Ohio Employers Ask for Another Review of Workers’ Comp Rates

May 12, 2008

A group of Ohio employers who say their businesses are being crushed by injured-worker insurance rates that the state modified last year has asked the state’s watchdog to take another look at the program.

The newly formed coalition, We’veHadEnough.Net, told Ohio Inspector General Tom Charles in a letter sent Thursday, May 8th that the Ohio Bureau of Workers’ Compensation has ignored findings he made in August against its system for determining group discounts.

Ohio has the nation’s largest state-run workers’ compensation system.

Connie Nahra, group president and an owner of Cleveland-based Aladdin Baking Co., said a decision to cut group discounts in December didn’t go far enough to fix the system. Businesses with good safety records could have their premiums reduced by as much as 90 percent under the old system, and by a maximum of 85 percent under the new rate structure.

Keary McCarthy, a spokesman for the bureau, said Charles’ August report involved activities that took place prior to Gov. Ted Strickland’s administration taking over the agency and appointing a new administrator.

“In less than six months, the new administration and the new BWC board of directors took action on its actuarial recommendations and mandated that a long-term plan be developed,” he said. “Certainly, there was just a confluence of circumstances that surrounded this issue and this administration chose to take action swiftly.”

Joe Montgomery, the deputy inspector general assigned to monitor the bureau, said the office would put the business group’s request through its normal screening process.

“The important consideration is that what we made is a recommendation, not a dictate or a mandate,” he said. He noted that a lawsuit has been filed against the bureau over its group rating program, noting, “we cannot and do not force agencies to adopt every recommendation we may make.”

The overall reductions were the state’s first since 2001, and 2 percentage points more than initially expected, but they still fell nowhere close to what insurance rate-setting experts had been recommending for 15 years.

Prior to the change, the bureau acknowledged that the set-up it had in place was handsomely rewarding groups of businesses with spotless safety records that banded together into coalitions or associations, but hurt companies that experienced even one serious accident.

A third of the 6,800 businesses that lost their group rating in 2006 because of a serious accident or death involving an employee either stopped paying insurance or filed for bankruptcy, according to the bureau.

Nahra noted in her letter that investigative findings Charles released in November scolded the bureau for “an act of omission” for ignoring piles of actuarial data. Numerous studies over the years found that group-rated businesses were paying rates too low to cover their claims, while businesses outside those groups were paying rates that more than covered their losses.

“We realize that your office cannot force BWC to set group discounts at a particular level,” Nahra wrote to Charles. “But we believe that a finding of another wrongful omission could put pressure on the Board to take the action your previous report recognized as being correct.”

Marsha Ryan, appointed by Strickland when he took office last year to take over the agency, at the time supported cutting even more deeply into the discounts the bureau was offering. But the decision was made by the bureau’s board of directors. She has said improvements to the program may require a series of steps because even a slight premium adjustment impacts businesses and insurance markets.

The bureau took in $1.78 billion in premiums in 2007, for example, a figure that is expected to drop to $1.69 billion this year because of the decrease.

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