Author: Chris Wilson, Senior Account Executive – McClone
As you may know, certain states require you to purchase workers compensation insurance through their state pool. Likewise, benefits payable to injured employees vary by state. Here are some interesting facts that I came across which show how the rules and regulations for workers compensation vary by state. (*Note: These facts were compiled by the Oregon Department of Consumer and Business Services.)
- Of the 50 states and the District of Columbia, 35 states use NCCI (National Council on Compensation Insurance) to develop their rate structures and calculate experience modification factors; 12 states have independent rating bureaus, and 4 states have monopolistic state-operated funds. (Wisconsin has an independent rating bureau, the Wisconsin Compensation Rating Bureau)
- Forty states allow competitive rating of workers compensation whereby the insurance company can debit or credit the published rates for a particular business based on the forecasted claims activity. (Wisconsin does not allow competitive rating, but insurance companies can offer dividend plans to be more competitive)
- Twenty states (including Wisconsin) have a contracting class premium adjustment.
- Payroll basis differs by state. Payroll above $35,000 in Nevada and $31,800 in North Dakota is not included when developing the premium. Oregon and South Dakota exclude vacation pay from the calculation. Some states use full overtime payroll while others, such as Wisconsin, use only the straight time portion of the pay.
- Twenty-five states factor assessments and taxes into their rates to fund state workers compensation agencies or special funds. Other states charge separate fees and taxes.
- North Dakota and Wyoming, both monopolistic states, offer workers compensation insurance exclusively through a state fund. Ohio and Washington allow either the state fund or self-insurance.
- Competitive state fund states allow employers to choose private insurers, the state fund, or self-insurance. Kentucky, Louisiana, Maryland, Oklahoma, and South Carolina allow the state funds to set their own rates.
Here are a few more interesting facts:
The overall combined loss and expense ratio for workers compensation in 2013 was 101, down from 108 in 2012 and 115 in 2011. Investment gains during the same period averaging 14% have actually made workers compensation insurance profitable for the many insurance carriers whose results were at or below the overall average, according to NCCI’s 2014 State of the Line report.
In Wisconsin, the workers compensation rates change every year effective October 1. In 2015, the overall increase in rate level is 1.24%. Historically, changes for the past 5 years were in 2014 a 3.19% increase, in 2013 a 1.73% decrease; in 2012 a 1.36% decrease; in 2011 a 0.01% decrease, and in 2010 a 3.35% increase.