Mass. Top Court Orders Insurance Commissioner to Explain 14.6% Workers’ Comp Rate Cut

Case File

Although the Massachusetts insurance commissioner was entitled to depart from WCRIB's ratemaking methodology, he failed to adequately explain how he arrived at a 14.6% rate decrease.

Case

Workers' Compensation Rating and Inspection Bureau v. Commissioner of Insurance, No. SJC-13807 (Mass. 07/06/26)

What Happened?

The Massachusetts Workers' Compensation Rating and Inspection Bureau is a licensed rating organization that is required to file classifications of risks and premiums at least every two years and "on any additional date that the commissioner ... may designate."

The state's insurance commissioner is required to conduct a hearing to determine whether the classifications and rates are not "excessive, inadequate, or unfairly discriminatory for the risks to which they respectively apply and that they fall within a range of reasonableness."

On Dec. 22, 2023, WCRIB submitted its "General Revision of Workers' Compensation Insurance Rates and Rating Values," proposing rates to be effective July 1, 2024. WCRIB initially proposed a statewide decrease in average rates of 8.3%, which it later changed to 7.6%.

The attorney general challenged several aspects of WCRIB's filing and recommended a rate decrease of 17.5%. The state rating bureau also challenged several aspects of WCRIB's filing but did not recommend a specific rate decrease.

Ultimately, the commissioner disapproved WCRIB's filing and ordered a statewide decrease in average workers' compensation insurance rates of 14.6%.

For the following year, on Nov. 15, 2024, WCRIB submitted its "General Revision of Workers' Compensation Insurance Rates and Rating Values," to be effective July 1, 2025. WCRIB proposed a statewide increase in average rates of 7.1%.

The attorney general and SRB each submitted advisory filings, with the attorney general recommending a rate decrease of 6.2% and the SRB simply recommending a rate decrease.

The commissioner disapproved of WCRIB's filing but concluded that no party had presented convincing evidence that the current rate was excessive and therefor declined to order an increase, leaving the rate that went into effect July 1, 2024, intact.

WCRIB sought review of both decisions in court. The trial court sided with the commissioner, prompting WCRIB to appeal to the Massachusetts Supreme Judicial Court.

Rule of Law

The commissioner may disapprove rates or withdraw his approval only if rates are inadequate, excessive, or unfairly discriminatory. If the commissioner disapproves a proposed rate, he must state his reasons for disapproval. When exercising ratemaking authority, the commissioner must provide a reasoned explanation sufficient to permit judicial review of how the evidence supports the resulting rate determination.

What the Massachusetts Supreme Judicial Court Said

Although the court accepted several of the commissioner's departures from WCRIB's assumptions and methodology, it could not determine from the decision how those adjustments translated into the final 14.6% decrease.

While the commissioner's findings had "reasonable support in the evidence," the Massachusetts Supreme Judicial Court found that what was missing was "any reasoned explanation" as to how the commissioner determined in the 2024 decision that a 14.6% decrease in rates was warranted.

Specifically, the court upheld the commissioner's use of two years of data instead of the five years WCRIB turned to as being consistent with past practice. However, in looking at the 14.6% decrease, the court found no evidence of how the commissioner reached that figure.

"As our high school mathematics teachers reminded us: you need to show your work," the court wrote. "That is true for the commissioner's calculations as well."

According to the court, the commissioner must provide a reasoned explanation of as to how he determined that the 14.6% decrease in rates fell within a range of reasonableness.

Verdict: The Massachusetts Supreme Judicial Court upheld the commissioner's authority to reject WCRIB's proposed methodology and agreed that the record supported a finding that rates were excessive. However, it remanded the matter because the commissioner failed to adequately explain how he calculated the specific 14.6% rate reduction.

Takeaway

The Massachusetts Supreme Judicial Court reinforced that workers' compensation ratemaking decisions must be transparent and explainable. The insurance commissioner may reject a proposed methodology and select a different approach, but the commissioner must articulate how the evidence supports the specific rate ultimately adopted. In short, agency discretion does not eliminate the obligation to "show the work" behind the decision.

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