Uninsured Employers Fund warns insolvency risk; director urges penalty hikes and assessment reallocation

The subcommittee received companion briefings on the Subsequent Injury Fund (SIF) and the Uninsured Employers Fund (UEF), two special funds tied to workers' compensation collections.

SIF: DLS and director report
DLS analyst said the fiscal 2025 SIF allowance increases to about $3.1 million (about an 8% rise) and that the fund's balance grew 6.4% in FY23. Exhibit data and an actuarial study (Jan 2022) led the analyst to conclude that the current 6.5% assessment mechanism supports SIF's mission for the near term. Edgar Dodd, SIF director, reiterated the actuary's conclusion and requested a positive committee report on the governor's recommendation.

UEF: fund pressure, penalties and proposed responses
DLS presented UEF's FY25 allowance at $6.0 million (7.6% increase) and noted a declining fund balance driven by fewer assessment revenues and higher operating costs. The largest operating cost increase is the third-party administrator (CorVel) contract. DLS recommended restricting $150,000 of UEF's administrative budget until repeat audit findings are resolved.

UEF Director Michael Burns described the fund's vulnerability to catastrophic cases and argued Maryland's existing maximum penalty for failing to carry workers' compensation insurance (currently $10,000 statutory maximum, average penalties historically near $7,000) is too low to deter bad actors. Burns supported raising the maximum (SB 216) to as much as $25,000 (the parties later agreed to language setting the fine at up to $25,000 rather than mandatory), and urged a cross-agency work group to consider reallocating assessment shares between SIF and UEF so that UEF receives additional assessment revenue. Burns said the SIF balance is sizable and that modest reallocation could stabilize UEF without harming insurers.

Why this matters
UEF provides coverage for workers injured on the job when their employers lack required workers' compensation insurance. Insolvency risk at UEF would shift costs to injured workers and to taxpayers. The SIF covers worsened preexisting conditions; its stability contrasts with UEF's strain and frames the work group discussion about assessment allocation and penalty enforcement.

Committee follow-up
Members asked for more data on penalty collection, repeat offenders and how other states enforce penalties (including authority to close noncompliant businesses). Directors agreed to provide more information and participate in a working group. DLS recommended continuing to monitor contract costs (CorVel rebid this summer) and unresolved audit findings.

Ending
The subcommittee closed the hearing after hearing both funds, encouraged prompt interagency work on penalties and assessments, and scheduled additional budgets for the next day.