As a special commission prepares to hold its first public hearing Tuesday morning on auto body labor rates paid by insurers in Massachusetts, the executive director of the Alliance of Automotive Service Providers of Massachusetts is vowing to press for legislative action around the issue.
Evangelos “Lucky” Papageorg told Repairer Driven News that “nothing has got better” since an identical commission held hearings and presented its findings and recommendations in 2008. “Nothing ended according to those findings. And i believe when you observe the hearing , you’re likely to hear that in a resounding fashion.”
“The truth that it had been clear in LRSC report recommendations in 2008 that unless the insurance coverage industry did something to address the issue of labor reimbursement on its own after managed care was implemented , the Legislature must part of and do something. And also, since 2008, which has not happened,” Papageorg said.
The special commission’s hearing is going to be conducted remotely at 11 a.m. Eastern on Jan. 25, and will also be live streamed via a link on the state Legislature’s website.
Those with legislative action explain the “prevailing rate” of approximately $40 an hour or so used by insurers in Massachusetts in settling claims is definitely the cheapest in america. That rate has not risen to help keep pace with rising costs to operate a collision business in over 30 years.
Papageorg said the labor rate issue has been “constantly getting kicked in the future,” and that even the development of the current commission as part of the state’s budget process “might be construed as a way to slow roll and stall the issue.”
“Many have voiced the opinion that it’s just another way of delaying and making more bureaucratic action without change in the end. And that’s something which myself and also the other members from the commission which have been appointed now are very focused on not letting happen. We’re bound to help keep the pressure on.”
Bills under consideration
The Legislature has had up numerous bills to deal with the issue. One of these simple, H 1111, proposed by state Rep. James Hawkins, would require insurers to use a minimum rate comparable to the rate at that time the Insurance Reform Act passed in 1988, adjusted for that consumer price index. The speed would then be adjusted each year in line with the Bureau at work Statistics' Northeast Consumer Price Index, which covers Massachusetts.
“We believe that House Bill 1111 is a long-term means to fix an issue that’s gone completely back to 1988,” Papageorg said.
The Joint Committee on Financial Services held a hearing on H 1111 on Sept. 15, 2022. In that hearing, supporters told legislators that Massachusetts auto body repair shops and consumers alike are suffering from insurers' failure to pay a higher hourly rate for labor.
Some insurance industry officials who testified at that hearing did not deny that the issue must be addressed, but all urged lawmakers not to impose “price fixing,” which they argued would inevitably lead to higher prices for consumers.
The 14-member commission, established as part of the 2022 Massachusetts budget, includes three people in the car insurance industry, three members of the car repairer industry, people in the state House and Senate and representatives of the state’s governor, insurance commissioner and attorney general.
The commission’s work includes an analysis of auto body rates paid in the state, together with a comparison with surrounding states; an analysis of the impact of “managed competition” within the insurance market around the rates; and an assessment of whether rates paid by insurers are “reasonable.” If the minute rates are not discovered to be reasonable, the commission is to evaluate potential methods of calculating an acceptable rate.
The commission can also be to report on the amount of auto body shops functioning in Massachusetts every year from 2008 to the present, such as the number that have closed in that time, and to analyze the outcome of labor rates on the auto body labor workforce.
At least two public hearings are required, and the commission would be to report on their behavior to the Joint Committee on Financial Services in July. The deadline had originally been Dec. 31, 2022, but continues to be moved to give the commission additional time to do its work.
During an introductory meeting of the special commission held remotely on Dec. 15, co-chairs state Sen. Brendan P. Crighton assuring Rep. James M. Murphy promised to work toward a study that will result in action.
“Our intention here's to have this be considered a commission that comes up with real recommendations and action items that we are able to take as quickly as possible,” Crighton said.
Murphy proposed that members consider making visits to auto body repair centers and vocational technical schools, to obtain first-hand knowledge about the issue.
Commission member Jack Lamborghini of of Total Care Accident Repair in Raynham, Mass., spoke from the urgency from the issues involved.
“We've technicians fleeing to go to work and the body shops in adjacent states because the labor rates are higher. We can’t pay for training. We can’t purchase equipment, but technology is changing almost day to day,” Lamborghini said.
“The truth is the collision repair industry is in considerable trouble when it comes to attempting to maintain itself moving forward and providing the consumer with safe, quality repairs,” he explained.
“The insurance industry, you know, has ignored the labor issue,” Lamborghini said. “Right now, the entire collision repair industry is dying for technicians … because there’s been 30 years of suppression from the labor rate and people have vacated the and new people aren’t entering the. And it’s just gotten more horrific by the day.”
Papageorg told RDN that a part of AASP-MA’s approach to getting legislation passed will be to educate the public about the effects of low labor rates on consumers and the collision repair industry.
“We have to ensure that consumers comprehend the ramifications brought on by an insufficient reimbursement rate versus the potential minimal rise in premium dollars to make sure their rights to chose a repair facility and give them peace of mind regarding their repairs is insignificant in comparison,” he said.
“Yes, they may be saving a few bucks on their policies, since the insurance companies have been able to artificially suppress the labor rate for thus a long time with the referral and contract programs. They must understand that in the long run those minimal savings happen to be to their detriment.”
“The insurance coverage industry has got the consumer brainwashed that collision repairers are just worth on average $40 dollars an hour or so,” he said. “All you have to do is get out there and attempt to get your snow thrower fixed for $40 an hour or so, or get a plumber or perhaps an electrician. The truth is that when it's stated to a vehicle owner that they're only being reimbursed in an average of $40 each hour, they are shocked. They know what they pay for mechanical work per hour or any other similar work, and that typically $40 within Massachusetts is absurd .”
“We’re just gonna have to keep raising it and raising [this issue] and raising it until our legislature realizes that we as an industry have been totally and completely unfairly treated and that it would be to the detriment from the consumer in the long run. Artificially keeping premiums from potentially going up a minimal amount is really a travesty. It's unconscionable to do so underneath the guise of enhancing the consumer, especially after the insurance industry has reported a banner year for profits.”
Written testimony might be listed in the commission via email to [email protected]
Report of the 2008 commission
The following were the advice of the previous commission, spelled out in its Dec. 30, 2008 report: