“As our high school mathematics teachers reminded us: you need to show your work. That is true for the commissioner’s calculations as well.”
With that admonition, the Massachusetts Supreme Judicial Court criticized and returned the 2024 and 2025 workers’ compensation rate decisions to the state’s insurance regulators for reconsideration. The court found that they failed to explain why they chose to order a 14.6% rate cut in 2024 and a change in the methodology for rating public housing authority employees for 2024 and 2025.
The high court’s opinion, written by Justice Scott L. Kafker, is a partial victory for the industry’s Workers Compensation Rating and Inspection Bureau (WCRIB) which had appealed both rate decisions. The 2024 decision ordering the 14.6% cut was issued by then-acting Commissioner Kevin Beagan and the 2025 decision that continued the 2024 rates was issued by current Commissioner Michael Caljouw, who was appointed in October 2024.
The high court affirmed the commissioner’s authority to reject WCRIB’s rate proposals and the 2024 rate decision insofar as it determined that the then-existing rates were excessive. However, because the commissioner did not provide a “specific, reasoned explanation” for the 14.6% decrease, the court remanded that matter to the insurance department for further consideration. In addition, the commissioner must also address the issues related to public housing authority employees (class code 9033) in connection with both the 2024 and 2025 decisions.
The 14.6% decrease went into effect July 1, 2024. Then in the next round of rate oversight, the new commissioner rejected a WCRIB proposal for a 7.1% increase and left rates for 2025 the same as they were in 2024.
State officials said the 14.6% rate cut was worth $87 million to employers while the denial of the 7.1% increase for 2025 would save employers another $80 million.
WCRIB objected to several parts of the rulings that rejected certain traditional methodologies used for underwriting profit, indemnity paid loss, and rates for public housing authority employees.
Chief Objection
But the chief WCRIB complaint before the court was the lack of any explanation for the specific 14.6% decrease.
WCRIB did not contest the commissioner’s authority to order a specific rate decrease. That authority is expressly provided in the law which states that if the commissioner “determines that any already effective premium is excessive, he shall order a specific decrease.”
What WCRIB did contest, and the court said, “reasonably so,” was the lack of any explanation for the specific percentage decrease.
The high court found that the commissioner properly exercised his authority in finding WCRIB’s rates to be excessive and also in disapproving some WCRIB methodologies, but that he failed in his obligation to explain, in the 2024 decision, the basis for his decision to order a 14.6% rate decrease, which was almost double the decrease that WCRIB had recommended.