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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It is hard to believe that 2007 is nearing the end.  Fall is right around the corner, the weather changing, leaves falling from the trees and yes, your yearly review of your claims experience that will make up your 2008 rates.  Unfortunately, there are few things that can be done to improve what has already happened but there are a few things to keep in mind. 

1. Settle claims – this various from claim to claim. Claims must be filed with the Bureau of Workers’ Compensation by 11-15 to impact the next year’s ratings.
2. Handicap reimbursement – impacts lost time claims that had wage continuation or TT paid out. A claim review should be completed to see if any of your lost time claims meet the BWC criteria (25 recognized conditions).
3. Review MIRA reserves – there is occasion where the BWC will set reserves in error. There should be a thorough review of your risk so that this does not occur.  If reserves are set in error – this can be corrected!

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