The Maine Bureau of Insurance has approved a 15.7% average rate reduction in workers’ compensation insurance premiums for business clients of MEMIC, the largest workers’ comp provider in the state.

The rate reduction will save more than 17,500 Maine employers as much as $31 million in total workers’ comp costs, Robert Carey, state insurance superintendent, said Tuesday. The adjusted rates will become effective upon renewal of policies over the next year.

MEMIC’s initial rate request would have lowered average rates 13%. However, the bureau scrutinized MEMIC’s cost projections and cut its profit margin to achieve a larger rate reduction, Carey said in a statement.

“The further rate reduction will mean an additional $5 million in savings for Maine businesses, which they can use to invest in Maine people and Maine businesses,” Carey said. “The bureau’s property and casualty division worked with MEMIC staff to bring real savings to Maine employers.”

The reduction continues a trend resulting from 1993 legislative reforms that have lowered Maine’s workers’ comp rates 37% in the last three years and 70% overall, said Michael Bourque, president and CEO of The MEMIC Group, a Portland-based provider of workers’ comp insurance nationwide.

The Maine Bureau of Insurance reported an overall rate reduction of 19% this year – the largest among 37 states and the District of Columbia that report to the National Council on Compensation Insurance.

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“This is great news for employers and employees in Maine,” Bourque said. “Their ability to maintain a safer workplace is allowing for this decrease.”

Michael Bourque Photo by Kevin Brusie

Workers’ compensation is a type of insurance that employers provide for employees in case they are injured on the job. Benefits include weekly pay for lost time and payment for medical bills, prescriptions, vocational rehabilitation and loss of life or body parts.

Workers’ comp costs vary from state to state and depend on the employer’s safety record, the industry’s risk level and the benefits required by law. Maine’s costs are among the highest in the nation.

In 2022, Maine ranked ninth nationally in Oregon’s biannual study of workers’ comp premium rates in 50 states and the District of Columbia. Maine ranked fifth last year among 37 states and the district that report to the National Council on Compensation Insurance.

Maine’s average cost for workers’ compensation benefits – primarily medical costs and wage replacement – was 87 cents per $100 of payroll, compared to 65 cents nationally, according to the council.

“The cost difference has a lot to do with the benefits that are provided by law, which are viewed as more generous (in Maine) than in other states,” Bourque said.

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Increasing MEMIC’s average rate reduction to 15.7% may reduce future dividends paid to policy holders, Bourque said.

MEMIC, which provides workers’ comp insurance to about two-thirds of Maine’s commercial market, returned $18 million in dividends to policyholders last year, representing about 12% of the premiums paid in 2020.

“When there’s excess profit, it’s returned to employers as dividends,” Bourque said. “We’ve returned $350 million to policyholders since our inception.”

Founded in 1993 as the Maine Employers’ Mutual Insurance Co., MEMIC was one of four companies licensed to sell workers’ compensation insurance in Maine, as the other three were poised to exit the state altogether, according to the state insurance bureau. Injury rates at Maine companies were high, and workers’ compensation costs were the nation’s highest.

In response, the Maine Legislature passed a landmark workers’ compensation reform law, signed by then-Gov. John R. McKernan Jr., creating a private mutual company governed by policyholders. Despite its public purpose, MEMIC received no funds nor guarantees from the state of Maine.

Now, to help companies avoid high workers’ comp costs, MEMIC has 25 employees who work with policyholders to develop educational and training programs to help prevent injuries on the job, Bourque said.

The new average workers’ comp rates vary across different industries. The vast majority of Maine employers insured by MEMIC will see rate decreases, but some will see increases, according to the state bureau.

“MEMIC continues to be a success story that delivers on its mission of workplace safety, fair treatment of all workers, and a strong Maine economy,” Carey said. “In addition to lower premiums, MEMIC has consistently delivered multi-million-dollar dividends to its member companies.”

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