Michael W. Burns, director of the Maryland Uninsured Employers Fund, told the Senate Finance Committee on Jan. 15 that the fund is facing a near-term financing shortfall and urged lawmakers to raise the optional assessment that helps finance the agency.

“We are a payer of last resort,” Burns said, explaining the UEF covers injured workers whose employers lack workers’ compensation insurance. He told the committee the fund’s revenue has fallen in the last two fiscal years and that the fund has lost about $2.7 million in assessment revenue during that period. Burns said the drop left the agency with a reduced reserve and that the established 1+1 assessment mechanism from 1983 is no longer sufficient.

Why it matters: The UEF pays medical benefits and wage supplements to injured workers when an employer has no insurance. Committee members and the Workers' Compensation Commission said a failure of the fund would affect a small number of workers but be catastrophic for those families.

Burns recommended the legislature consider Senate Bill 219 — the administration-backed bill that would allow the board to raise the optional assessment one additional percentage point — and described a possible path: temporarily increase the assessment to 3 percent for a year or two, evaluate incoming revenue, and then lower it to 2 percent if the fund stabilizes. He said the measure could generate roughly $3 million to $4 million depending on assessment activity.

The chair of the Maryland Workers' Compensation Commission, Maureen Quinn, told the committee she and her staff saw the situation as an urgent short-term crisis. "The fund balance was only 5,300,000," Quinn said, noting that figure limits the agency’s ability to pay salaries, medical bills and benefits. She recommended appointment of an independent monitor to track monthly data, vet loss-run reports and verify reserve calculations while reforms proceed.

Key proposals and points of contention discussed at the briefing

- Raise assessment: Burns and some work-group members support raising the optional assessment (the statutory mechanism often described as “1+1”) to provide immediate revenue. Burns described a short-term 3 percent surge, then returning to a lower steady rate.

- Split increase with SIF: Several members discussed a compromise shifting some percentage from the Subsequent Injury Fund (SIF) to the UEF (for example, moving half a percentage point from the SIF while adding a half-point to the UEF). Burns and Quinn said the SIF has a much larger balance and could likely absorb a small reallocation; SIF representatives have opposed such shifts.

- Collections and penalties: Burns described collection problems with the state Central Collections Unit (CCU), saying the UEF currently has about $60 million recorded at the CCU but the unit averages roughly $5,000 per month in collections on that debt. Burns and Quinn discussed using private collection contractors or amending statute to allow the UEF to convert civil penalties into judgments more readily; both said improved collections could materially help the fund.

- Penalty enforcement and usage: Burns noted last year’s statutory increase in the maximum penalty for uninsured employers—from $10,000 to $25,000—took effect July 1, but the UEF had not received penalties over $10,000 yet. The committee discussed redirecting some civil penalty revenue from the general fund to the UEF as a possible revenue source.

- TPA vs. in-house claims handling: Burns argued against bringing claims administration in-house, saying contracting with a professional third-party administrator (TPA) — currently CorVel under an emergency procurement and most recent contract — has been ‘‘the single best thing’’ for UEF operations. He warned that eliminating the TPA could disrupt the fund’s administration. Quinn and legislative staff, however, said oversight of the TPA contract and clearer data were prerequisites to approving additional assessments.

- Data and oversight: Quinn said the work group received inconsistent loss-run reports (one report showed 350 claims; another showed 628). She called for a monitor to validate claims counts, reserve calculations and contract performance. Quinn offered that a monitor could be a retired industry professional, funded by the UEF, and report monthly to the legislature.

Quantitative and operational details discussed

- Reported fund balance: Maureen Quinn said the UEF fund balance was about $5,300,000 (quoted figure provided to the work group).

- Recent revenue loss: Michael Burns said assessment revenue from Workers’ Compensation Commission awards was “abnormally low” over the past two fiscal years, a shortfall he estimated at about $2.7 million and a corresponding fund decline of roughly $3 million.

- CorVel/TPO costs and staffing: Burns and staff reported the new CorVel administrative contract is priced at about $1,680,000 per year for administrative costs. Committee discussion suggested on-site staffing of about eight to nine employees, while Burns said duplicating CorVel’s broader services in-house could require roughly a dozen staff and higher salary costs; a cited midrange figure to hire comparable staff was about $125,000 per position.

- Statutory provisions cited: speakers cited several Labor & Employment code sections discussed in the report, including the provision that directs collection to stop when the UEF assessment balance reaches certain statutory thresholds and other statutes authorizing fines and judgments (statute citations discussed in the briefing: Labor & Employment §9-1011, §9-1007, §9-1005 and §9-407; committee staff or counsel should be consulted for exact statutory wording and codification).

What the committee did not decide

No formal vote or binding action was recorded during the briefing. The committee received the UEF and Workers' Compensation Commission reports, heard questions from members and left options on the table: (1) a temporary increase in the assessment, (2) partial reallocation of percentages from the SIF, (3) appointment of an independent monitor, (4) collection improvements including private collection contractors or statutory changes to permit more aggressive conversion of penalties to judgments, and (5) retaining the TPA rather than moving claims administration in-house.

Direct quotes (selected)

- Michael W. Burns, director, Maryland Uninsured Employers Fund: "We are a payer of last resort."

- Michael W. Burns: "We have $60,000,000 at the CCU. They are the collection agency for the state and they average about $5,000 a month."

- Maureen Quinn, chair, Maryland Workers' Compensation Commission: "The fund balance was only 5,300,000. That's all the money they had left to pay salaries and medical bills and injured workers benefits."

- Senator Kramer (questioning): "Do you think if we were to shift that half percent from SIF ... do you think that would be advantageous and help stabilize?"

Outlook and next steps

Committee members signaled interest in short-term fixes that include modest revenue increases but repeatedly asked for clearer, validated data and stronger oversight before authorizing permanent changes. The Workers' Compensation Commission recommended a one-year monitor to produce monthly reports; the UEF director supported increased assessments as a viable short-term remedy while urging oversight of collection and administrative spending.

Ending: The committee concluded the briefing without votes and left the policy choices for later deliberation during the legislative session.