' compensation coverage from the Maine Employers' Mutual Insurance Company, except that the initial appointment may include employers who have purchased coverage through the workers' compensation residual market mechanism. Three Two members must be persons who represent the public interest of the company and must be appointed by the Governor within 30 days after a new board member is authorized or a vacancy occurs, subject to review and approval comment by the joint standing committee of the Legislature having jurisdiction over banking and insurance matters. The designated committee shall complete its review and vote on approval of the appointments of the Governor within 15 days of the Governor's written notice of appointment. If the designated committee fails to act within the required 15 days, then the appointees put forward by the Governor become the required board members. Except for the initial selection of board members under subsection 4, each division as established pursuant to section 3712 must have one member on the board. One member must be an at-large policyholder member elected by the board. The remaining board member is the president and chief executive officer who shall serve on the board of directors while employed as president and chief executive officer. The reduction in the number of board members from 13 to 9 must be done by attrition. The first 4 appointments to expire after September 1, 1998 may not be filled.
A member of the board who is not elected by one of the divisions as specified in section 3712 may not be a lobbyist required to be registered with the Secretary of State, a service provider to the workers' compensation system or a representative of a service provider to the workers' compensation system.
Sec. 6. 24-A MRSA §3703, sub-§§6, 7 and 9, as enacted by PL 1991, c. 885, Pt. C, §3, are amended to read:
6. Terms. The initial terms of the board of directors are staggered at 3 years, 2 years and one year. Of the initial division policyholders, 3 serve 3-year terms, 3 serve 2-year terms and 3 serve one-year terms. The initial public interest members serve one 3-year term, one 2-year term and one one-year term. A full term on the board of directors is 3 years. An individual may not serve more than 2 consecutive full terms as a director, except for the president and chief executive officer. All members shall serve for the terms provided and until their successors are appointed or elected and qualified.
7. Corporate governance. The initial board of directors shall, at the organizational meeting of the company to complete organization, adopt bylaws consistent with section 3359. The bylaws must provide a schedule of meetings and rules specifically relating to the conduct of meetings and voting procedures.
9. Nominating committee. The board shall create a nominating committee. The nominating committee shall present to the board nominees for the at-large and the policyholder board member position positions.
Sec. 7. 24-A MRSA §3704-A, as enacted by PL 1991, c. 885, Pt. C, §5, is repealed.
Sec. 8. 24-A MRSA §3707, sub-§1, as enacted by PL 1991, c. 885, Pt. C, §8, is amended to read:
1. General authority. The board may perform all acts necessary or convenient in the exercise of any power, authority or jurisdiction over the company, either in the administration of the company or in connection with the business of the company to fulfill the purposes of this chapter, except as otherwise provided to the divisions under section 3712.
Sec. 9. 24-A MRSA §3710, sub-§1, as enacted by PL 1991, c. 885, Pt. C, §8, is repealed.
Sec. 10. 24-A MRSA §3712, as amended by PL 1995, c. 560, Pt. G, §9, is repealed.
Sec. 11. 24-A MRSA §3712-A is enacted to read:
1. Industry and geographic divisions. The company shall maintain industry or geographic divisions consisting of general industry groupings. The industry or geographic divisions shall advise the board on workers' compensation insurance issues of importance to those industries or geographic areas. The divisions may parallel industry groups identified by the State's advisory organization as defined in section 2381-C. A separate high-risk division must also be created and maintained as defined in subsection 3.
Not more than 30 days after the assignment to a division, a policyholder may in writing appeal to the bureau on that assignment.
2. Changes in divisions. With the approval of the superintendent, the board may change the configuration of the divisions.
3. High-risk division. The high-risk division is subject to the following provisions.
A. An employer must be placed in the high-risk division if the employer has at least 2 lost-time claims, each greater than $10,000 and a loss ratio greater than 1.0, over the last 3 years for which data is available.
B. The board, with the approval of the superintendent, may modify the eligibility standards for the high-risk division, if those standards limit those in the division to employers who have measurably adverse loss experience, have a relatively high claim frequency record or have demonstrated an attitude or practice of noncompliance with reasonable safety requirements or claims management standards.
C. Eligibility requirements must be applied annually at the policy renewal date or, if the necessary claim history is not available at that time, 30 days after notice to the insured.
D. Deductibles in the high-risk division are subject to this paragraph.
(1) A deductible applies to all coverage for policyholders in the high-risk division that meet the following qualifications:
(a) A net annual premium of $20,000 or more subject to adjustment, pursuant to this section, in the State;
(b) A premium not subject to retrospective rating; and
(c) The policyholder's threshold loss ratio is 1.0 or greater.
The deductible is $1,000 a claim but applies only to wage loss benefits paid on injuries occurring during the year of coverage. The sum of all deductibles in one year of coverage may not exceed the lesser of 15% of net annual payment for coverage or $25,000. Each loss to which a deductible applies must be paid in full by the company. After the year of coverage has expired, the policyholder shall reimburse the company the amount of the deductibles. This reimbursement is considered as payment for coverage for purposes of cancellation or nonrenewal.
Unless otherwise acted upon as provided for in subsection 2, beginning October 1, 1996, the board shall adjust, annually, the $20,000 payment of coverage level established in this subsection to reflect any change in rates for the high-risk division and any change in wage levels in the preceding calendar year. Changes in wage levels are determined by reference to changes in the state average weekly wage, as computed by the Department of Labor. Any adjustment is rounded off to the nearest $1,000 increment.
(2) For policies effective on or after January 1, 1994, the board may modify, with
the approval of the superintendent, the mandatory deductible elements. Any modification or elimination of this rating feature must consider the incentive impact on an employer, the reasonableness of the retained cost relative to the claim history, safety record or claims management practices of impacted employers and the ability of employers of all sizes to absorb these costs.
E. The board may file, with the superintendent, retrospective rating plans that, after hearing, may be imposed on an employer with a demonstrated record of repeated serious violations of workplace health and safety rules and regulations such as those adopted under Title 26, chapter 6 or 29 United States Code, Chapter 15, whichever is applicable.
F. The board shall develop and file with the superintendent, and, if not disapproved by the superintendent, make available to policyholders on a voluntary basis, retrospective rating plans.
4. Division advisory boards. Each division, except for the high-risk division, has its own advisory board.
A. Each advisory board must be composed of representatives of policyholders and employees of the policyholders of the division.
B. There may be up to 9 advisory board members for each division, with a ratio of 2 members selected by the policyholders within the division to each member who is an employee selected from employees of the policyholders within the division. The president, with the approval of the board, shall establish procedures for the initial and subsequent selection of advisory board members, and procedures for the filling of vacancies and replacements. Terms are for 3 years on a staggered basis.
C. Each advisory board shall elect a chair.
D. Each advisory board shall hold regular meetings and advise the board in the following areas:
(1) Workplace safety training;
(2) Claims administration and adjusting;
(3) Compliance with advisory board performance standards;
(4) Debit and credit plans reflecting member safety programs and experience;
(5) Policyholder grievances;
(6) Premium audits; and
(7) Any other issues of concern to the advisory board.
Sec. 12. 24-A MRSA §3713, as enacted by PL 1991, c. 885, Pt. C, §8, is amended to read:
§3713. Authority to contract with licensed producers
The president may enter into contracts, as directed by the board as provided for in this chapter. The divisions may enter into contracts within the scope of their authority for servicing as provided in this chapter and in accordance with the standards adopted by the board. The board shall, by rule or by the plan of operation, specify the requirements for and standards by which contracts are issued. Awarding of contracts must be based on price, qualification of the contractor or subcontractors and the quality and extent of services to be provided and is not limited to licensed insurance carriers. Servicing contracts for safety engineering, loss prevention, claim management, premium audit and other functions when there are multiple qualified contractors may be divided upon a geographical or other basis if, in the judgment of the governing committee of the division, those distributions are in the best interest of policyholders. The company may contract with licensed general lines insurance agents producers to submit applications and otherwise assist applicants and insureds.
Sec. 13. 24-A MRSA §3714, sub-§§1, 2 and 5, as enacted by PL 1991, c. 885, Pt. C, §8, are amended to read:
1. Separate accounting. In addition to the financial reporting requirements applicable to the company, there must be a separate accounting of each division by fiscal year to the extent practicable. These financial statements must be based on the premiums collected and earned, claims paid and incurred, expenses accrued or allocated, investment income allocated to and any other financial items that are associated with or allowable to each division.
2. Rates. Rates developed and filed by the company, and the supporting actuarial analysis, must consider, to the extent credible, the experience of each division based on sound actuarial principles must be in accordance with chapter 25, subchapter II-B.
Rates filed within the rate-band are considered voluntary for purposes of chapter 25, subchapter II-B. If a rate is filed outside the rate band, the superintendent may disapprove the rate if it is excessive, inadequate or unfairly discriminatory, using the standards set forth in section 2382.
"Rate band" means the range of rates from 85% to 145% of the benchmark rate. For the purposes of this subsection, "benchmark rate" is the pure premium rate filing filed by the State's advisory organization as defined in section 2381-C and currently approved by the superintendent.
5. Assessment. Any assessment levied against policyholders in a division is for the exclusive benefit of the policyholders subject to the assessment. Any policyholder not paying an undisputed assessment is not eligible for coverage from the company or in the voluntary market.
Effective June 30, 1998, unless otherwise indicated.
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