Employers quickly learn workers’ compensation is full of surprises, nearly all unpleasant. Compensation premiums are a good example. Taking Control of workers compensation is only the first step. As you proceed, you’ll begin to ask questions like why your premiums go up if you have no claims. Ask what your “mod” is. When was the last time there was an independent audit of your premium calculation to see whether your employees might be misclassified and you are entitled to a lower premium?
Private insurance companies are regulated on how they price premiums. The rates are set by a rating board. Large states have their own boards but many smaller states use the National Council on Compensation Insurance (NCCI), located in Boca Raton, Forida, to set rates.
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Rates vary according to what industry the business fits into. There are several hundred classifications given designations in the “Standard Industrial Classification” system (SIC code).
Every year, rates for each industrial classification are changed, according to data sent by carriers, self-insured, the compensation board and the insurance department. If an industry has had more claims and longer periods of disability the rate for ALL businesses in that industry rise.
Smaller businesses often go years without a claim. The expectation is the premium should continue to fall. Sometimes, however, it rises anyway. Why?
There is a lower limit to what a premium can be, even without claims. In low-risk, small businesses with no claims, most of the premium pays for necessary administrative handling required regardless of claims. These costs inevitably rise over time. Then there are the raises dictated for the industry as a whole, even for employers with no history of work-related injuries.
Following 9/11, there was an emergency meeting of the New York Compensation Insurance Rating Board to deal with the consequences of the largest workers’ compensation event in history. Nearly all the victims were clerical workers, normally the least expensive for compensation insurance. Nearly all the claims were death claims at maximum rate. Special formulas, never used before or since, had to be created to prevent economic devastation of businesses otherwise not affected. The only solution was to create special surcharges for many other industries throughout the state.
There is a saying among loss-prevention specialists, “It’s hard to improve on zero!” If you indeed have no workplace injuries, check with your carrier to make sure your industrial classification and your reported payroll are correct. Keystroke errors, changing an accounting firm into a medium factory, are to occur. Adding a zero to the total payroll is also a typewriter hazard.
Author: Attorney Theodore Ronca is a practicing lawyer from Aquebogue, NY. He is a frequent writer and speaker, and has represented employers in the areas of workers’ compensation, Social Security disability, employee disability plans and subrogation for over 30 years. Attorney Ronca can be reached at 631-722-2100.
Click on these links to try it for yourself.
WC Calculator: www.ReduceYourWorkersComp.com/calculator.php
TD Calculator: www.ReduceYourWorkersComp.com/transitional-duty-cost-calculator.php
WC 101: www.ReduceYourWorkersComp.com/workers_comp.php
Do not use this information without independent verification. All state laws are different. Consult with your corporate legal counsel before implementing any cost containment programs.
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