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Missouri “pool” businesses should reportedly save $3 million from 3.7 percent workers’ compensation rate cut
The private insurer running Missouri’s workers’ “pool” for high-risk businesses has filed an average rate cut of 3.7 percent, effective for policies issued after June 30, Missouri Department of Insurance (MDI) Director Scott Lakin said.
The rate reduction should save the 7,500 Missouri businesses in the pool about $3 million a year overall.
The pool issues workers’ comp policies to employers that cannot find coverage in the regular insurance market. Some pool employers reportedly have poor safety records while others are in high-risk industries that regular commercial insurers refuse to cover.
Travelers Commercial Casualty Co., which administers the Missouri’s pool under a competitively bid contract, submitted the rate request to Lakin. Although MDI must hold a public hearing on the reduction by law, Lakin is expected to approve the filing.
The rate reduction is the second consecutive such request from Travelers, which cut rates by 0.4 percent last year with Lakin’s approval.
The pool contains those companies that are most likely to have workers injured on the job and file claims,” Lakin said. “To have two straight years of rate reductions for these employers holds the promise for Missouri businesses overall.”
After six straight years of rate cuts following price deregulation of workers’ comp in Missouri, 2001 to 2003 found insurers raising rates to cover rapidly increasing medical costs.
However, on-the-job injuries fell by 18 percent, or 30,000 cases, in 2002 and 2003.
In explaining this year’s rate reduction, Travelers cited a steady decline in severe injuries, particularly those that require the worker to lose time on the job and receive medical treatment. Its loss ratio – the percentage of premiums that it expects to pay out for lost wages, medical treatment and adjustment expenses – has been extremely favorable for two straight years, accounting for only two-thirds of each premium dollar.
The 3.7 percent reduction is the average for all employers, and the actual change for individual companies will vary based on their claims histories and type of business.
Travelers has proposed larger reductions for smaller carpentry operations, policemen, local truckers, roofers, home health agencies and automobile dealers.
The insurer has identified employers with charitable agency and colleges’ professional workers, salespersons and messengers, large-scale carpenters and athletic teams for larger rate increases because of the claims histories for those industry categories.
More on the workers’ comp front
Overall rates for Missouri’s workers’ comp market have increased 2.3 percent in 2004 after most companies have filed their rate changes, Lakin said.
Lakin said the rates have remained almost flat because of declining workplace injuries. Rates rose sharply the past two years because of rising medical costs.
Lakin said 101 companies had filed rate reductions averaging 2 percent so far this year compared to 84 that raised rates an average of 8.2 percent.
Lakin attributed half the overall 2004 market increase to a 4.8 percent rate increase by Missouri Employers Mutual Insurance Co. of Columbia, the state’s largest workers’ comp insurer with almost one-fourth of the entire market. MDI weights rate changes to take into account an insurer’s size.
The 185 companies filing through the end of March likely represent most 2004 rate changes because only about two-thirds of the 320 licensed companies file revisions each year.
Lakin noted that “the overall 2004 rate change should provide welcome relief” to the state’s business community, whose rates rose 14.7 percent in 2003, 9.2 percent in 2002 and 4.7 percent in 2001, thanks almost solely to rising medical costs for treating injured workers.
Although health care costs continue to climb more rapidly than general inflation, Lakin said an even sharper decline in the number of workplace injuries is offsetting those costs.
“The combined efforts of business owners, managers and workers in increasing safety are largely nullifying medical inflation, which has posed rate problems for several lines of insurance, ranging from HMOs to even auto coverage,” Lakin said.
The past two years, Missouri employers have reported a drop of 18 percent or 30,000 in workplace injuries.
The relative price of workers’ comp coverage remains considerably less than a decade ago, Lakin said. Since Jan. 1, 1994 – when Missouri deregulated workers’ comp rates – pricing has increased only 3.4 percent, far lower than the general inflation rate of 24.2 percent.
Of the 310 licensed Missouri carriers, 240 are charging less than they did in 1994.
With more than 100 insurers filing rate cuts, Lakin urged Missouri businesses to use the state’s competitive environment to shop around for the best possible pricing as well as service. Base rates for all companies in Missouri, for each type of worker, are available on the MDI Web site at insurance.mo.gov.