W. Va. Workers’ Comp Chief Warns Employers Failing to Pay

December 7, 2005

As it spins off as a private insurance program, West Virginia’s workers’ compensation program will show little patience with employers that fail to pay their premiums, its executive director said Monday.

As of Jan. 1, the more than 2,000 businesses that have failed to make prior payments into the program will find themselves barred from coverage through the new BrickStreet Mutual Insurance Co., Greg Burton told reporters and editors at a forum sponsored by The Associated Press.

Burton said the state’s privatization plan will dump those employers in default into an uninsured fund, which leaves their owners and officers personally liable for workplace injury claims as well as related lawyers’ fees. He noted that the cost of a permanent total disability award runs between $250,000 and $500,000.

“That’s a very harsh penalty,” Burton said. “It’s very bad for employers to get into the uninsured fund.”

The state Insurance Commission, meanwhile, can fine defaulted employers up to $10,000 and take steps to shut them down. Their business licenses also can be revoked, Burton said.

Burton said these same penalties apply to employers that fail to make the upfront payments due from all enrolled businesses on Jan. 1. Previously, premiums only covered prior time periods.

“Everyone will have to pay in advance for coverage,” Burton said.

Burton also pledged that no private employers will see their total payments increase as of Jan. 1; some will see rates drop by as much as 15 percent. But Burton said government agencies likely will see premiums hiked because Gov. Joe Manchin has decided to end the practice of subsidizing coverage of public workers.

Manchin and lawmakers crafted the plan to privatize workers’ compensation after the program struggled for years with a multibillion-dollar gap between assets and promised benefits. That unfunded liability prompted earlier legislation that restricted benefits and targeted fraud and employers in default.

Burton credited those prior rounds of law changes for the decision not to sell bonds to close the funding gap. Those changes have reduced the liability from $3 billion, Burton said, though a new estimate of its size is not yet available.

Burton said the $230 million in annual funding earmarked for bond payments will instead go directly toward the funding gap. Once it spins off Jan. 1, BrickStreet will also receive $400 million, including $190 million to cover recent claims and a loan-type payment of $200 million as startup capital.

Besides the crackdown on deadbeat employers, Burton said BrickStreet will be reviewing the more than 6,000 awards for workers deemed permanently and totally disabled. The program also has barred doctors in Mingo and Cabell counties from treating claimants following evidence of fraud, he said.

One doctor had written $1 million a year in OxyContin prescriptions, Burton said.

BrickStreet will become the nation’s 15th largest workers’ compensation insurer, and second in size only to Mountain State Blue Cross and Blue Shield among all West Virginia-based insurers. It will be the state’s exclusive worker injury insurer until mid-2008, when other private insurers can begin selling coverage.

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