Opinion ID: 2051450
Heading Depth: 1
Heading Rank: 2

Heading: AIM's Appeal from 1979 Decision.

Text: AIM raises two issues before this court in its complaint for review of the commissioner's 1979 decision. First, it challenges the commissioner's failure to provide a full public hearing prior to his December 31, 1979, approval of rates proposed by the bureau in a filing made following the commissioner's November 6, 1979, disapproval of the bureau's earlier filing. Second, it challenges the commissioner's allowance of the unlimited payroll liability exposure base program. The bureau and the commissioner raise several procedural grounds for dismissing AIM's claim for review. We conclude that none of these procedural arguments prevents us from reaching the merits of AIM's complaint for review as to the two issues before us. [6] We deny their joint motion to dismiss AIM's complaint. AIM's first argument proposes that we overrule our conclusion in Associated Indus. v. Commissioner of Ins., 356 Mass. 279, 284, 286 (1969), and deem the approval of rates under G.L.c. 152, § 52, regulations or adjudicatory proceedings under G.L.c. 30A. In Associated Indus. v. Commissioner of Ins., supra , we held that such approval involves neither a regulation nor an adjudicatory proceeding within the meaning of G.L.c. 30A. AIM presents no argument which warrants reversal of our earlier decision. AIM's second argument challenges the unlimited payroll liability exposure base program (unlimited payroll program). In his December 31, 1979, decision approving a rate filing to be effective January 1, 1980, the commissioner approved the introduction of unlimited payrolls as the measurement of exposure to which the manual rates are applied. The unlimited payroll program for workmen's compensation insurance premiums is a modification of the payroll-based exposure used to set premiums prior to 1980. Prior to the commissioner's December, 1979, order, insurance premiums were calculated by applying the prevailing rate for a risk category to the number of payroll units covered by a policy. Each payroll unit was $100 of weekly wages, but no more than three payroll units, $300 of weekly wages, could be attributed to an individual employee in setting premiums. Accordingly, an employer's workmen's compensation insurance rate exposure was limited to $300 of weekly wages per employee. The unlimited payroll program changed this system. While it retained payroll as the base of exposure, it removed the $300 per employee cap for determining premiums. The rates for manual risk calculations were then adjusted so that the total premiums collected by insurers remained approximately the same as under the limited payroll exposure base system. According to the commissioner's November 6, 1979, decision, this change in methodology was to simplify payroll auditing procedures, to bring Massachusetts in line with the other 45 states who have adopted the program and to permit a more accurate measurement of risk and a more equitable distribution of premiums among risks. He observed in his December, 1979, decision that the unlimited payroll program had been thoroughly scrutinized and discussed in detail at the public hearing held July 23, 1979 through July 27, 1979. AIM argues that the unlimited payroll program is unfairly discriminatory under G.L.c. 152, § 52, and its adoption violates the due process and equal protection provisions of the Massachusetts and United States Constitutions. At bottom, AIM's challenge to the unlimited payroll program rests on the position that under this system employers paying higher wages than other employers for the same work will be charged higher premiums, while their employees may not receive any greater benefits than employees of lower paying employers. According to AIM, this situation arises because workmen's compensation weekly indemnification benefits for total incapacity are regulated by statute: [w]hile the incapacity for work resulting from the injury is total, the insurer shall pay the injured employee a weekly compensation equal to two-thirds of his average weekly wages, but not more than the average weekly wage in the commonwealth.... G.L.c. 152, § 34, as appearing in St. 1981, c. 572, § 1. AIM asserts that two employees performing the same job will receive the same benefits in the event of injury, even though two-thirds of one's salary equals the average weekly wage, while two-thirds of the other's is higher than that, and even though one's employer pays higher workmen's compensation premiums than the other. AIM argues the commissioner erred in approving an exposure base which could lead to such results. We disagree with AIM and uphold the commissioner's rulings. To review whether the commissioner acted properly under G.L.c. 152, § 52, in allowing the unlimited payroll program, we must focus on whether the program leads to unfairly discriminatory rates. As AIM correctly admits, rates are permissible even if discriminatory, so long as they are not unfairly discriminatory. See Century Cab Inc. v. Commissioner of Ins., 327 Mass. 652, 664 (1951). Here AIM does not argue that the risk classifications in the rates are unfairly discriminatory, nor does it assert that the unlimited payroll program itself sets up arbitrary classifications. Rather, it asserts that the unlimited payroll program produces results which in fact are unfairly discriminatory when combined with two factors external to the program: the statutory weekly dollar limit on workmen's compensation total disability benefits, and a disparity in wages received by persons within the same risk classifications. If either of these factors were not present, AIM's allegation of unfair discrimination would be unfounded because there would be, respectively, no equality of benefits for different premium charges, or no employers paying disparate premiums for the same coverage of similarly situated employees. The commissioner's approval of the unlimited payroll program as not leading to unfairly discriminatory results has reasonable support in the evidence. The bureau presented evidence that the existing limited payroll exposure system was not well suited to wage and benefit inflation. Moreover, AIM's expert witness, Dr. Lena Chang, stated as follows: It appears that as inflation goes down and that as the statewide average weekly wage increases from year to year there will be higher and higher disparities using the $300 limitation. Dr. Chang acknowledged that some upward adjustment in the $300 payroll exposure limitation would be necessary to keep pace with increases in the average weekly wage. She then admitted that adjusting the payroll exposure limitation every year according to the inflation factor would not be reasonable. The bureau also provided evidence that its proposed methods of implementing the unlimited payroll program would not increase total premiums collected, because offset factors would be applied to adjust rates for risk classifications. Finally, the bureau presented evidence that the unlimited payroll program would simplify payroll auditing procedures and bring Massachusetts in line with the majority of other States. The commissioner was warranted in concluding AIM failed to present sufficient evidence that the unlimited payroll program would lead to unfairly discriminatory rates. First, the bureau presented evidence that, in workmen's compensation, partial disability indemnity benefits may allow workers earning more than 1.5 times the average weekly wage to collect larger benefits than workers earning less. AIM presented no contradictory evidence. Accordingly, a worker earning more than $300 a week could collect more benefits than someone earning less. Under the $300 limit, however, the extra earnings allowing higher benefits presumably would not be included in the premium calculation. Therefore, charging higher premiums for higher paid workers could reasonably be found by the commissioner to be related to this risk. Second, AIM presented no documented evidence establishing that individuals within the same risk classification are employed at such disparate wages that employers of similarly situated employees pay premiums which vary independently of job risk and policy benefit levels. Finally, the commissioner could fairly conclude that AIM's alternative method of adjusting the exposure base is as open to charges of unfair discrimination as is the unlimited payroll program. AIM suggested at the hearing that increasing the cap on payroll exposure units, above $300, will include a larger percentage of total payroll than that covered by the existing cap. It argues this would obviate the need for the unlimited payroll program in keeping pace with wage inflation. Nonetheless, the commissioner reasonably could have concluded that the alleged unfair discrimination based on disparate wages within risk classifications challenged by AIM under the unlimited payroll program would apply here as well. Workers in the same risk classification may receive the same benefit levels while their employers are paying varying premium rates due to different wage scales. Such a situation arguably could arise anytime the average State weekly wage is less than two-thirds of the payroll exposure cap and employers pay more than 1.5 times the average weekly wage. We find equally little merit in AIM's contention that the unlimited payroll program, for the same reasons it violates G.L.c. 152, § 52, violates due process and equal protection provisions of the Massachusetts and Federal Constitutions. In considering such constitutional claims, we conduct an independent review of the facts and law in question. Massachusetts Auto. Rating & Accident Prevention Bureau v. Commissioner of Ins., 384 Mass. 333, 346 (1981). AIM asserts that it would be hard to argue that a finding of `unfair discrimination' is anything less than a denial of the `equal protection of the laws' under the state and federal Constitutions. We need express no opinion about this position as, on an independent review of facts and law before us, we find the unlimited payroll program not unfairly discriminatory.