Wednesday, May 11, 2011

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BWC rate reform efforts lead to savings for most Ohio employers

A column by State Senator Shannon Jones suggested Ohio’s workers’ compensation system is stifling small business growth in the state. I assure you this is not the case.

Over the past three years, BWC and its Board of Directors have been diligent in bringing stability, fairness and equity to the rates Ohio employers pay for workers’ compensation insurance coverage. The results are phenomenal. Effective July 1, 2010, Ohio’s base rates will be 35 percent lower than they were for the 2007 policy year–their lowest point in at least two decades. Our efforts have made Ohio’s rates among the most competitive for future economic development in the Midwest.


We have taken strategic and successful steps to not only lower the base rates that are used to compute workers’ compensation insurance premiums, but to significantly lower premium costs for more than half of Ohio’s private employers. For the July 1, 2009 policy year, this group of employers experienced a more than 25-percent rate drop, resulting in a collective $139 million in savings in just one year.

Utilizing the expertise of professional actuaries and the recommendations of the comprehensive study, over the past three years, BWC and its Board of Directors have made gradual reductions to the group discount to bring fairness and to guarantee employers are paying the right rate for the risk they pose to the system. On July 1, 2010, that discount will be set at 51 percent, giving group-rated employers a more than half-off discount to their workers’ compensation costs. This is a significant discount for those who qualify, and it is a figure that is in a range of actuarial soundness.

Sen. Jones also made reference to a BWC surplus. This notion of a surplus is a common misconception. Like any insurance company, BWC is required to have reserve funds set aside to manage the system’s 1.3 million open claims. Unlike private insurance companies, BWC is able to discount those reserves, meaning that our “surplus” is actually less than a private company would be required to maintain. Many claims require a one-time payment for medical fees, but a large number require medical and indemnity payments for many years, and in our most severe cases, over the lifetime of the injured worker. Our oldest open claim was filed in 1940 – 70 years ago! Last year we received about 120,000 new claims.

Finally, the issue of opening Ohio to a competitive system was addressed in the column. While lawmakers debate the value of a competitive system over a monopolistic system, BWC continues to focus on providing outstanding service to employers and injured workers. These services come with little overhead and a great return-on-investment for Ohio employers. Of the nearly $2 billion Ohio employers pay in premium each year, 96 percent of their investment goes directly to the care and well-being of injured workers and their families. Private insurers average about 69 cents of every dollar on customer care and service. BWC is able to operate with such efficiency because as a state entity, the Bureau is not subject to federal and state taxes, does not operate for a profit and charges in arrears, allowing the employer to only pay for coverage they used in the previous payroll cycle. Additionally, BWC’s cost savings are passed on directly to the employer through lower premiums.
While reform may be a difficult process, BWC and our professional board of directors have refused to allow the system to continue to function at a less than optimal level. Today’s BWC is much different, delivering fair, stable and equitable premium costs for Ohio employers. Our benefits for injured workers are competitive, and promote a safe, swift return to work. And new, safety-based cost saving programs are helping to further lower costs for employers, while enhancing safety efforts for Ohio’s workforce. BWC is undergoing a positive transformation that has its roots in cost savings, safety and outstanding services.

Contributed by:
Marsha P. Ryan, Administrator
Ohio Bureau of Workers’ Compensation

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