Monday, October 13, 2014

Illinois Workers Comp Rates Down--Premiums, Not So Much

Here's an interesting article from Business Insurance about how Illinois construction companies have not seen a decrease in Workers Comp premiums, even though there have been highly touted reductions in insurance rates in recent years.

This illustrates something I have written about before--just because manual rates go down, it doesn't mean the actual premiums paid by employers do the same. For one thing, this reduction in manual rates has coincided with a change in the NCCI experience modification factor formula. So even as manual rates decline, many employers have seen sharp increases in experience mods that more than offset any rate decreases.

And of course, there are lots of mechanisms for insurers to offset manual rate reductions in other ways, mainly by adjusting the use of Schedule Credit or Debits.  So a decrease in manual rates doesn't translate to an automatic decrease in premiums in the so-called Voluntary Market. And even in the Assigned Risk Plan, the change in the experience mod formula would more than offset the manual rate decrease for many employers.

Something to keep in mind when politicians hype the effectiveness of recent "reforms" in the benefits paid to injured workers.

Friday, October 10, 2014

New Oregon Study Ranks State Workers Comp Cost

The Oregon Department of Consumer and Business Services has released its latest study ranking the relative costliness of Workers Compensation insurance in all the various states.  The 'winner' this year, for most costly state, is California. And in our own experience, not only is California an exceedingly expensive state to buy Workers Compensation insurance, t is also a state where the regulatory and oversight mechanisms seem particularly poor, in terms of the redress and protection provided to employers in disputes over premiums, audits, classifications, and modifiers.

California goes its own way when it comes to Workers Compensation insurance, using its own rating bureau with its own distinctive manual of rules--and the biggest source of WC insurance is the State Compensation Insurance Fund, a state owned and operated WC fund that competes with private insurance. The combination of all these factors, really high premium rates and really crappy regulatory oversight, combined with a particularly high-handed State Fund means that employers in the Golden State have a really, really tough time of it. If you think your Workers Compensation insurance costs are a burden, just thank the business gods that you're not in California--unless you are, which in that case means you're really, really taking it on the chin.

Thursday, October 9, 2014

New York Small Biz Learning Hard Lesson About Group WC Trusts

This is one of those stories that pops up repeatedly, in different states at different times, but never seems to ever go away for long, because various states seem unable to resist the lure of cheaper Workers Comp alternatives without making sure adequate regulatory oversight is in place to avoid disaster down the road.

It's happened here in Illinois in the past, in Kentucky, and in other states that have allowed group self-insurance trusts for Workers Compensation coverage. Without effective oversight, some of these plans inevitably dig themselves into a hole from there is no escape. They underprice coverage, getting business in the short term, but eventually those long-tail WC claims eat them alive.

Then the former members of these trust start getting bills for huge amounts, as they are held responsible for their proportionate share of the huge shortfall of the fund to which they were once a member. It isn't fair, it's a huge and crushing burden to many small businesses, and those who created the problem--lawmakers and those who ran the trusts--typically avoid the painful fallout.

Florida Officials Courageously Target Exploited Workers

...the employers who exploit them, not so much, apparently. And in the process, of course, helps reward employers who hire undocumented laborers.

This article in the Insurance Journal explains that Florida officials have been touting the arrests of undocumented workers who used fake ID to get work (and thus get Workers Comp coverage). Apparently, those workers foolhardy enough to actually make a claim when injured at work were instead arrested.

According to the article, there have been way more cases against such workers than there have been against the employers who benefit from such exploitation. And the beauty of this all is that the system rewards employers who use such desperate workers, because if the injured workers are afraid to file claims when injured, the experience modification factors for these employers will stay low--lower than the modifiers of companies that play by the rules and hire legal workers.

For companies in construction trades in particular, keeping experience modifiers low is an increasingly critical matter--more and more, customers are insisting on experience modifiers at 1.00 or lower in order to even bid on projects. And the new NCCI experience mod formula is pushing a lot of smaller companies over that all-important threshold, with dire consquences.

So nice to know that Florida authorities are focusing their efforts on the poor desperate people who do the dangerous and difficult work, and not the shady employers who take advantage of them (and in the process, gain a huge advantage over honest employers.)