Workers#039; compensation bites employers
Ohio's public and private employers will soon feel the hit of paying the full amount of workers' compensation premiums for only the second time in eight years.
Because of the sluggish economy and soaring health care costs, the Ohio Workers' Compensation Oversight Commission approved in late May a 9-percent average premium rate increase, and announced that the employers will not receive the premium discounts many had grown accustomed to receiving.
"We've tightened the reins administratively, reducing our operating budget to where it's $7 million less than it was 10 years ago," BWC Administrator James Conrad said in a written statement in May. "But slower investment growth and skyrocketing medical costs make it financially impossible for us to maintain current rates or offer a dividend while still fully reserving the state insurance fund."
In the 1970s and 1980s,
worker's compensation rates were inconsistent. So, in 1995, Conrad created the surplus fund so that the bureau would not have to raise rates if the economy slowed, said Jeremy Jackson, media relations officer for the Ohio Bureau of Workers' Compensation.
Between 1996 and 2003, the BWC returned to Ohio employers more than $9.3 billion in monies that exceeded the surplus funds by providing rate reductions between 20 and 75 percent of their premium costs. Much of this surplus was generated through returns on investments, Jackson said.
However, slow investment growth during the past two years has reduced the surplus. While the fund remains 100-percent reserved, the surplus is not able to provide a discount. This means employers will be responsible for paying 100 percent of their premiums for only the second time since 1995, Jackson said.
The second part of the increase is a 9-percent premium rate increase that will go into effect for the July 1, 2003 to June 30, 2004 policy year, with the first bill due February 2004, he said.
Since 1999, the cost of hospitalization has increased 68 percent while drug costs have spiked 104 percent ,making an increase necessary, Jackson said.
While this affects every business across the state, Lawrence County Commiss-ioner Jason Stephens said it is just another tough hit for the county government that has seen health care costs triple and revenues steadily decrease in recent years.
The county has approximately 500 employees that range from office workers and road crews to employees in the sheriff's office, many of which are inherently dangerous jobs, he said.
According to a recent county auditor's report, the county's workers' compensation costs increased 172 percent from last year. In 2002, the county paid $36,940. In 2003, workers' comp cost the county $100,420.
County officials expect workers' compensation to increase to an estimated $500,000 in 2004 because of the loss of the 75 percent discount and a 12 percent increase for public employers. Even though all employers knew the reductions would not last forever, the timing could have been better, Stephens said.
"I wish they would not have cut us off so quickly," he said. "If they would have done it slower, it would not have been as dramatic an impact as it is going to be."
The BWC also offers programs, grants and other free services that provide employers with discounts on their premiums. The county instituted a drug-free workplace program and a transitional work program that each saved the county 10 percent - about $40,000 each.
Stephens and James Ward, coordinator for the county's drug-free workplace program, also attended a workshop by the BWC that allowed the county to receive a $100,000 rebate, he said.
Pat Clonch, executive director of the Greater Lawrence County Chamber of Commerce and the Lawrence Economic Development Corporation, said that this is a problem all over the nation and that Ohio may be better off than most.
"Never before has a state been willing to share the surplus," she said. "Conrad wanted to help the employers take care of all the employees. Now it is impossible to do it because the income is not there."
Overall, Conrad has been an excellent director of the BWC and will continue to work for the best interest of all parties despite the economic climate, Clonch said.
Private businesses of all sizes will also suffer from the lack of a discount.
Muth Lumber in Ironton employs 51 people at two different rates. Since last July, the cost of workers' compensation has increased by $27,000 for the company, an employee in the payroll department said.
Although it was a shock to have to pay the full amount after getting a discount for so long, the company always expects that it will have to pay the full premium, the employee said.
Regardless of these recent increases, Jackson cited statistics that workers' compensation rates have decreased 34 percent for private employers and 12 percent for public employers during the past seven years.
The average private employer who paid $10,000 for workers' compensation in 1995 now only pays about $7,400 and has received more than $60,000 in rebates, he stated.
While no immediate change is predicted, Jackson said investments in the beginning part of 2003 have earned a respectable 5 percent.
The surplus can be evaluated every six months and may be reviewed in November. However, winter of 2004 may be more realistic prediction on when the dividends could potentially return, Jackson said.
"The important thing is employers need to work with the BWC to assess their own specific work conditions," he said. "The best injury is the one that never happens."