Dues blues 

Are small business owners getting slammed by workers’ comp bills?

As if Montana wasn’t already a tough place to do business, along comes the new worker’s compensation premium payment plan to make things that much tougher for entrepreneurs.

Last November the state worker’s comp fund board of directors decided to change the way small business owners pay their insurance premiums on their employees. For years employers have been able to pay their premiums quarterly, twice a year or annually. Now, employers already walking a thin profit line must pay their entire annual worker’s comp premiums within 90 days of their due date.

John Ryan, CEO of Grand Prix Motoring Accessories in Missoula, doesn’t have it too bad when it comes to insurance premiums: He’s got two employees working in a low-risk work environment. His company’s annual worker’s comp premiums total $1,200 a year, payments he used to stretch over four quarters. But as of July 1, Ryan must now pay his entire premium within 90 days.

Why the change? Ryan says he was told that the directors of the worker’s comp fund “‘want to help people.’ What kind of lame excuse is that?” Ryan fears that small businesses, already operating in what many consider a hostile business climate and possibly facing crippling energy prices next year, will be hard-pressed to meet their payroll and pay annual insurance premiums in the 90-day period. A bigger concern is for those high-risk businesses carrying high premiums—businesses like roofing companies, construction or building contractors—where a single accident can result in tens or even hundreds of thousands of dollars in medical bills.

Angela Fisher has owned Angela’s Pizza in Kalispell, a seven-employee business, for 15 years. When she was notified recently that her annual $1,300 worker’s comp premiums would have to be paid within 90 days—payments that she hadn’t included in her monthly budget—she considered her options. “I had just given them $531 and I got another bill right after that,” says Fisher. “I thought maybe I’d received the bill in error. I’m thinking I might even have to use my credit card. I hadn’t budgeted for it. Or I could play the bill lottery. Who doesn’t get paid?”

Ryan is critical that the board of directors seems to answer to no one. It wasn’t the Legislature that changed the payment plan, he says, nor does State Auditor John Morrison oversee the “semi-private” worker’s comp state fund, though Morrison, who also is the state insurance commissioner, is charged with regulating the private insurance industry. “Well, if you’re semi-private, how come John Morrison doesn’t have semi-authority [over the worker’s comp fund]?” he asks.

Laurence Hubbard, vice-president of insurance operations for the worker’s comp state fund, says the $153 million fund is indeed a quasi-private business, despite the fact that it’s a state-owned business run out of a government office. State government has no regulatory authority over the fund, though the Legislature maintains fiscal oversight. Rather, a seven-member board of directors, appointed by the governor, manages the fund, and it was this board that came up with the plan to change the way insurance premiums are collected. Though Hubbard says the decision was made at the request of the fund’s policy holders, there had been complaints from small business owners across the state.

The old way of billing and collecting premium payments was inefficient, he argues. Every year the fund’s board of directors mailed out 161,000 billing notices to 24,000 policy holders. The one complaint the board heard loud and clear was that small businesses were being smothered in paperwork. “In an effort to respond to that, instead of allowing up to four payments a year, we changed it,” says Hubbard. “What we do is constantly look for ways to save money.”

Though Hubbard downplays the impact this decision has had on small businesses, calling it insignificant, he says he has received enough calls from worried business owners that the board has had to adjust some payment schedules. If a business owner simply can’t make the year’s premium payments in 90 days, the fund’s board will work out a more flexible payment plan. The board has also allowed some small businesses to go back to the quarterly payment method, and for others has extended the 90 days to 180 days. “We are very much customer focused, and in retrospect we could have done a better job communicating (with policy holders),” says Hubbard.

The fund managers could have done a better job of communicating with Fisher, who says she never received any notice of the change. Nor did anyone offer her a different payment plan when she called to complain. “They didn’t really give me any options when I talked to them on the phone,” she says. Despite what Hubbard maintains is the board’s willingness to work with businesses on more flexible payment plans, the change may just be one more indicator of what many business owners describe as Montana’s hostility towards entrepreneurship.

Last year, a Washington D.C.-based organization called the Small Business Survival Committee ranked Montana a dismal 45th in terms of maintaining a friendly business climate.

The SBSC ranked all 50 states and the District of Columbia according to the taxes imposed on investment and business, and by the ratio of bureaucrats to citizens. In September 2000 taxes on capital gains, health insurance, property, income, unemployment, gasoline and worker’s comp were rated both individually and in the aggregate for each state. Montana came in 45th overall, meaning that only five other states and the District of Columbia were more hostile to business. Montana also tied with one other state for 48th place for the nation’s highest worker comp rates. Whether the fund’s new payment plan will push Montana further down the SBSC’s ladder or boost it a rung won’t be known until the 2001 tax statistics are tallied. Thus far, no complaints have come in from business owners to either the Bitterroot Valley Chamber of Commerce or the Missoula Area Chamber of Commerce. Bitterroot Chamber Executive Director Diane Wolfe says she hadn’t even heard of the change. Kim Latrielle, CEO of the Missoula Chamber, was aware of the new payment plan, but says none of the Chamber’s 850 members have complained.

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