Executive Summary

Hays Companies was retained to perform an overview of current Uninsured Employer Fund (UEF) practices in Montana and compare and contrast them with the best practices used by other states. These best practices were gleaned through telephone and in-person interviews with 18 staff from agencies in 10 states (California, Colorado, Michigan, Minnesota, Nevada, Oregon, South Carolina, Utah, Virginia and Wisconsin)

During those interviews, it became clear the keys to a successful coverage and enforcement operation rest in the following seven areas;

1. Prevention and Education of Employers - In order for businesses to understand coverage and exemption requirements for workers' compensation, there needs to be consistent and effective education and communication efforts to ensure those employers that need coverage obtain it and maintain it at the appropriate times. Failure to educate at an early stage leads to compliance efforts playing catch up after the fact and results in a less effective compliance program.

2. Identification of Non-Complying Employers - Businesses that comply with mandatory coverage must be ensured a level playing field. In order to guarantee this, there needs to be an accurate and timely method to identify non-compliant businesses.

3. Penalty Assessment - The Public policy behind mandatory coverage and penalty efforts must be to bring employers into compliance, not to bring in revenues. A penalty assessment procedure should be realistic, understandable, consistent and equitable.

4. Negotiation and Settlement - There needs to be a consistent yet flexible method for regulators and uninsured employers to reach compromise on penalties and benefit repayments. Payment agreement terms should be high enough to ensure no employer is better off for evading coverage, but not so onerous as to dissuade continued compliance and repayment of assessed amounts.

5. Adjudication - There are occasions where penalized employers cannot reach an agreement with the compliance agency on the need for coverage, scope of penalty or the, compensibility of a claim. There must be a timely method to resolve those disputes with finality.

6. Collection - Once a final determination has been reached, and repayment begins, it must be monitored closely to ensure payments are up to date and remain collectible. If there is no cooperation from the employer as to repayment methods, collection remedies with real consequences are required to ensure penalties and benefit reimbursements are collected to the fullest extent possible.

7. Claims - If injured and entitled to benefits, public policy demands that employees in a no-fault workers' compensation system receive the same benefits as those who work for properly insured employers. Adequate management tools are needed to ensure claims and financial status is monitored effectively.

These basic components of an effective mandatory coverage program are in place at the Montana Employment Relations Division. There are some areas where Montana UEF can change or enhance their current processes to take advantage of better practices, thereby improving their operations.

The State of Montana ensures employers comply with the mandatory coverage components of its workers' compensation statute in a manner very similar to other states. The degree to which they match the best practices present in other successful states varies by degree.

The main differences between Montana and the best practices of other states can be summed in general;

1) Most states interviewed rely more on automated matching and predictive methods to identify uninsured employers.

2) Other states have stronger collection results for penalties and reimbursements of benefits.

3) Other states have more effective statutes and rules to prevent abuses by non-complying employers.

4) Other states have more effective and consistent collection tools for ensuring evading employers reimburse a higher percentage of benefits paid to injured workers.

5) Consistent data and measuring of results is more apparent in other states.

6) Funding sources are much more divergent and responsive to program demands than Montana's dependence on penalty and benefit recoveries.

Current penalty and benefit recovery levels have not kept pace with the program expenses for which they are responsible. Without real changes to the policies and practices of the Montana UEF, there is a likelihood that the benefits to injured workers will need to be suspended, staff will need to be reduced, or both.

Montana UEF has well-qualified staff who understand their specific job duties and the need for improving the overall effectiveness of their program. There is general agreement among the staff for needed changes in some areas such as improved training and communication.

The UEF management team is aware of the challenges facing the unit and is committed to ensuring the best practices recommendations are reviewed, prioritized and implemented where possible.