Ohio Employers Split Over Group Rating Issue
Posted by Douglas Maser - Monday, November 19, 2007
On Wednesday, November 14th, a first in BWC history took place in the BWC’s auditorium in Columbus, Ohio. For over three hours, sixty (60) employers and trade association representatives appeared before the members of the BWC Board of Directors’ Actuary Committee to offer public comment and input to the members of the Board in attendance. One Hundred Fifteen (115) additional witnesses submitted written testimony only. The Committee had requested public testimony in response to the BWC Administrator’s proposal to decrease the maximum available credibility discount to employers in the Ohio group rating program from 90% to 80%. BWC alleges group-rated companies are actuarially being subsidized by non-group-rated companies by an estimated $200 million a year. At the September board meeting, at the request of the Administrator, the Board had referred the matter to the Actuary Committee for study and to recommend a maximum discount percentage.
For the first time since the late 1980’s, the Ohio employer community is divided over an issue regarding governance by the BWC of the state fund. This division was reflected by the testimony of individual employers and trade association representatives. Two different groups of witnesses with different agendas converged on the BWC to offer testimony. Over half of the total witnesses appearing were employers who had enjoyed group rating discounts, but within the last two years had not qualified due to extraordinary claims losses. Their complaints almost uniformly focused on the resulting increases in premium and the inability to understand the BWC’s reserving of their claims. They generally supported the BWC’s stated goals to lower all employers’ base rates by 4%, which would in turn lower their premiums, but to also raise the premiums paid by group members to more closely mirror what they were now paying. However, many of these same witnesses expressed a wish to be back in group to enjoy the lower premiums again. Of particular interest was the testimony that revealed that BWC had actively recruited and encouraged them to appear before the Committee tell their stories.
Joining with these employers and offering support for the BWC Administration proposal were two trade association group rating sponsors, the Ohio Manufacturing Association (OMA) and the Council of Smaller Enterprises (COSE). The OMA urged the BWC Board to act with a sense of urgency to reduce marketplace confusion, to lower the maximum credibility to 80%, and to communicate frequently with employers regarding BWC’s changes to the group rating program. See the OMA’s website for more information. COSE joined the OMA in recommending that the Board act favorably and quickly on the Administration’s proposal, but did not recommend a specific percentage of reduction for the maximum discount. See COSE’s website for more information. Both organizations believe non-group rated employers are subsidizing employer premiums of group rated employers and that the BWC’s recommendations will lead to premium parity.
The second significant group of witnesses included group rating sponsoring trade associations opposing the credibility reduction. Trade association leaders testified that the proposed premium increase resulting from the reduction of the maximum available credibility discount would be extremely harmful to their members and Ohio business in general. Several association heads suggested their members could sustain premium increases of up to 100% of current levels if the BWC’s proposal was accepted.
After considering the public testimony and further discussion amongst the Board members present, the Committee voted to recommend a reduction in the maximum available credibility discount to 87%. This recommendation will go forward to the Board of Directors for their action at the regularly scheduled meeting of Wednesday, November 21, 2007.
Steve Chmielewski wrote:
There were two other groups that had slightly different points. Large credit rated employers stand to have their premium increased if the BWC reduces the maximum credibility. For example, rather than receiving a 50% discount, a large fully credible employer would receive only a 40% credit. Two employers raised this issue. Their basic take was that if the credibility percents are to be reduced, they should only be reduced for groups, not individual employers.
There was also a representative from a public group. They opposed the reduction in max credibility for the same reason most of the private group representatives did, that it would increase premium. The actuarial analyses showing a subsidy from non-grouped employers to grouped employers did not conclude that a similar subsidy was being paid by non-grouped public employers. Public employers are very distinct as a group from private employers and the analysis performed on one group does not necessarily hold for the other.
Posted on 20-Nov-07 at 2:51 pm | Permalink