Businesses worry about new Marshalls worker comp law
by Giff Johnson Marshall Islands Correspondent
MAJURO, Marshall Islands — A new workers compensation law goes into effect Oct. 2 with the requirement that all employers in the Marshall Islands obtain insurance to cover worker injuries and medical care needed as a result of on-the-job injuries. Just days before it is implemented, Saipan-based insurance companies involved in potentially providing insurance for the worker compensation program have pushed back at greatly reduced rates.
Marshall Islands Resort Employees Emi Kattil (left) and Nerissa Kaminaga are shown in the reception area of the Marshall Islands Resort in September 2021. Journal file photoAt the outset of the discussion between the Marshall Islands Social Security Administration, which is overseeing administration of the new law, and the private sector about the law, originally passed in 2019 but not yet implemented, local business leaders pushed back strongly against potentially high insurance rates that many, perhaps most local businesses would have difficulty affording.
One issue with the law is that it was entirely copied and pasted from the Northern Mariana Islands, where U.S. standard healthcare and U.S.-level medical costs prevail.
This led to MISSA engaging Deloitte to do an actuarial study to review the local situation with the aim of providing information that would allow insurance companies to offer lower rates than those charged in U.S. territories, where U.S. laws apply.
The actuary recommended that insurance rates for the Marshall Islands be set at just 40% of Saipan workers compensation insurance rates. Local business leaders say the two primary insurers involved, Firstnet/Moylan’s Insurance Underwriters inc. and Century Insurance Co. Ltd. had initially agreed to this, but days before the law is to go into effect they are saying the rates they will charge will be the same or close to Saipan level costs. According to the new law, the Marshall Islands government can “self-insure” so it is not impacted the way local businesses will be.
“The Chamber of Commerce’s position is that we open up the government self-insurance scheme to the private sector, who would then pay the rates recommended by the actuary into the government fund or choose to buy the private insurance if they want,” said Randy Sylvester, owner of Majuro Computer Services and president of the chamber. “This would also help the currently uninsurable businesses such as the dive operations get coverage for their workers.”
Sylvester said most businesses required by law to buy insurance will find it difficult or impossible to afford U.S. insurance rates.
“Six days until the worker’s comp law goes into effect and the insurers still aren’t budging on rates,” he said the week prior to the October start of the law. “They continue to demand our premiums be the same rates as USA premiums.”
CorpuzMagtanggol "Gol" H. Corpuz, general manager of Century Insurance in Saipan, told MISSA officials earlier this month that the high cost of benefits required under the law does not justify the 40% rate that was proposed earlier.
“Loss ratios in workers compensation normally average 50% and up annually,” Corpuz said. “However, medical expenses - as it is unlimited - can reached as high as 400%. We had one case in CNMI where we paid $4 million purely on medical expenses alone. Considering the limited medical facilities available in RMI, it is likely that more patients will opt for treatment overseas than in the past, which will result in more expensive medical costs. This will push the insurer’s loss ratios up, unless such expenses will be assumed by the Health Fund.”
Corpuz said that in 2022, at the beginning of MISSA discussion on the subject, he “recommended to use the CNMI workers compensation tariff rate as a start for simple reason that Marshall Islands workers compensation law which details benefits are exactly or 100% patterned from CNMI workers compensation law. We can review our underwriting results at the end of two or three years and adjust the rates accordingly thereafter. This will give us time to assess market conditions and do whatever is fair and equitable to all parties including our Insurers.”
But, he said, “For the sake of goodwill, as a start we are agreeable to discount the current CNMI workers compensation tariff by 20% or in short 80% instead of the 40% being proposed. However, this will be subject on the conditions that the Marshall Islands Health Fund issuing a letter to insurance providers with copy to MISSA about their roles in medical expenses, the maximum limits it will put forth (if it is $100,000 per individual, it should be cited in that letter) and the condition that it will not recover such amount from the insurers. We note that incorporating this condition to the current RMI workers compensation law will be much work, but we are supporting this approach if this is workable through RMI legislation.”
All of which leaves Marshall Islands business facing the Oct. 1 deadline for taking out insurance at, what for the Marshall Islands, will be extremely high insurance rates as they are at a U.S. level. mbj
