Ohio Workers’ Compensation

When the BWC switched from the old tabular system to the new MIRA reserving system, the intent was to be revenue neutral.  However, based on a review of thousands of claims from the 2002 through 2007 it appears the switch to MIRA reserving had a far more significant impact on public employers than on private employers. 

From 2002-2004, the BWC calculated reserves for private employers using both reserving methods.  For our sample, the average MIRA reserve was 8.4% higher than the tabular reserves.  From 2005, the BWC just used the MIRA reserving system.  The MIRA reserves from our sample for 2005-2007 was 7.77% higher than the MIRA reserves from 2002-2004.  Assuming the tabular reserves would have remained constant, the average increase in MIRA reserves over tabular reserves from 2005-2007 was 17.53%.

For public employers, the MIRA transition period was from 2003-2005.  During this period, the average MIRA reserve was 58.59% higher than the average tabular reserve.  For 2006-2007, the average MIRA reserve was about the same as it was from 2003-2005.  Therefore, the impact of the MIRA reserving system was more than 3 times as great for public employers than for private employers.

The reason for this is almost solely due to the reserves set for percent permanent partial (%PP) claims and the fact the public employees are much more likely to file %PP claims than private employees.  About 6% of all private claims are coded as a %PP claim, while almost 16% of all public claims are coded as %PP. 

The result of this is quite significant because the average MIRA reserve for %PP claims exceeds $14,000, while the tabular reserves average less than $4,000.  The combined factors of more %PP claims and a much higher average MIRA reserve on those claims resulted in a much greater reserve burden for public employers versus private employers.  The impact of just the MIRA reserving resulted in between an 8%-10% increase in premium for public employers since 2006.  The premium increase for private employers is around 2%-3%.

Next I’ll look to see if the switch from tabular to MIRA created a more accurate reserving system justifying the increase in reserves, especially for %PP claims.

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Workers’ Compensation fraud could be a significant contributor not only for the employer but to the nation’s annual insurance.  

• Claimant can never be reached at home
• Tips from Co-Workers
• Injury Description is not consistant with normal job duties
• No Witnesses to the accident
• Date, time, and place of injury is unknown
• Company layoffs
• Early Retirement
• Same attorney or physician who handled previous claims
• Claimant refuses diagnostic procedures
• Summer vacation plans. Hunting or Hobby seasons
• Claimant making company complaints
• Claimant moving out of state
• Cross out, White out, and erasure marks

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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.

(Continued)

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While the Ohio BWC figures out how and when they will introduce their reductions in group-rating savings and participation, here are a few “Do’s” and “Don’t” that may prove more important than ever:

1. Do: Shop around for the best group program for your company.  In 2007, nearly 50 different employer associations (trade groups and chambers of commerce) offered a group-rating program.  Look for a complete list on the BWC’s website.
2. Don’t: Rush into a decision or be led to believe that you must re-commit to your current program before its necessary.  All commercial business group-rating plans are filed with the state on or near the last business day of February prior to the start of the plan year July 1st.  Likewise, don’t remit payment for terms beyond the start of the next plan year until you are certain that you want to renew with your group.
3. Do: Your homework.  Before committing to a different plan, require the administrator to supply the past few year’s projected savings and actual results.  If you find differences greater than 5-7% of the projections, you may want to steer clear.
4. Don’t: Accept a savings projection unless it comes from the sponsoring group’s own administrator.  More than ever, employer associations and websites are started simply to broker access to registered groups.  Be sure you are dealing with the company that is assembling the entire employers group you are considering.
5. Do: Share your successes with your prospective administrators.  If you want the best possible offer, make sure those quoting you know of all recent settlements, handicap reimbursements and cost savings judgments from the BWC.
6. Don’t: Lose sight of the premiums that you would pay BWC if group-rating was not available to you.  Too often employers become accustomed to paying a low amount for workers’ comp insurance and are shocked at the increase when a claim or two enters your claims cost history resulting in disqualification from any group offering.    The competitive nature of group-rating with its multiple tiers of discounts and the commodity-like view of comparing one offer to another has led to no room for error. 

If you haven’t already completed your applications, now is the time to do so.  The Temporary Authorization to Review Information form, or AC-3, is the official BWC document for releasing claim, rating and payroll history to prospecting firms.  While the application process can be a fast paced exercise, the results should be deliberate.  Any savings projections received prior to November 1st should be closely scrutinized.  Third quarter claims data is typically published by the third week in October and will be the basis for a group’s eligible prospects.  Know that fourth quarter data will ultimately determine an employer’s eligibility, and all group plans reserve the right to add or eliminate employers based on these final sets of claims data.

For more information on the group-rating process and how to protect your company from misleading offers, contact Jim Mocho at (216) 520-6377.  

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There are many changes presently being considered by the Ohio Bureau of Workers’ Compensation (BWC).  Perhaps the most impacting for Ohio employers are the changes being discussed regarding private employer group rating programs.

If you are presently in a group rating program receiving the maximum 90% discount and assuming you continue to qualify for group rating, you may find the maximum discount reduced to 85% or even lower. 

What might this mean in terms of dollars and cents? 

Let us assume your undiscounted premium is $5,000.  A 90% discount would result in paid premiums of $500.  An 85% discount would result in paid premiums of $750 or a 50% increase in premium. 

There is strong consideration being given to reducing the maximum discount to around 65% in possibly a few years or less. 

An employer who was receiving a 90% discount and a premium of $500 would now pay $1,750 or a 350% increase in premiums.

Another change the BWC is considering is to require employers who ordinarily would be removed from group rating because of higher claim costs to stay in the group program for possibly up to three years.  This change would cause all other members of the group program to absorb the increased costs of those employers required to stay in the group.  Presently there are approximately 100,000 Ohio employers in group rating programs.  It is my opinion that over time fewer employers will qualify for group rating or will explore other funding arrangements such as retrospective rating or self insurance in order to keep costs suppressed and avoid the volatility associated with group rating.

No matter what final decisions the BWC makes, two things remain constant regarding controlling workers’ compensation costs.  Safety programs must be in place to avoid injuries and proactive claims management strategies must be employed.  Ensuring these components are in place puts your organization in the best position to control costs.

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