Massachusetts Auto Body Shops Fight for Better Reimbursement Rates
Collision repair industry leaders, along with a row of tow trucks, paraded outside the Massachusetts State House on May 18 to demand action on two proposed bills before lawmakers that would raise the state's lowest-in-the-nation reimbursement rates.
House Bill 1111 and State Bill 709 are an “Act to establish a minimum reimbursement rate to insurance claimants" and are currently being argued in a joint committee.
According to supporters, both bills would set the rate for repair at approximately $78 per hour for reimbursement.
The current reimbursement rate is $40 per hour, which, according to the group, is the lowest in the nation and just $10 more than it was in 1988.
Both bills have until June 30 to clear the committee, after which the legislature would have just a month before the end of the session to approve and send them to Gov. Charlie Baker’s desk.
AASP-MA Executive Director Evangelos “Lucky” Papageorg is excited about the two proposed bills that might actually level the playing field. He offered a little history on House Bill 1111 and State Bill 709.
“In 1988, insurance reform led to the reimbursement rate being at $30 an hour, which made Massachusetts have one of the highest-paid reimbursement rates in the country and best reimbursement rates,” Papageorg said. “But, once the Insurance Reform Act went through, the reimbursement rates actually dropped from $30 to $28 per hour for about five years, based on contractual arrangements that shops had with the insurance companies. Today, they are at $40---35 years later. I wouldn’t call that a jump in rates, to say the least.
“House Bill 1111 and State Bill 709 are essentially identical bills that take away the ability for insurance companies to stagnate the rates in the future, which is what they've effectively done,” Papageorg said. “It allows the insurance industry and body shops to be able to plan ahead as far as what they can anticipate for expenses and income, because the reimbursement rate will keep pace with the consumer pricing index here, with the language in these bills.”
Papageorg has witnessed the results of not providing a livable wage to body technicians, causing many to exit the industry with prejudice, he said.
“One of our members and a top body shop operator, Brian Bernard, has lost several of his top techs to other shops or to the industry altogether," Papageorg said. "He lost several technicians over the last few years to other industries in neighboring states because the surrounding states are paying a higher rate.
"One vocational school teacher told us recently that students get into collision repair because it's cool and they love it. It's exciting. It's constantly changing," Papageorg continued. "But all those things don't pay the bills. The collision repair students don't stay with it, and those who do leave the vocational schools and get into a collision repair shop don't last very long because they can't make a decent living.
Reimbursement rates in Massachusetts have been stuck at $40 for the last 35 years. Photo courtesy of AASP-MA.
"These bills have the potential to rectify a situation. I can’t find any other industry or vocation out there that can say they have only increased their skills by only $10 an hour over the last 35 years," Papageorg said. "Insurance companies are reporting record-breaking profits, and yet they're still applying for increases in their premiums, and some of their top managers have incredible salary packages. Cost containment has to begin at the top.”
Bernard, co-owner of Total Care Accident Repair in Raynham, MA, sees the problem of underpaying technicians causing a whole set of additional issues.
“This should have happened several decades ago, so these bills are much-needed and can provide us with a much-needed boost in many ways,” Bernard said. “The cost of living keeps going up every year, and the insurance companies can tell us with straight faces that these wages are acceptable? What can you say to a young person who is trying to get into this industry and willing to work for inferior pay? It all comes from the fact that the insurers don’t want to compensate us properly for repairs, so we are in this unfortunate situation.”
Former State Sen. Guy Glodis said the insurance companies are going to do everything they can to prevent these bills from passing.
Nearly a decade ago, the collision repair industry in Massachusetts approached Glodis to tell the insurance companies their wages were ridiculously low.
“Everything [collision repairers] told me has happened exactly the way they described it to me in 2003,” he said. “They said workers would leave the state and that it would be difficult to get young people to join the industry. We couldn’t get any traction back then, but now we might be able to break through. It involves educating the legislature about the fact that the insurance industry has been successfully suppressing wages for more than 20 years.”
Elias Akiki, owner of Akiki Auto Body in Hyde Park, MA, appeared on several news stations in the Boston area, speaking about a topic he knows too well.
“The bottom line is that the insurance companies have been taking advantage of the collision repairers and insured consumers since day one,” he said. “They will always try to get away with whatever they can. It ends up creating a bad situation because many shops can’t afford to do an OE repair, and the customer doesn’t know any better. So, they settle for sub-par repairs, and all we’re doing is trying to do the job right.”
Akiki, 47, entered the collision repair industry at 19, working with his father. He has seen the path these bills have taken and is ready for change, he said.
“Back in 1985, we were a completely different company than we are today because the industry has changed so dramatically since then," Akiki said. "Our obligation now is to learn, educate, evolve and do repairs the right way. For us, it’s the only way, but it comes at a cost.”
Spiraling costs have hamstrung many shops, Akiki said, which makes it so much more difficult to make a profit.
“We have more than 10 OE certifications; do you know how much that costs us?" he said. "The training, the diagnostics, aluminum repair---it’s not cheap. We have to pay for all of it at a reimbursement rate of $40? It’s not fair.”
There is always a silver lining in every cloud, Akiki said with a chuckle.
“One good thing is that we don’t have any MSOs here competing with us. They are smart enough to know that they can’t make money in Massachusetts.”